Nicholas LePan said in remarks to a committee of the Canadian Parliament that the Office of the Superintendent of Financial Institutions (OSFI) asked Air Canada to begin eliminating the deficit based on an analysis done in early 2003, according to a report by Washington-based legal publisher BNA.
To help protect Air Canada retirees and employees, he said OSFI told the company to stop taking “contribution holidays,” which it has done since 2001, file a required pension valuation report a year early, and adequately disclose the plans’ financial condition to participants.
In its April 2 bankruptcy filing under Canada’s Companies Creditors Arrangement Act, Air Canada cited OSFI demands to inject money into the underfunded plans as a key bankruptcy driver and confirmed that it has worked out an interim arrangement with OSFI on considering changes to the plans’ structures. That proposal could include reducing or freezing current employees’ benefits and transformation of the current traditional pension program into a defined contribution plan (See Air Canada Blames Pension Regulator for Bankruptcy).
The airline is administrator for 10 registered pension plans and a number of unregistered supplementary pensions, covering in total about 17,000 Air Canada retirees and almost 40,000 current employees.
Le Pan noted in his presentation to the parliamentary committee that, under the 1985 Pension Benefits Standards Act any deficit found by the updated evaluation reports requested from Air Canada would only have to be funded over a five-year period, but he conceded that accelerating the timing of the reports was intended to enhance the position of plan members. OSFI told the airline it had some flexibility in the precise timing of the reports and that it recognized the funding requirement would be affected by negotiations the airline indicated it planned to conduct with its unions on restructuring the plans, he testified.