C-228, An Act to amend the Bankruptcy and Insolvency Act, the Companies’ Creditors Arrangement Act, and the Pension Benefits Standards Act, 1985, is not a new or novel idea.

In fact, proposals on giving pension plan members super-priority in the event of a bankruptcy pop up every time a prominent defined benefit pension is threatened by the bankruptcy of its sponsor. Recent history brings to mind Nortel in 2007 and Sears Canada in 2017.

There is concern that this time it may be enacted, making Canada the only developed country in the world offering this kind of protection as it has the support of the Conservatives, the NDP, and the Bloc Quebeçois.

11th Commandment

Now when it comes to DB pension plans, not reducing pension benefits is the 11th commandment ‒ thou shalt not. This is emphasized every time a public session on pensions in Canada takes place. I recall vividly pensioner after pensioner telling the 2006 Harry Arthurs-led Ontario Expert Commission on Pensions that when it came to their pension benefits, they must never be touched. To hell with those employees who may lose their jobs if a DB pension plan bankrupts a company.

Still, super-priority was not recommended by the Arthur’s report.

Both the Pension Investment Association of Canada and the Association of Canadian Pension Management have made eloquent submissions stating their objections to this. Both agree that it will make ordinary course borrowing more difficult for Canadian companies, impeding their ability to access credit, to grow, and to contribute to the economy through employment and taxes.

And, they warn it could sound the death knell for DB pensions plans in the private sector.

However, in 2022 does saving DB plans matter?

If the death knell isn’t sounding on DB plans in the private sector, the bells are being tuned up. Pension coverage in Canada is less than 40 per cent and most of that is government employees. Government is not restricted by any pension funding obligations. If they don’t have enough money to pay off debts, they cut programs (we wish) or raise taxes.

Frozen or Closed

Over the past 20 years, the number of private sector DB pension plans has dropped from 21.9 percent in 1997 to 9.2 per cent in 2017. While the published stats are hard to find (if kept at all), the percentage of plans frozen or closed could be as high as 40 to 50 per cent. And every single time we see a consultancy firm issue a pension solvency report, it ends with a suggestion that sponsors of DB plans de-risk ‒ in other words, get out of the DB pension business.

So does it really matter? Canadian businesses without pension plans won’t see their access to credit affected, nor will those who offer a capital accumulation plan (CAP). And that is a clearly a majority of businesses.

Maybe if we can get past ‘saving’ DB plans, we can turn our energies towards creating an environment where employers can offer retirement savings plans where they share the risk with the employees.

Perhaps then we can start re-building pension plans in the private sector.