Plan assets lost 25% of value during fiscal 2022.
A kindergarten student could have made better investment choices.
Jazz DB Pilots
Moderators: North Shore, sky's the limit, sepia, Sulako, lilfssister, I WAS Birddog
-
Captain S itmagnet
- Rank 3
- Posts: 110
- Joined: Mon Apr 24, 2006 7:53 am
Re: Jazz DB Pilots
I think either of my chihuahuas could have done better by picking which random tree to pee on.
Re: Jazz DB Pilots
Meanwhile, at Air Canada…..
8.7 PENSION FUNDING OBLIGATIONS
Air Canada maintains several defined benefit pension plans, including domestic registered pension plans and supplemental pension plans. Air Canada also sponsors several defined contribution pension plans and pension plans for foreign employees and contributes to some multi-employer pension plans. In addition, Air Canada has plans providing other retirement and post- employment benefits to its employees.
On a preliminary basis, at January 1, 2023, the aggregate solvency surplus in Air Canada’s domestic registered pension plans was estimated at $4.4 billion. The final valuations will be completed in the first half of 2023. As permitted by legislation and subject to applicable plan rules, amounts in excess of 105% on a solvency basis may be used to reduce current service contributions under the defined benefit component or to fund the employer contribution to a defined contribution component within the same pension plan.
Total employer defined benefit pension funding contributions (including international and supplemental plans) amounted to $89 million in 2022 and are forecasted to be $88 million in 2023.
Net of the surplus in the defined benefit components which was used to fund the employer contribution to a defined contribution component within the same pension plan, total employer contributions for the defined contribution plans and multi-employer plans amounted to $42 million in 2022 and are forecasted to be $60 million in 2023.
At December 31, 2022, approximately 75% of Air Canada’s pension assets in the domestic defined benefit plans were invested in fixed income instruments to mitigate a significant portion of the interest rate (discount rate) risk. Air Canada seeks to maintain a high percentage of long-term fixed income products to hedge pension liabilities.
Included in plan assets, for determining the net benefit obligation for accounting purposes, are 17,646,765 (2021 – 17,646,765) Class B voting shares of Air Canada which were issued to a trust in 2009 in connection with pension funding agreements reached with all of Air Canada’s Canadian-based unions. The trust arrangement provides that proceeds of the sale of the trust shares will be retained and applied to reduce future pension solvency deficits, if any should materialize. In addition, for so long as the trust continues to hold at least 2% of Air Canada’s issued and outstanding shares, the trustee will have the right to designate one nominee to the Board of Directors of Air Canada (who shall not be a member or officer of any of Air Canada’s Canadian-based unions), subject to completion by Air Canada of its usual governance process for selection and confirmation of director nominees.
With Air Canada’s domestic registered plans in a surplus position on a solvency basis, the accounting rules prevent the recognition of the value of the shares held in trust as part of the pension assets. The shares held in trust had a fair value of $342 million at December 31, 2022 (2021 – $373 million), however after giving effect to the asset ceiling, the recognized accounting value of the trust asset is nil.
In November 2021, Air Canada announced that its Canadian unions and the Air Canada Pionairs agreed in principle to permit certain other uses of the proceeds of the shares discussed above. If all conditions are met, shares in the trust will be gradually sold over a period of up to 15 years with the net proceeds from the sales used to make lump sum payments to Canadian pensioners and to fund voluntary separation packages for senior unionized employees and non-executive employees. Pursuant to the agreement in principle, the above-described right to designate one nominee for election to the Board of Directors of
Air Canada would continue until the earlier of (i) January 1, 2030, or (ii) the date that Air Canada shares in trust represent 2% or less of Air Canada’s issued and outstanding shares. There are several conditions to the completion of the agreement in principle and effecting such sales and payments. These include the conclusion of definitive documentation, and the receipt of all required regulatory and other approvals which remain outstanding. While the satisfaction of the conditions is being pursued, there can be no assurance that these or any other conditions will be satisfied.
8.7 PENSION FUNDING OBLIGATIONS
Air Canada maintains several defined benefit pension plans, including domestic registered pension plans and supplemental pension plans. Air Canada also sponsors several defined contribution pension plans and pension plans for foreign employees and contributes to some multi-employer pension plans. In addition, Air Canada has plans providing other retirement and post- employment benefits to its employees.
