Monday, July 27, 2009

Another Assault on Pensions: Air Canada

I’ve said before that a great many Canadians won’t get the pensions they were promised through their working lives. Too many pension plans just don’t contain enough money to cover the promised payments. Recent news about Air Canada adds to this problem.

Air Canada’s pension plan holds $2.9 billion less than it needs to hold to cover promised payments, and this deficit is likely to grow because the company has received approval to make reduced contributions to its pension plan for the next few years to avoid another bankruptcy.

The possible outcomes here are

1. Air Canada’s business strengthens enough in the coming years that it makes up the pension shortfall (HA!).

2. The government makes up the pension shortfall and retired employees get all of their money.

3. Employees don’t get the money they were promised.

4. A combination of 2 and 3 where the government makes up some of the shortfall.

My guess is that outcome 4 is the most likely. I’d like to think that all employees of all companies will get their full pensions, but this appears to be impossible.

1 comment:

  1. Employees don’t get the money they were promised.

    I understood pension contributions were a contractual obligation between the employer & the employee, and the funds were essentially supposed to be held in trust for the employee. Maybe it's time we removed this responsibility from the employer, so it is no longer tempting for them to dip into these trust funds to prop up the company.

    Maybe the retirees association had it right, and CPP was somehow expanded....