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Introducing The Pension Protection Act

On February 16, 2023, in the 1st session of the 44th Parliament of Canada, Bill C-228, An Act to amend the Bankruptcy and Insolvency Act, the Companies’ Creditors Arrangement Act and the Pension Benefits Standards Act, 1985, short titled, the Pension Protection Act passed a Senate Committee without any amendments. This Bill will now go before the Senate for its second and third readings before receiving Royal Assent and becoming law.

This article will provide an overview of the proposed legislative amendments before taking a look at some of the commentary from its supporters and detractors.

Pension Reform

Earlier this year, protests erupted in France after the government there planned to raise the retirement age from 62 to 64.[1] Despite these nationwide strikes being unique to France’s situation, it is arguable that these protests highlight the rapidly changing face of retirement. One of the trends that accompany this change is the fact that less companies are offering their employees pension plans compared to before.

In Canada, coming off the heels of the global COVID-19 Pandemic, there is also a growing discourse in Canada which seeks to address the precarious situation that many Canadian retirees have found themselves in after their pensions have been depleted because of bankruptcy or insolvency. Many proponents of the legislative amendments to Canada’s Pension laws have raised the point that because retirees earn their pensions during their working career, these deferred wages must be guaranteed, especially where the employer has the ability to pay their own pension deficits.

The conversation in Canada is likely to evolve further when Bill C-228 passes the Senate. But, in the meantime, what is Bill C-228 and how did we get to this point?

Bill C-228

Bill C-228 is a Private Members Bill sponsored by the Honourable Marilyn Gladu, Member of Parliament for Sarnia-Lambton, Ontario. It received it’s first reading in the House of Commons on February 3, 2022 and passed on November 23, 2022. The Bill, which is now before the Senate, offers to provide significant amendments to legislation surrounding employee pension plans in the face of a corporate bankruptcy or insolvency.

It’s enactment will amend the Bankruptcy and Insolvency Act[2] as well as the Companies’ Creditors Arrangement Act[3] to ensure that claims in respect of unfunded liabilities or solvency deficiencies of pension plans and claims relating to the cessation of an employer’s participation in group insurance plans are paid in priority in the event of bankruptcy proceedings.

Its enactment would also amend the Pension Benefits Standards Act, 1985[4] to provide that an employer may provide financial security in the form of insurance for any portion of the contributions that they are required to pay under subsections 9(1.1) and (1.2) of the Act, and to authorize the administrator of an underfunded pension plan, in certain situations, to transfer or permit the transfer of any part of the assets or liabilities of the pension plan to another pension plan. The amendments also provide for the tabling of an annual report respecting the solvency of pension plans.

Currently, the Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act protects certain claims under a pension plan including:

  • Employees’ salary contributions to the pension fund; and
  • The normal costs that the employer is required to pay to the pension fund.

Because these amounts are protected, courts can only approve a proposal, settlement or arrangement if the payment of these amounts is anticipated and if the court is satisfied that the employer is actually in a position to pay them.

Bill C-228 proposes adding special payments related to unfunded liabilities or solvency deficiencies to the above-mentioned list, decreasing the risk that members’ benefits will be reduced if their pension plan is terminated. Bill C-228 would apply to registered pension plans, whether they are regulated by federal or provincial legislation.

Where it concerns federal pension plans, Bill C-228 would amend the Pension Benefits Standards Act, 1985 to require the Superintendent to present an annual report to the Minister of Finance on the corrective measures taken or directed to deal with pension plans that fail to meet funding requirements.

To obtain the support of the New Democratic Party and the Bloc Quebecois, the government of Canada agreed to amendments to Bill C-228 which also allow the legislation to also deal with protections surrounding employee termination and severance pay.

Leading up to Bill C-228

David Bish, a partner at Torys LLP and head of it’s Corporate Restructuring and Advisory Practice writes that Bill C-228 incorporates elements of a number of prior bills on the subject.[5]

In May of 2021, CanAge, Canada’s National Seniors’ Advocacy Organization sent a letter to key federal government officials urging them to vote in support of Bill C-253, which they argue safeguards defined benefit pensions by addressing the unfairness of current bankruptcy laws. In support of this argument, CanAge provided four reasons to support Bill C-253:

