e-3893 (Economy and finance)

The Government would like to thank the petitioners for sharing their views on how to strengthen retirement security for pensioners in cases of employer insolvency. The Government welcomes input on these important issues.

The Government of Canada understands the importance of pension and retirement security for Canadians and the consequences of employer insolvency on current and former employees, retirees and their communities. The Government notably acknowledges that some pensioners with defined benefit pension plans continue to face risks in cases of employer insolvency for a portion of their retirement income. Canadians deserve peace of mind when it comes to their retirement security.

This is why the Government has taken significant steps to strengthen Canada’s Retirement Income System, including enhancements to Old Age Security and the Canada Pension Plan. Since 2016, these include:

• A ten per cent increase to the maximum Guaranteed Income Supplement (GIS) benefit for single seniors;
• Reversing the announced increase to the eligibility age for Old Age Security (OAS) and GIS back to age 65 from 67; and
• A ten per cent increase to the OAS pension for seniors aged 75 and over.

Federal and provincial pension laws regulate pension funding and require pension fund assets to be held in trust, for the sole benefit of pensioners. They are completely protected from the claims of other creditors during an insolvency. Pension plan sponsors must also make periodic contribution payments to the pension trust fund to ensure sustainability of the plan over time. In some cases, regulators will notably require special payments to reduce unfunded liabilities – that is where there is a deficit between a pension plan’s current assets and its future obligations to pensioners.

Canada’s insolvency laws (such as the Bankruptcy and Insolvency Act (BIA) and the Companies’ Creditors Arrangement Act (CCAA)) aim to strike the proper balance between the competing interests of debtors and creditors when a company in financial difficulty restructures. This includes favoring restructuring processes that can allow companies to re-emerge as financially viable businesses, saving jobs, pensions, and economic value. When restructuration is not possible, insolvency laws facilitate orderly liquidations that enhance recoveries for employees, pensioners and creditors – helping make very difficult situations easier to bear.

In 2019, the Government also enacted changes to better protect workplace pensions from employer insolvency by making proceedings fairer, more transparent and more accessible for pensioners and workers; providing better oversight of corporate behaviour; and improving sustainability and benefit security for federally regulated pensions.

The marketplace functions of insolvency laws will play an important role in supporting our economy as it recovers from the COVID-19 pandemic and as Canadian businesses and individuals face pressures and uncertainty from geopolitical instability, supply chain constraints, and rising energy prices and interest rates. They will work as a backstop and complement to the Government’s investments in skills, innovation and growth to help build a resilient and sustainable economy that strengthens the middle class and leaves no one behind.