The stated goal of C-228 is commendable, but the proposed means of achieving that goal are flawed and will have serious and undesirable unintended consequences – including for the interest groups the parliamentarians are trying to help

TORONTO, Oct. 18, 2022 (GLOBE NEWSWIRE) — In a Letter to the House of Commons Standing Committee on Finance (FINA)Commenting on Bill C-228, the Association of Canadian Pension Management (ACPM) noted serious, undesirable and unintended consequences should the bill go into effect and outlined alternative approaches to safeguarding retirees’ pensions to achieve the same goal without the potential for harm reach the pension system.

Among the negative unintended consequences, ACPM notes that Ordinary course lending is becoming more difficult, expensive, or impossible for some defined benefit (DB) plan sponsors, noting that the “priority created by C-228 for pension deficits would fundamentally change the risk profile assessed by creditors”. In addition, the letter notes that almost every country in the world is doing this Not take a priority approach to bankruptcy, including the United States, and such an approach would make it even more difficult for Canada to attract business investment.

Another negative possible consequence of C-228 in its current form is that Many DB pension plans are terminated due to increased costs and the burden of borrowing from plan sponsors. These measures would have wider implications for Canada’s pension system, further eroding DB coverage and resulting in less favorable outcomes for blue collar and unionized workers. Indeed, it is stated that this could be the case “Virtually eliminate DB plans for active private sector workers who are still accumulating a DB pension.”

To avoid the negative consequences, ACPM proposes several policy approaches to secure pensions. First, to enable pension plans to continue despite the insolvency of the sponsoring employer by…