Bill C-228 And Defined Benefit Pension Plans

The Canadian Parliament has enacted significant changes to federal insolvency legislation, elevating the priority that must be provided to fund the deficit of a defined benefit pension plan when distributing debtor assets. Bill C-228, the Pension Protection Act (the "Act"), is an Act to amend the Bankruptcy and Insolvency Act ("BIA"), the Companies' Creditors Arrangement Act ("CCAA") and the Pension Benefits Standards Act, 1985. The Act will require insolvent employers to pay certain defined-benefit pension plan entitlements in priority to the claims of secured lenders. In effect, the Act would operate to increase the current range of pension benefits that receive "super priority" vis-à-vis the claims of certain creditors. While the Act provides protection for the defined benefit pensions of employees and retirees in the event that their employer becomes insolvent, the legislation will add an additional layer of risk and complexity for both secured lenders and