Air Canada 2009 Annual Report Download - page 112

2009 Air Canada Annual Report
112
8. PENSION AND OTHER BENEFIT LIABILITIES
The Corporation maintains several defi ned benefi t and defi ned contribution plans providing pension, other post-retirement
and post-employment benefi ts to its employees, including those employees of the Corporation who are contractually
assigned to Aveos and were contractually assigned to Aeroplan.
The Corporation is the administrator and sponsoring employer of ten Domestic Registered Plans (“Domestic Registered
Plans”) under the Pension Benefi ts Standard Act, 1985 (Canada). The US plan, UK plan and Japan plan are international plans
covering employees in those countries. In addition, the Corporation maintains a number of supplementary pension plans,
which are not registered. The defi ned benefi t pension plans provide benefi ts upon retirement, termination or death based
on the member’s years of service and fi nal average earnings for a specifi ed period.
The other employee benefi ts consist of health, life and disability. These benefi ts consist of both post-employment and post-
retirement benefi ts. The post-employment benefi ts relate to disability benefi ts available to eligible active employees, while
the post-retirement benefi ts are comprised of health care and life insurance benefi ts available to eligible retired employees.
Certain Corporation employees perform work for ACE and Aveos and are members of Corporation-sponsored defi ned benefi t
pension plans and also participate in Corporation-sponsored health, life and disability benefi t plans. Other Corporation
employees performed work for Aeroplan until the date of transition to employment at Aeroplan and then ceased to accrue
benefi ts under the Corporation-sponsored defi ned benefi t pension plans and under the Corporation-sponsored health, life
and disability benefi t plans. These consolidated fi nancial statements include all of the assets and liabilities of all Corporation-
sponsored plans. The employee benefi t expense in these consolidated fi nancial statements includes the expenses for all
employees participating in the plans less a cost recovery which is charged to ACE, Aveos, and Aeroplan for those employees
contractually assigned. The cost recovery includes current service costs for pensions, past service cost to Aeroplan for
pensions and a portion of post-employment and post-retirement benefi ts to ACE and Aveos, based on actuarial calculation
for their specifi c employee group. This cost recovery amounted to $32 for the year ended December 31, 2009 (2008 - $40).
In May 2009, Air Canada and Aeroplan reached an agreement with the Canadian Auto Workers (CAW) Local 2002 providing
for a process for the approximately 750 Air Canada employees then assigned to and working in the Aeroplan contact
centres to choose to transition to employment at Aeroplan, effective June 1, 2009, or to remain employees of Air Canada.
Employees at Air Canada work locations who became surplus to Air Canada’s needs due to employees who were senior to
them and then working at Aeroplan contact centres choosing to remain employees of Air Canada were given the option to
transition to employment at Aeroplan. Effective October 4, 2009, all affected employees had completed the transition to
Aeroplan. For those employees who transferred to Aeroplan, their service, which largely determines benefi t levels under the
Air Canada pension and other employee benefi t plans, ceased to accrue as of the date of employment with Aeroplan. Air
Canada and Aeroplan continue to discuss the terms surrounding the transfer of pension benefi ts. and certain implications
relating to same remain to be resolved. Air Canada continues to retain plan assets and report liabilities for services accrued
for the transferred Aeroplan employees as at December 31, 2009, pending fi nal determination of this matter. Aeroplan is
now contributing current service costs in their pension plan for service accruing with Aeroplan.
As described in Note 18, Air Canada and Aveos are parties to a Pension and Benefi ts Agreement covering the future transfer
of certain pension and benefi t assets and obligations to Aveos.
As described in Note 2, the accounting for pensions requires management to make signifi cant estimates including estimates
as to the discount rate applicable to the benefi t obligation and the expected rate of return on plan assets.
Pension Plan Cash Funding Obligations
As at January 1, 2009, based on the actuarial valuations which were used to determine certain pension funding requirements
in 2009, the aggregate solvency defi cit in the registered pension plans was $2,835. Based on preliminary actuarial valuations,
as at January 1, 2010, the aggregate solvency defi cit in the registered plans is estimated to be between $2,500 and $2,700.
This preliminary estimated solvency defi cit range includes the impact of the actual return on plan assets as shown below
partially offset by a decrease in the discount rate used to value the benefi t obligation which has the effect of increasing
the benefi t obligation. The fi nal actuarial valuations for January 1, 2010 will be completed in the fi rst half of 2010, but as
described below, they will not impact the 2010 pension funding obligations.