Air Canada 2009 Annual Report Download - page 42

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2009 Air Canada Annual Report
42
10.6 PENSION FUNDING OBLIGATIONS
The Corporation maintains several defi ned benefi t pension plans as described in section 16 of this MD&A. 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 million. Based on preliminary actuarial
valuations as at January 1, 2010, the preliminary estimate of the aggregate solvency defi cit in the registered plans is
estimated to be between $2,500 million and $2,700 million. This preliminary estimate of the solvency defi cit range includes
the impact of the actual return on plan assets 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.
In July 2009, the Government of Canada adopted the Air Canada 2009 Pension Regulations. The Air Canada 2009 Pension
Regulations relieve the Corporation from making any special (past service cost) payments in respect of the period beginning
April 1, 2009 and ending December 31, 2010. Thereafter, in respect of the period from January 1, 2011 to December 31,
2013, the aggregate annual past service contribution shall equal the lesser of (i) $150 million, $175 million, and $225
million in respect of 2011, 2012, and 2013, respectively and (ii) the maximum past service contribution permitted under
the Income Tax Act.
The Air Canada 2009 Pension Regulations were adopted in coordination with the Pension MOUs identifi ed in section 6 of
this MD&A. Pursuant to the Pension MOUs, on October 26, 2009, Air Canada issued to a trust, 17,647,059 Class B voting
shares. This number of shares represented 15% of the shares of Air Canada issued and outstanding as at the date of the
Pension MOUs and the date of issuance (in both cases after taking into account such issuance). All net proceeds of sale of
such shares by the trust are to be contributed to the pension plans. For so long as the trust continues to hold at least 2%
of Air Canada’s issued and outstanding shares of Air Canada, the trustee will have the right to designate one nominee (who
shall not be a member or offi cer of any of Air Canada’s Canadian-based unions) to Air Canada’s board of directors, subject to
completion of Air Canada’s usual governance process for selection and confi rmation of director nominees. Current service
contributions will continue to be made in the normal course while the Air Canada 2009 Pension Regulations are in effect.
After consideration of the effect of the Air Canada 2009 Pension Regulations, as outlined above, employer pension funding
contributions amounted to $389 million in 2009.
(Canadian dollars in millions) 2009 Contributions 2008 Contributions
Past service cost for registered pension plans $ 140 $ 189
Current service cost for registered pension plans 185 165
Other pension arrangements (1) 64 102
Total contributions $ 389 $ 456
(1) Includes retirement compensation arrangements, supplemental plans and international plans.