Air Canada 2014 Annual Report Download - page 107

107
2014 Consolidated Financial Statements and Notes 107 2014 Consolidated Financial Statements and Notes
The Corporation maintains several defined benefit
and defined contribution plans providing pension,
other post-retirement and post-employment benefits
to its employees, and to former employees for whom
the related pension assets and liabilities have not yet
been settled.
The Corporation is the administrator and sponsoring
employer of 10 Domestic Registered Plans (“Domestic
Registered Plans”) with defined benefit commitments
registered under the Pension Benefits Standards Act,
1985 (Canada). The US plan, UK plan and Japan plan
are international plans covering members in those
countries. In addition, the Corporation maintains a
number of supplementary pension plans which are
not registered. The defined benefit pension plans
provide benefits upon retirement, termination
or death based on the member’s years of service
and final average earnings for a specified period.
Under the terms of the domestic registered and
supplementary plans, there is no indexation provided
after January 1, 2007. Benefit payments are from
trustee-administered funds, however there are also
a number of unfunded plans where the Corporation
meets the benefit payment obligation as it falls due.
Plan assets held in trusts are governed by regulations.
The governance of the plans, overseeing all aspects
of the plans including investment decisions and
contributions, lies primarily with the Corporation.
The Pension Committee, a committee of the
Board of Directors, assists in the monitoring and
oversight of the plans to ensure pension liabilities are
appropriately funded, pension assets are prudently
invested, risk is managed at an acceptable level and
retirement benefits are administered in a proper and
effective manner.
The other employee benefits include health, life
and disability. These benefits consist of both post-
employment and post-retirement benefits. The
post-employment benefits relate to disability benefits
available to eligible active employees, while the
post-retirement benefits are comprised of health care
and life insurance benefits available to eligible retired
employees.
AMENDMENTS TO THE DEFINED BENEFIT
PENSION PLANS
In December 2013, amendments to the defined
benefit pension plans, determined in accordance with
new collective agreements during 2011 and 2012 and
changes applicable to non-unionized employees as
communicated to them in 2013, were approved by
OSFI and became effective January 1, 2014.
As a result of this approval, the Corporation has
recorded a credit of $82 in Benefit plan amendments
in 2013 related to the impact of those amendments
on pension liabilities. By virtue of its size and
incidence, this item is separately disclosed within the
consolidated statement of operations.
PENSION PLAN CASH FUNDING
OBLIGATIONS
As at January 1, 2014, the aggregate solvency
surplus in the domestic registered pension plans was
$89. The next required valuations to be made as at
January 1, 2015, will be completed in the first half
of 2015, but they will not impact the 2015 pension
past service cost funding obligations should the
Corporation continue to fund its domestic registered
pension plans pursuant to the 2014 Regulations.
Pension funding obligations under the normal funding
rules 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.
In December 2013, the Government of Canada
formally approved the Air Canada Pension Plan Funding
Regulations, 2014 (“the 2014 Regulations”) under the
Pension Benefits Standards Act, 1985 in respect of
special payments under Air Canada’s defined benefit
plans applicable to the period between 2014 to 2020
inclusive, expiring December 31, 2020. According to
the terms of the 2014 Regulations, Air Canada will be
required to make payments of at least $150 annually
with an average of $200 per year, to contribute an
aggregate minimum of $1,400 over seven years in
solvency deficit payments, in addition to its pension
current service payments. Air Canada may elect to
opt out of the regulations and have special payments
in respect of all Air Canada pension plans, collectively,
determined in accordance with normal funding rules.
9. PENSIONS AND OTHER BENEFIT LIABILITIES