On a preliminary basis, at January 1, 2023, the aggregate solvency surplus in Air Canada’s domestic registered pension plans was estimated at $4.4 billion. The final valuations will be completed in the first half of 2023. As permitted by legislation and subject to applicable plan rules, amounts in excess of 105% on a solvency basis may be used to reduce current service contributions under the defined benefit component or to fund the employer contribution to a defined contribution component within the same pension plan.
Total employer defined benefit pension funding contributions (including international and supplemental plans) amounted to $89 million in 2022 and are forecasted to be $88 million in 2023.
Net of the surplus in the defined benefit components which was used to fund the employer contribution to a defined contribution component within the same pension plan, total employer contributions for the defined contribution plans and multi-employer plans amounted to $42 million in 2022 and are forecasted to be $60 million in 2023.
At December 31, 2022, approximately 75% of Air Canada’s pension assets in the domestic defined benefit plans were invested in fixed income instruments to mitigate a significant portion of the interest rate (discount rate) risk. Air Canada seeks to maintain a high percentage of long-term fixed income products to hedge pension liabilities.
Included in plan assets, for determining the net benefit obligation for accounting purposes, are 17,646,765 (2021 – 17,646,765) Class B voting shares of Air Canada which were issued to a trust in 2009 in connection with pension funding agreements reached with all of Air Canada’s Canadian-based unions. The trust arrangement provides that proceeds of the sale of the trust shares will be retained and applied to reduce future pension solvency deficits, if any should materialize. In addition, for so long as the trust continues to hold at least 2% of Air Canada’s issued and outstanding shares, the trustee will have the right to designate one nominee to the Board of Directors of Air Canada (who shall not be a member or officer of any of Air Canada’s Canadian-based unions), subject to completion by Air Canada of its usual governance process for selection and confirmation of director nominees.
With Air Canada’s domestic registered plans in a surplus position on a solvency basis, the accounting rules prevent the recognition of the value of the shares held in trust as part of the pension assets. The shares held in trust had a fair value of $342 million at December 31, 2022 (2021 – $373 million), however after giving effect to the asset ceiling, the recognized accounting value of the trust asset is nil.
In November 2021, Air Canada announced that its Canadian unions and the Air Canada Pionairs agreed in principle to permit certain other uses of the proceeds of the shares discussed above. If all conditions are met, shares in the trust will be gradually sold over a period of up to 15 years with the net proceeds from the sales used to make lump sum payments to Canadian pensioners and to fund voluntary separation packages for senior unionized employees and non-executive employees. Pursuant to the agreement in principle, the above-described right to designate one nominee for election to the Board of Directors of
Air Canada would continue until the earlier of (i) January 1, 2030, or (ii) the date that Air Canada shares in trust represent 2% or less of Air Canada’s issued and outstanding shares. There are several conditions to the completion of the agreement in principle and effecting such sales and payments. These include the conclusion of definitive documentation, and the receipt of all required regulatory and other approvals which remain outstanding. While the satisfaction of the conditions is being pursued, there can be no assurance that these or any other conditions will be satisfied.
Re: Jazz DB Pilots
Could the Jazz DB plan not just “piggyback “ on the AC DB plan? In other words, just invest in the exact same way that the AC plan does?
-
canadian_aviator_4
- Rank 6
- Posts: 444
- Joined: Mon Aug 29, 2022 9:32 am
Re: Jazz DB Pilots
Sounds like it’s managed just like the company: poorly.
Re: Jazz DB Pilots
Curious, does this mean the company is now responsible to ensure the funding threshold is met? Or was is it overfunded before it lost 25%? I know this scenario is very unlikely.
Re: Jazz DB Pilots
Is the copycat annuity an option for those on the Jazz DB plan? I saw it mentioned in the ALPA forum but don't know if anyone has successfully done it.
Re: Jazz DB Pilots
He’s losing confidence in his company pension - what should he do?
ROB CARRICK
PERSONAL FINANCE COLUMNIST
PUBLISHED APRIL 8, 2021
Having a defined-benefit pension plan is a luxury because it means lifetime income in retirement, no matter what happens in financial markets from year to year. But even the minority of people with this type of pension have their worries.
“I have a company pension but am losing confidence with the company,” a reader of this newsletter recently wrote. “Young people are not career-minded in this industry (I see them come and go), and the industry is old and past its glory days. I am thinking of cashing out into a locked-in retirement account (LIRA). Any advice?”
