The Canadian Federation of Pensioners (CFP) recently provided a list of suggested changes to the BIA and CCAA legislation to Canada’s Industry Minister for the upcoming 5 year review. These acts must be reviewed every 5 years and the next review is due September 2014.
In our submission, the CFP recommends legislative amendments that would preserve the protections intended by the deemed trusts conferred by pension legislation, and recommends the extension of that protection to all amounts owed to a DB pension plan. In particular, the recommendations are:
- Give effect to the pension deemed trusts created under federal and provincial legislation in all insolvency proceedings;
- Grant pensioners priority over secured creditors to amounts covered by a deemed trust, no matter when the security was granted to the lenders;
- Ensure the pension deemed trusts are given effect even if the plan is wound-up after the insolvency proceedings have commenced; and
- If Parliament is unwilling to make such changes, extend the secured priority ranking that currently applies to unpaid normal costs today to all amounts owing to the plan.
These recommendations would mitigate the losses that pensioners currently suffer when their DB pension plan is wound-up when underfunded. At the same time, these recommendations would redress the imbalance of security among creditors in a way that is more likely to lead to successful corporate reorganizations.
Given the particular vulnerability of pensioners in insolvency and the many means that commercial lenders have to mitigate their own risks, it is time to update insolvency legislation in a way that supports the pensions that have been earned by Canadians during their working lives.
You can get a copy of our submission by clicking on this link: CFP Submission – 5year Review of BIA and CCAA
As always we appreciate your comments and feedback.