On April 27, 2023, Bill C-228, also known as the Pension Protection Act, received royal assent. The Pension Protection Act (the Act) amends federal bankruptcy and insolvency law to grant pensioners super priority for unfunded liabilities in private sector defined-benefit company pension plans over secured and unsecured creditors.

The Act aims to ensure workers are protected in the event of a company becoming insolvent; where a fund is insolvent, the company is required to declare bankruptcy and give priority to pension payouts. Further, the Act mandates that pension fund managers provide an annual disclosure of their respective fund’s solvency to the Superintendent of Bankruptcy.

The Association of Canadian Pension Management (ACPM) released an open letter in November 2022, expressing concern and highlighting their perceived flaws of the Act. Specifically, the ACPM noted the potential serious consequences for existing private sector defined-benefit pension plans. These concerns surround the response by lenders mitigating risk through increased lending rates, restricting lending practices and potentially making financing unavailable during restructuring, leading to the demise of distressed companies and the winding up of existing defined-benefit plans.

The amendments are now in force. For more information or to discuss matters further, please reach out to a member of the Dentons Restructuring, Insolvency and Bankruptcy group.