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Today Air Canada released preliminary reports on the funded status of its pension plan, anticipating favourable results for January 1, 2014 including the possible elimination of the $3.7 billion shortfall. The final report will be completed later in the year.
For years, the funding shortfalls in the AC pension plan have left members and retirees concerned about the security of their pension and created a difficult environment for collective bargaining.
“Today’s news shows that Unifor has been justified in our efforts to maintain the defined benefit pension plan despite constant pressure from the company and the government to end it,” said Unifor National President Jerry Dias. We’re pleased that Air Canada CEO Calin Rovinescu wants to ensure that the pension funding remains secure and the deficit is eliminated. That’s also our priority and we intend hold Air Canada to their commitment.
Dias said that members, particularly new hires, have made sacrifices to maintain the pension plan. “We need to ensure that all parties, including Air Canada, act prudently going forward to safeguard retirement security.”
Air Canada has indicated that it will continue the fixed contributions required under the Air Canada Pension Plan Funding Regulations 2014. Unifor expects Air Canada to honour this commitment to a securely funded pension plan.
Air Canada reported several factors contributing to the improved pension funded status:
1) an increase in the discount rate (which reduces liabilities),
2) improved investment return on assets,
3) negotiated benefit reductions, and
4) company contributions to the plan.
The discount rate for the January 1, 2013 pension report was 3.0% compared to 3.9% for January 1, 2014, which has a sizable impact on the solvency funding.
Most pension plans in Canada have seen a significant improvement in funded status during 2013 and attribute the improved funding to good investment returns and the higher discount rates. Pension funds are sensitive to discount rates.
“Unifor will continue to hold employers to their defined benefit pension plans and seek securely funded pensions so that workers can retire at a reasonable age to a stable income,” said Dias.