  1.   Protect Seniors: Bill C-253 grants pensioners the legal status they need to protect their pensions and safeguard their financial security;
  2.   Fairness: Only the federal government can make changes to Canada’s pension and insolvency regimes and protect pensioners by ensuring fairness;
  3.   Companies Can Afford Their Pension Commitments: As an example, in Ontario, where 90 % of pensions are registered, the government offered solvency relief to companies struggling with liquidity during the pandemic. However, to receive relief, a company would have to accept restrictions on discretionary uses of case, such as dividends, share buybacks, or executive bonuses. No company applied for this relief; and
  4.   Pension Protection Must be Mandatory, or Companies Won’t     Do it: In 2017, the CCPA’s study of thirty-nine companies on the S&P/TSX 60 that maintained defined benefit pension plans concluded that while companies have the capacity to fully fund their pensions, they simply don’t. Instead, they use the cash for dividends, executive bonuses and share buybacks because the current laws allow it.[6]

On June 8, 2021, CanAge presented to the federal Standing Committee on Industry.[7] In my capacity as a Policy Officer with CanAge, I had the opportunity to provide witness testimony on the matter. In summary, CanAge provided the Standing Committee with five recommendations:

  1.   Create “super-priority” for defined benefit pensioners in the case of corporate insolvency;
  2.   Create Pension Benefit Guarantee Funds across Canada, ensuring that pensioners receive 100 percent of their deferred wages – the pension their employer committed to;
  3.   Require pension funds to be fully funded to 100 percent;
  4.   Establish a retroactive and recurring refundable tax credit equal to the annual pension loss experienced by a pensioner to make up for pension losses such as Sears’, Nortel and others; and
  5.   Operationalize modern tax and pension policies to allow for increased options for flexible retirement and a hybrid pension withdrawal and income-earning model.[8]

Commentary on the Bill

On February 15, 2023, Les MacDonald, Unifor’s National Executive Board Retirees Representative, presented to the Senate Committee, asking the Senators to respect retirees and pass the bill into law. According to Mr. MacDonald:

In bargaining, pensions are a large portion of monetary conversations. Members end up making immediate sacrifices to their present wages in order to earn long-term, guaranteed retirement benefits. However, the current BIA and CCAA statutes do not offer any protections that can provide peace of mind at retirement for a pension that is being drawn particularly from a single employer defined benefit pension plan.

Mr. MacDonald also pointed out to the Senate that if enacted, Bill C-228 will put any outstanding amounts due to the pension fund in the face of bankruptcy or insolvency ahead of secured creditors, regardless of whether the corporate entity declares bankruptcy or restructuring.

To illustrate this issue under the current legislative regime, MacDonald drew on examples from Unifor’s own history and membership, including the well-publicized Sears Canada bankruptcy. According to MacDonald, “Eddie Lampert, Sears Canada’s largest shareholder, landlord and supplier doled out $6 billion dollars to buy back shares and dividends from 2005 onwards to profit himself, yet the company continued to carry a $260 million pension deficit.”[9]

By the end of 2015, Sears Canada reported 14,015 retirees with an average annual lifetime pension of only $5,141, literally $428 per month.

Writing for MLT Aikins, a full-service law firm in Western Canada, William E.J. Skelly, Mark Gill, and Dax Moir have commented that Bill C-228 may adversely impact commercial lending.[10]

According to the authors, the proposed changes may leave employers offering defined benefit positions with reduced access to capital from commercial lenders. They argue that under the proposed bill, the amount deducted as priority payables at the time a lender advances funds to a borrower with a defined-benefit pension plan would be largely unknowable and that lenders would likely seek to maximize their discretion when assessing priority payables in these circumstances since their funds would be at risk. As a result, the authors argue Bill C-228 is likely to make it more expensive and difficult for an employer who has adopted a defined benefit pension plan to obtain credit, which could effectively increase the risk of bankruptcy for employers who are subjected to increased cost of capital.[11]

Echoing the above sentiments, the Association of Canadian Pension Management (the “ACPM”) wrote an open letter to the Senate on November 23, 2022. In the letter, the ACPM argues that while the stated goal of Bill C-228 is laudable, it’s proposed means to accomplish that goal are flawed and will have serious, negative consequences. The ACPM argues that a super-priority creates an immediate risk for secured and unsecured creditors in an insolvent situation, forcing them to take action to mitigate their risks through restrictions on financing, higher borrowing costs and by potentially making financing unavailable for a bankruptcy restructuring.[12]

In response to the open letter, Michael Powell, President of the Canadian Federation of Pensioners opined that “[b]y opposing this legislation, banks and pension sector organizations are putting their own interests ahead of the financial security of millions of Canadian seniors.”[13] Powell went on to provide an illustrative example from the Sears Canada bankruptcy fallout.