Let’s consult on this question with David Field, a certified financial planner (CFP) with Papyrus Planning.
“I hate rules of thumb in personal finance, but let me break my own rule for this one. It is almost never advantageous for someone to commute the value of their defined-benefit pension,” Mr. Field wrote in a detailed answer to this reader question.
“This is especially true for a government employees, but also very true for private-company pensions. There could be personal reasons why commuting the value of your pension makes sense, such as shortened life expectancy, but generally it is not advantageous.”
The reason for this is that there’s a maximum transferable amount to a LIRA when the pension is commuted, Mr. Field said. Often when you have worked at your employer for a while, this results in the remainder of the commuted value being paid as taxable income in the year you commute and is taxable on top of your current employment income.
This causes a huge portion of the commuted value to be paid in income tax. Some extra funds could be sheltered in a registered retirement savings plan, but only up to your available contribution room accumulated from previous years.
One further reason not to commute is that guaranteed pension income becomes more valuable when interest rates are as low as they are right now. To match the returns from a defined-benefit pension, you would have to take on even greater investment risk.
Now, regarding this reader’s concern about the health of his pension and the company he works for. Mr. Field suggests researching the pension’s funding ratio to see how consistently it is funded near or above 100 per cent. Frequent ratios below 100 per cent could cause concern.
Mr. Field’s final suggestion for this reader if he remains concerned about the health of his pension: “When you are about to apply to start your pension, look at transferring the benefit to a copycat annuity – creating an identical pension amount guaranteed instead by a life insurance company.”
He said that in a time of low interest rates, the commuted value of a pension can be higher than the cost of purchasing the annuity – depending on the retiree’s age and the guarantees to a surviving spouse. Therefore, the pensioner can lock in a guaranteed benefit with the annuity and still have money afterward that goes into an RRSP or is paid out in cash as a retirement-type bonus.
ROB CARRICK
PERSONAL FINANCE COLUMNIST
PUBLISHED APRIL 8, 2021
Having a defined-benefit pension plan is a luxury because it means lifetime income in retirement, no matter what happens in financial markets from year to year. But even the minority of people with this type of pension have their worries.
“I have a company pension but am losing confidence with the company,” a reader of this newsletter recently wrote. “Young people are not career-minded in this industry (I see them come and go), and the industry is old and past its glory days. I am thinking of cashing out into a locked-in retirement account (LIRA). Any advice?”
Let’s consult on this question with David Field, a certified financial planner (CFP) with Papyrus Planning.
“I hate rules of thumb in personal finance, but let me break my own rule for this one. It is almost never advantageous for someone to commute the value of their defined-benefit pension,” Mr. Field wrote in a detailed answer to this reader question.
“This is especially true for a government employees, but also very true for private-company pensions. There could be personal reasons why commuting the value of your pension makes sense, such as shortened life expectancy, but generally it is not advantageous.”
The reason for this is that there’s a maximum transferable amount to a LIRA when the pension is commuted, Mr. Field said. Often when you have worked at your employer for a while, this results in the remainder of the commuted value being paid as taxable income in the year you commute and is taxable on top of your current employment income.
This causes a huge portion of the commuted value to be paid in income tax. Some extra funds could be sheltered in a registered retirement savings plan, but only up to your available contribution room accumulated from previous years.
One further reason not to commute is that guaranteed pension income becomes more valuable when interest rates are as low as they are right now. To match the returns from a defined-benefit pension, you would have to take on even greater investment risk.
Now, regarding this reader’s concern about the health of his pension and the company he works for. Mr. Field suggests researching the pension’s funding ratio to see how consistently it is funded near or above 100 per cent. Frequent ratios below 100 per cent could cause concern.
Mr. Field’s final suggestion for this reader if he remains concerned about the health of his pension: “When you are about to apply to start your pension, look at transferring the benefit to a copycat annuity – creating an identical pension amount guaranteed instead by a life insurance company.”
He said that in a time of low interest rates, the commuted value of a pension can be higher than the cost of purchasing the annuity – depending on the retiree’s age and the guarantees to a surviving spouse. Therefore, the pensioner can lock in a guaranteed benefit with the annuity and still have money afterward that goes into an RRSP or is paid out in cash as a retirement-type bonus.
