Bill C-225 amends three federal statutes to raise the legal standing of pension-related funding obligations in insolvency and to give the federal Superintendent of Financial Institutions sharper tools to respond when a pension plan’s funding is impaired. In the Bankruptcy and Insolvency Act (BIA) and the Companies’ Creditors Arrangement Act (CCAA) the bill adds employer “special payments” (and certain section‑29 termination payments) to the list of prioritized claims in restructuring and bankruptcy proceedings and bars employers from cutting group insurance contributions while a consumer proposal or CCAA order is in effect.
The bill also expands the Pension Benefits Standards Act, 1985 (PBSA) by allowing the Superintendent to declare plan funding “impaired” or an administrator “at risk,” require employer and administrator notices, and order prompt solvency payments (with limited ability for the Superintendent to extend payment schedules). For employers, trustees, pension administrators and insurers the measure reshapes who gets paid first in insolvency and imposes fast funding and reporting deadlines that could materially affect restructuring choices.
At a Glance
What It Does
The bill adds pension special payments and prescribed termination‑related payments to priority claims under the BIA and the CCAA, prevents employers from stopping contributions to group insurance plans during proposals or CCAA orders, and gives the Superintendent of Financial Institutions authority to declare impaired pension funding and to require near‑term solvency funding and member notifications.
Who It Affects
Federally regulated employers and their pension plans, administrators and members under the PBSA, insolvency trustees and CCAA monitorments, group insurers providing employee benefits, and unsecured creditors whose recoveries may be reduced by elevated pension claims.
Why It Matters
This shifts the insolvency hierarchy in favour of pension plan deficits and imposes quick funding and notice obligations that can constrain restructurings and corporate distributions; compliance officers and insolvency practitioners will have to incorporate these new priorities and tight timelines into workout planning.
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What This Bill Actually Does
Bill C-225 changes three federal laws so pension shortfalls move up the queue when an employer becomes insolvent or attempts a court‑supervised restructuring. Under the changes, amounts defined as special payments under the PBSA regulations, plus certain payments required on termination of prescribed plans, are explicitly included among the prioritized claims in both the Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act.
That means trustees and monitors must treat those pension‑related obligations ahead of many other unsecured claims.
The bill also protects ongoing group insurance arrangements during the life of a filing or order: once a proposal is filed under the BIA and until the trustee is discharged or bankruptcy occurs, or where a CCAA order is in force, employers cannot modify, cancel or stop contributing to group sickness/accident, group term life or private health services plans that provide benefits to employees or former employees. The practical effect is to preserve short‑term benefit continuity for covered individuals during restructuring.On the regulatory side, the PBSA amendments give the Superintendent the power to declare that a plan’s funding is impaired or that its administrator is at risk, to notify employers of required measures, and to require administrators to notify members.
Employers must tell the Superintendent within five business days about any corporate action likely to materially increase a plan’s solvency deficiency under a statutory A‑minus‑B test (retained earnings minus unsecured debt). If the Superintendent makes a formal determination, the plan must be funded within 30 days by solvency special payments calculated under the regulations, although the Superintendent may extend the payment period or set a schedule if doing so protects members’ benefits or employment.Taken together, the bill accelerates payments into underfunded plans, raises notice and disclosure duties, and restricts employers’ ability to cut benefit contributions during insolvency processes.
That tightens protection for plan members but creates immediate operational and liquidity demands for employers and will change insolvency practitioners’ priority assessments and negotiation leverage.
The Five Things You Need to Know
The bill adds PBSA “special payments” and section‑29 termination payments for prescribed plans to the prioritized claims lists in the Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act.
It bars an insolvent employer from modifying, cancelling or ceasing to contribute to group sickness/accident, group term life or private health services plans from the filing of a proposal until trustee discharge or bankruptcy, and imposes an equivalent bar where a CCAA order is in place.
The Superintendent of Financial Institutions may determine that a plan’s funding is impaired or that an administrator is at risk, notify the employer of required measures, and require the administrator to notify members in a Superintendent‑specified form and manner.
An employer must inform the Superintendent within five business days of any decision, transaction or event that would make the plan’s solvency deficiency exceed the statutory A‑minus‑B threshold (A = retained earnings; B = unsecured debt, excluding plan‑related debt).
Following a Superintendent determination, the plan must be funded within 30 days by solvency special payments equal to the solvency deficiency offset by going‑concern special payments; the Superintendent can extend or set a payment schedule if it protects members or employment.
Section-by-Section Breakdown
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Add pension special payments and termination amounts to insolvency priorities
Multiple amendments insert language into the Bankruptcy and Insolvency Act to list employer special payments (as defined in PBSA regulations) and certain section‑29 termination payments as prioritized claims. Practically, trustees will be required to account for these sums when preparing distributions, which raises the absolute dollar value of claimant priority tied to pension funding. The change also adds an explicit priority for certain termination‑related amounts for prescribed plans, which can shift recovery prospects for unsecured creditors and secured creditors depending on ranking clauses and security packages.
