Air Canada 2011 Annual Report Download - page 42

2011 Air Canada Annual Report
42
9.8. Pension Funding Obligations
Air Canada maintains several pension plans, including defined benefit and defined contribution pension plans and plans
providing other retirement and post-employment benefits to its employees. Based on actuarial valuations completed in the
third quarter of 2011, the aggregate solvency deficit in its domestic registered pension plans as at January 1, 2011 was
$2,167 million. The valuations as of January 1, 2012 will be completed in the first half of 2012 but, as described in the
paragraph below, valuations will not increase pension past service cost funding obligations required prior to 2014. Solvency
deficit obligations for 2014 would be determined based on actuarial valuations completed in mid-2014.
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
solvency 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 million, $175 million, and $225 million in 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 in 2011 amounted to $385 million.
(Canadian dollars in millions) 2011 2010
Past service cost for registered pension plans $138 $ –
Current service cost for registered pension plans 171 169
Other pension arrangements(1) 76 74
Total contributions $385 $ 243
(1) Includes retirement compensation arrangements, supplemental plans and international plans.
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 2013, Air Canada’s past service pension funding obligations are also limited by the Air Canada 2009 Pension Plan
Funding Regulations.
Air Canada's projected pension funding obligations, on a cash basis, for 2012 and for the next year, are provided in the table
below. As of 2014, the Air Canada 2009 Pension Regulations will cease to have effect and Air Canada's pension funding
obligations may vary significantly based on a wide variety of factors, including those identified above.
(Canadian dollars in millions) 2012 2013
Past service domestic registered plans $ 173 $ 221
Current service domestic registered plans 168 173
Other pension arrangements(1) 85 82
Projected pension funding obligations $ 426 $ 476
(1) Includes retirement compensation arrangements, supplemental plans and international plans.