Air Canada 2012 Annual Report Download - page 111

2012 Consolidated Financial Statements and Notes
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Pension Plan Cash Funding Obligations
As at January 1, 2012, the aggregate solvency deficit in the domestic registered pension plans was $4,200. The next required
valuations to be made as at January 1, 2013, will be completed in the first half of 2013, but as described below, they will not
increase the 2013 pension past service cost funding obligations.
In July 2009, the Government of Canada adopted the Air Canada 2009 Pension Regulations. The Air Canada 2009 Pension
Regulations relieved Air Canada from making any past service contributions (i.e. special payments to amortize the plan deficits)
to its ten domestic defined benefit registered pension plans 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 is the lesser of (i) $150, $175, and $225 in respect of 2011, 2012, and 2013, respectively, on an
accrued basis, and (ii) the maximum past service contribution permitted under the Canadian Income Tax Act. Current service
contributions 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, total employer pension
funding contributions during 2012 amounted to $433. Expected total employer contributions to defined benefit pension plans
for 2013 are $471.
Pension funding obligations are generally dependent on a number of factors, including the assumptions used in the most
recently filed actuarial valuation reports for current service (including the applicable discount rate used or assumed in the
actuarial valuation), the plan demographics at the valuation date, the existing plan provisions, existing pension legislation and
changes in economic conditions (mainly the return on fund assets and changes in interest rates). Actual contributions that are
determined on the basis of future valuation reports filed annually may vary significantly from projections. In addition to
changes in plan demographics and experience, actuarial assumptions and methods may be changed from one valuation to the
next, including due to changes in plan experience, financial markets, future expectations, changes in legislation and other
factors. Until the end of 2013, Air Canada’s past service pension funding obligations are limited by the Air Canada 2009
Pension Plan Funding Regulations.
As of 2014, the Air Canada 2009 Pension Regulations will cease to have effect. Air Canada has, with the support of its five
main Canadian labour groups, entered into discussions with the federal government with the purpose of requesting an
extension of pension funding relief which would cap annual pension funding contributions at acceptable levels. There can be
no assurances that extended or new pension funding relief will be available and any such relief would be subject to the passing
of regulations by the federal government.
Absent the adoption and implementation of new rules establishing funding requirements within defined parameters applicable
specifically to Air Canada, under generally applicable regulations, Air Canada's pension funding obligations may vary
significantly based on a wide variety of factors, including those described above as well as the application of normal past
service contribution rules which would generally require one fifth of any solvency deficit, determined on the basis of an
average over the previous three years, to be funded each year in addition to required current service contributions.
Pension and Benefits Agreement with Aveos
Air Canada and Aveos are parties to a Pension and Benefits Agreement covering the transfer of certain pension and benefit
assets and obligations to Aveos. On July 14, 2011 (the “Certification Date”), certain unionized employees of Air Canada
elected to become employees of Aveos.
Following Aveos filing for court protection pursuant to the Companies’ Creditors Arrangements Act (“CCAA”) in March 2012,
OSFI ordered the termination of Aveos’ defined benefit pension plans and, as a result, the assets and liabilities accruing prior
to the Certification Date in respect of transferred employees will not be transferred to Aveos’ plans and will remain under Air
Canada’s pension plans. In addition, obligations under the other post-retirement and post-employment benefits plans
pertaining to the transferred unionized employees, for accounting purposes, continue to be included in these financial
statements but their final determination may be subject to Aveos’ CCAA proceedings.
In light of the uncertainty relating to Aveos’ CCAA filing, no final determination as to the impact of Aveos’ CCAA filing on
transfers and compensation amounts, if any, between Air Canada and Aveos has been made, and the ultimate settlement of
such amounts may be dependent on resolution by the court process under Aveos’ CCAA proceedings.