Summary#

This bill, called the Pension Protection Act, changes bankruptcy and restructuring rules to put pension shortfalls and certain group insurance claims ahead of other debts. It also requires an annual federal report on pension plan funding and actions taken to fix underfunded plans. A 4‑year transition delays the new priority for employers already in a pension plan when the law takes effect (Transitional Provisions).

• Gives priority to claims for unfunded liabilities and solvency deficiencies in defined benefit pension plans in bankruptcies and restructurings (BIA 60(1.5), 81.5, 81.6; CCAA 6(6)).
• Gives priority to claims related to an employer stopping participation in group insurance plans during insolvency (Bill summary).
• Requires the Superintendent to report yearly on pension plan solvency and corrective measures, and table the report in Parliament (PBSA s.40).
• Applies immediately to employers entering new prescribed pension plans after the law takes effect; applies after 4 years to employers already in such plans (Transitional Provisions).
• Extends protection to plans regulated provincially by treating them as if federally regulated for these priority purposes (BIA 60(1.5)(a)(iii)(A.1), 81.5(1)(c)(i.1); CCAA 6(6)(a)(iii)(A.1)).

What it means for you#

• Households (retirees and workers in defined benefit plans)
  • If your employer becomes insolvent, amounts needed to fix a pension funding shortfall must be paid before many other creditors. This includes special payments and any amounts required to eliminate unfunded liabilities or solvency deficiencies, as measured at filing (BIA 81.5-81.6; CCAA 6(6)).
  • If your employer stops participating in a group insurance plan during insolvency, related claims get priority in payment (Bill summary).
  • For employees in plans that existed before the law took effect, this priority starts 4 years after the law comes into force (Transitional Provisions). For plans started after the law takes effect, the priority applies right away.
• Workers not in defined benefit plans
  • Direct pension effects are limited if you are in a defined contribution plan or have no pension. Group insurance cessation claims in insolvency may still get priority (Bill summary). Specific scope is not detailed in the sections provided.
• Businesses (employers with defined benefit plans)
  • In any proposal under the Bankruptcy and Insolvency Act or plan under the Companies’ Creditors Arrangement Act, you must ensure pension shortfalls are fully addressed to obtain approval (BIA 60(1.5); CCAA 6(6)).
  • If you were already in a prescribed pension plan before the law took effect, the new priority does not apply to you for 4 years after the law comes into force (Transitional Provisions).
• Lenders, bondholders, suppliers, and other creditors
  • Your recoveries in an employer insolvency may be lower because pension shortfall and certain group insurance cessation claims are paid ahead of you (BIA 81.5-81.6; CCAA 6(6)).
• Governments and regulators
  • The Superintendent must submit and the Minister must table an annual report on pension funding and corrective actions; the Superintendent must also send the report to provinces (PBSA s.40).

Expenses#

Estimated net cost: Data unavailable.

• No explicit appropriations or new fees in the bill text (Bill text).
• New annual reporting duty for the Superintendent of Financial Institutions; administrative cost not stated (PBSA s.40). Data unavailable.
• No official fiscal note identified in the provided materials. Data unavailable.

Proponents' View#

• Improves pension security by requiring full payment of pension deficits before other creditors in insolvency, reducing the chance of pension cuts for retirees and workers (BIA 81.5-81.6; CCAA 6(6)).
• Closes a known gap in prior law that prioritized only certain unpaid contributions, by adding unfunded liabilities and solvency deficiencies to priority claims (BIA 60(1.5), 81.5-81.6).
• Protects employees’ group insurance-related claims when employers stop participation during insolvency, giving workers a better chance of recovery (Bill summary).
• Increases transparency through an annual public report on pension plan solvency and actions taken to fix underfunding, aiding oversight by Parliament and provinces (PBSA s.40).
• Provides a 4‑year transition so existing employers can adjust funding strategies and financing arrangements before the new priority applies (Transitional Provisions).

Opponents' View#

• Lowers recoveries for unsecured and some secured creditors because pension deficits and certain insurance-related claims must be paid first, which could raise borrowing costs for firms with defined benefit plans (BIA 81.5-81.6; CCAA 6(6)).
• May make restructurings harder to complete, since a court cannot approve a plan unless it fully addresses pension shortfalls measured at filing, increasing the risk of liquidation (CCAA 6(6)).
• Could encourage employers to close or avoid defined benefit plans to reduce future insolvency risk exposure, potentially shifting workers to less secure retirement arrangements. Data unavailable.
• The scope and size of “claims relating to the cessation of an employer’s participation in group insurance plans” are not detailed in the provided sections, creating uncertainty for creditors and courts (Bill summary).
• The 4‑year delay creates uneven treatment across employers depending on when they entered a plan, which may complicate lending and covenant structures during the transition (Transitional Provisions).