A federal private member’s bill is making its way through Parliament that prioritizes defined pension plan participants amid a company’s insolvency. Unintended effects, according to restructuring and pension experts at Blake, Cassels & Graydon LLPs, might lead to a drastic decline in DB plans, which are often regarded as the gold standard for supporting retirement.
“Protecting employee pensions is a really noble purpose,” says pension lawyer Jeff Sommers, emphasizing the ramifications for other creditors. “The question is whether this measure is indeed the best method to accomplish it.”
Bill C-228, a private member’s bill proposed by Conservative MP Marilyn Gladu, was unanimously supported by 318 federal Members of Parliament in November, sending it to the Senate for consideration and third reading.
It is anticipated to become law before Parliament adjourns for the summer. There will, however, be a four-year transition period before the system is completely implemented.
If passed, the bill would amend bankruptcy and insolvency legislation to provide pensioners “super-priority” for unfulfilled liabilities in private sector defined benefit pension schemes. This would prioritize the pension debt over secured and unsecured creditors, increasing the likelihood that plan participants would be made whole in the event of a collapse.