Preserve group insurance contributions during proposals
Section 62.01 prohibits an insolvent employer from modifying, cancelling or ceasing contributions to employer‑sponsored group sickness/accident, group term life or private health services plans from the filing of a proposal until the trustee is discharged or bankruptcy occurs. The provision protects benefit continuity for employees and former employees during the proposal period but does not suspend other restructuring powers; trustees and advisors must therefore budget and plan for continued employer contributions while negotiations proceed.
Mirror BIA pension priorities and preserve benefits under CCAA orders
The Companies’ Creditors Arrangement Act is updated to include the same PBSA special payments and termination sums among prioritized creditor claims, and a new section prevents CCAA orders from having the effect of allowing a company to stop contributing to the same categories of group insurance plans. For CCAA filings — which are aimed at business rescue — the change restricts one avenue by which a debtor might reduce short‑term costs, forcing negotiators to address benefit funding explicitly in restructuring plans.
Superintendent can declare impaired funding, compel notices and require prompt solvency payments
The PBSA additions give the Superintendent discretion to determine that a plan’s funding is impaired or that its administrator is at risk; require the employer to notify the Superintendent of corporate actions that would materially worsen solvency using an A‑minus‑B test; compel the administrator to notify members within 30 days of the employer’s disclosure; and, on making a determination, require solvency special payments to be made within 30 days (including additional special payments tied to plan amendments). The Superintendent may lengthen the schedule where doing so protects members’ benefits or continued employment, but the default is a fast funding deadline that can strain employer liquidity.
Short, specified timelines for employer notice and member disclosure
Employers must notify the Superintendent within five business days of becoming aware of a decision, transaction or event that would trigger the A‑minus‑B threshold; they must also provide additional information on request. The plan administrator then has 30 days to notify members and must provide a copy of the notice to the Superintendent with proof of the notification date. These tight notification deadlines create clear compliance milestones and records that regulators can use to assess whether employers complied with their disclosure and funding obligations.
Adds some termination/severance pay to recognized amounts on bankruptcy
The bill amends subsection 136(1) to explicitly include the amount of any termination or severance pay owed to certain classes of employees (clerks, servants, travelling salespersons, labourers and workers) by a bankrupt, less any amounts already paid by the trustee. That provision clarifies that a defined subset of employment‑related arrears is a recognized claim in bankruptcy distribution calculations, which may affect the order and quantum of payouts.
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Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Pension plan members and former members — they gain stronger protections because special payments and certain termination amounts are elevated in insolvency priority and administrators must receive and relay Superintendent determinations about impaired funding.
- Employees and former employees with group insurance — ongoing employer contributions to group sickness/accident, group term life and private health services plans are preserved during proposals and CCAA orders, avoiding immediate loss of coverage during restructurings.
- Plan administrators and regulators — the Superintendent’s explicit authority and the statutory notice regime create clearer triggers and documentation, giving regulators a stronger enforcement posture and administrators more formal channels to inform members.
- Certain rank‑and‑file employees owed termination/severance — the explicit inclusion of these amounts in subsection 136(1) clarifies their claim status in bankruptcy, improving enforceability.
Who Bears the Cost
- Federally regulated employers (and employers of prescribed plans) — they face rapid funding obligations, new disclosure duties within five business days, and a prohibition on cutting group insurance contributions during insolvency processes, all of which can strain liquidity and restrict restructuring options.
- Unsecured and subordinated creditors — elevated pension claims can reduce the pool available for other creditors and alter recovery projections used in workouts and negotiation strategy.
- Insolvency practitioners, monitors and trustees — they must incorporate these new prioritized amounts into estate accounting and distribution plans and handle additional disputes over calculation and timing of special payments.
- Group insurers and benefit administrators — they will see administrative burdens from continuity obligations and may face downstream claims or premium disputes if employers are forced to maintain contributions while insolvent.
Key Issues
The Core Tension
The central dilemma is between immediate security for pensioners and beneficiaries — achieved by elevating pension funding and preserving group benefits — and the practical need to preserve corporate rescue and creditor compromise tools; forcing rapid funding and higher insolvency priority protects pension claims but can reduce the feasibility of reorganizations and lower recoveries for other creditors.
The bill forces a practical trade‑off between protecting pensioners and preserving rescue flexibility. Treating special payments and certain termination sums as prioritized claims increases the immediate cash demand on employers at a time when liquidity is scarce; that can push otherwise viable businesses toward liquidation or complicate negotiated compromises.
The statutory A‑minus‑B trigger for required employer notice is compact but potentially contentious: calculating retained earnings and parsing which unsecured debts to exclude can be fact‑intensive and invite disputes about timing and valuation, especially for complex capital structures or intercompany claims.
Another area of uncertainty is cross‑jurisdictional application. The bill treats “prescribed” plans and includes language about amounts that “would have been required” if a plan were regulated by an Act of Parliament; translating that hypothetical obligation into a concrete dollar figure for provincially regulated plans could produce contentious valuation and precedence disputes.
Finally, the short statutory timelines (five business days to notify, 30 days to fund, 30 days for member notice) sharpen enforcement but create operational pressure that may force employers to choose between satisfying regulator orders or preserving other creditor relationships. The Superintendent’s discretion to extend funding schedules mitigates this risk but transfers significant power to a regulator whose extensions will likely be litigated or negotiated in high‑stakes cases.
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