He described the story of Audrey and Ron, both Sears retirees whose pensions were drastically cut when Sears went bankrupt. At age 72, Ron was forced to go back to work to pay off debts incurred during Audrey’s cancer treatment. As a result, Ron lives in constant fear of losing his home, having lost over 20 per cent of his pension income due to Sears’ insolvency.[14]


For existing pension plans, the transitional provisions of Bill C-228 provide that the proposed amendments will only apply as of the fourth anniversary of the day the Act comes into force.

Once Bill C-228 receives Royal Assent, if brought into force, new pension plans will have to adhere to the new legislative amendments which place the funding of plans in super priority.

The legislation, as alluded to by some opposers, may require further tweaking and amendments, however, supporters such as those who advocate for retirees and older adults are heralding the proposed enactments as a victory for pensioners. For individuals like Audrey and Ron, the amendments may be seen as ‘too little’ and ‘too late’, however, it is hoped that the amendments will change the landscape for retirees who have deferred income towards their retirement.

[1] See Hugh Schofield & Paul Kirby, “French protests intensify against pension age rise” (January 31, 2023), BBC News, accessed online: https://www.bbc.com/news/world-europe-64463330.

[2] RSC 1985, c B-3.

[3] RSC 1985, c. C-36.

[4] RSC 1985, c. 32 (2nd Supp.).

[5] See David Bish, “Pension priorities in insolvency: Will Bill C-228 finally make them a reality?” (September 21, 2022), Torys, accessed online: https://www.torys.com/fr-ca/our-latest-thinking/publications/2022/09/pension-priorities-in-insolvency where the author describes previous efforts in: Bill C-281 in 2004, Bill C-372 in 2017, Bill C-384 in 2017, Bill C-405 in 2018, Bill C-253 in 2020, Bill C-259 in 2020, Bill C-225 in 2022 and Bill C-264 in 2022.

[6] CanAge, “CanAge urges federal leaders to protect pensioners” (May 11, 2021), CanAge News, accessed online: https://www.canage.ca/canage-urges-federal-leaders-to-protect-pensioners/

[7] See Standing Committee on Industry, Science and Technology, “Witness Testimony” (June 8, 2021), Government of Canada, accessed online: https://parlvu.parl.gc.ca/Harmony/en/PowerBrowser/PowerBrowserV2/20210608/-1/35656?mediaStartTime=20210608110638&mediaEndTime=20210608111231&viewMode=3&globalStreamId=14

[8] CanAge, “CanAge works with federal Standing Committee on Industry, Science and Technology to protect pensioners” (June 10, 2021), CanAge News, accessed online: https://www.canage.ca/canage-works-with-federal-standing-committee-on-industry-science-and-technology-to-protect-pensioners/

[9] Sarah McCue, “Prioritize retiree’s pensions in bankruptcy, says Unifor to Senate Committee” (February 15, 2023), Unifor, accessed online: https://www.unifor.org/news/all-news/prioritize-retirees-pensions-bankruptcy-says-unifor-senate-committee

[10] William E.J. Skelly, Mark Gill, and Dax Moir, “How Bill C-228 May Adversely Impact Commercial Lending” (February 17, 2023), MLT Aikins, accessed online: https://www.mltaikins.com/insolvency-restructuring/how-bill-c-228-may-adversely-impact-commercial-lending/

[11] Ibid.

[12] Lorianne Weston, “ACPM submits open letter to Members of the House of Commons and the Senate regarding Bill C-228, An Act to amend the Bankruptcy and Insolvency Act, (BIA) the Companies’ Creditors Arrangement Act (CCAA) and the Pension Benefits Standards Act, 1985 (PBSA)” (November 25, 2022), GlobeNewsWire, accessed online: https://www.globenewswire.com/en/news-release/2022/11/25/2562667/0/en/ACPM-submits-open-letter-to-Members-of-the-House-of-Commons-and-the-Senate-regarding-Bill-C-228-An-Act-to-amend-the-Bankruptcy-and-Insolvency-Act-BIA-the-Companies-Creditors-Arrang.html

[13] Michael Powell, “Put Main Street Ahead of Bay Street and Protect Canadian Pensioners” (November 29, 2022), Newswire, accessed online: https://www.newswire.ca/news-releases/put-main-street-ahead-of-bay-street-and-protect-canadian-pensioners-834074504.html

[14] Ibid.


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