Senate Passes Private Member’s Bill Protecting Canadian Workers’ Pensions

Marilyn Gladu addresses the crowd at a federal Conservative leadership forum during the annual general meeting of the Nova Scotia Progressive Conservative party in Halifax on Saturday, February 8, 2020. The 2020 Conservative Party of Canada leadership election will be held on June 27, 2020. THE CANADIAN PRESS/Andrew Vaughan

A private member’s bill that creates new protections for workers’ pensions in the event of employer insolvency has passed in the Senate and will soon become law.

“Pension protection is more important than ever. If an employer’s bankruptcy can wipe out an employee’s pension, then millions of Canadians who have worked hard all their lives are at risk of not being able to retire or afford to live,” said Conservative MP Marilyn Gladu in a release.

Gladu first introduced Bill C-228, “An Act to amend the Bankruptcy and Insolvency Act, the Companies’ Creditors Arrangement Act and the Pension Benefits Standards Act,” in the House of Commons in February 2022. It passed the third reading in the Senate on April 18 and is now awaiting Royal Assent before becoming law.

The act is meant to ensure that Canadian workers are protected in the event of a company’s collapse, according to the release. If a fund is insolvent, the company will be required to declare bankruptcy and give priority to pension payout or transfer funds into the pension plan to make it solvent.

Private member’s bills—legislation proposed by MPs who aren’t in cabinet—rarely become law in Canada.

Gladu, who is also the shadow minister for civil liberties, said her goal with this bill was to protect Canadians, their families, their livelihoods, and their retirements, “while at the same time ensuring that lenders and suppliers receive due consideration.”

In addition, the bill will require fund managers to prepare an annual report on the solvency of the pension fund and send it to the superintendent, who currently reviews this information, as defined in the Pension Benefits Act. The report will then be tabled in Parliament for “greater transparency.”

“This bill combines the elements of others that came before, and I am hopeful we will continue to work across the aisle to support and protect Canadians going forward,” said Gladu.

The Canadian Association of Retired Persons (CARP) called the passing of the bill a “historic victory for the protection of Canadian pensioners.”

“Until now, when companies like Sears went bankrupt, the assets of the failed company were divided and banks were paid first. ”This unexpected loss in a fixed income plunged vulnerable seniors into poverty,” said Bill VanGorder, chief policy officer at CARP.

“This soon-to-be law will protect the 4.6 million Canadian seniors and their families who rely on pensions for their financial security in retirement.”

Criticism

The bill has been criticized by the Pension Investment Association of Canada (PIAC), who have said it would be harmful to defined benefit pension plan sponsors. Back in September 2021, PIAC co-signed an open letter calling for MPs to block the bill.

In the letter, PIAC said while it shared the concerns of MPs on the standing committee on finance regarding pensions, it “strongly disagreed” that adopting a “super-priority for unfunded pension liabilities and employee retirement benefits in insolvency situations,” is the best way to achieve pension security.

PIAC has argued that by implementing super-priority rules, the bill would cause companies that sponsor defined benefit pension plan plans to be subject to higher interest, which could force employers to close the plans.

The open letter was also signed by the Canadian Bankers Association, the Canadian Chamber of Commerce, and  Canadian Manufacturers and Exporters.