Bankruptcy lawyers claim a bill to protect company pensions in case of insolvency may spell the death of defined benefit plans in the private sector. “Employers may abandon these plans,” partners with the largest law firm in Western Canada said of Bill C-228..“The proposed legislation may have unintended consequences and may even lead to some employers abandoning defined benefit pensions,” lawyers with MLT Aikins wrote in a legislative commentary. The firm has 270 solicitors operating out of Vancouver, Calgary, Edmonton, Saskatoon, Regina and Winnipeg..According to Blacklock's Reporter, Bill C-228 An Act To Amend The Bankruptcy And Insolvency Act would designate private sector company pensioners with defined benefit plans as preferred creditors in bankruptcy settlements. The bill unanimously passed the Commons last November 23 and on February 16 was endorsed by the Senate banking committee..“The proposed changes will likely have a significant effect on employers that offer defined benefit plans,” wrote MLT Aikins lawyers. “Insolvent employers would first need to fund special payment amounts for past, present and future pension plan liabilities prior to restructuring or paying debts held by other creditors.”.“If Bill C-228 is passed into law we may see the demise of defined benefit pension plans altogether,” said the commentary. “Employers may abandon these plans in favour of defined contribution pension plans in order to secure better options for financing.”.“Notwithstanding the fact Bill C-228 was put forward to protect pension plans, an unfortunate effect of the proposed changes may be that employers use the transition period to move away from defined benefit pension plans,” said the commentary. The bill has a four year phase-in period..Bill C-228, a private Conservative bill, follows a series of similar failed private Liberal, New Democrat and Bloc Québécois reform bills introduced since 1975. The Canadian Bankers Association in 2021 testimony at the Commons industry committee warned creditor protection for retirees would have “ripple effects across the economy.”.“This would mean less access to capital and higher borrowing costs,” testified Charles Docherty, assistant general counsel for the Bankers Association. “It is very difficult.”.Now-Opposition Leader Pierre Poilievre told the industry committee at the time the incentive of lower borrowing costs for companies with paid-up pensions was the point of reform bills. “This is actually to me a virtue,” said Poilievre..“I’ve worried about the fact CEOs have underfunded their pensions for a long time and said, ‘That problem is for another CEO down the line,’” said Poilievre. “And then when the pension problem emerges the CEO who caused it in the first place is long retired and on his yacht in the Caribbean while the workers are left holding the bag.”
