Pension

Learn about pension

https://mercerhrs.com/ca/AirCanada/Presentation/EN

Pensions / Pension Communications

Important statement

Unifor does not provide financial, investment, tax, legal, accounting, or other advice. If you need advice, please seek help from a professional advisor.

If you have a pension-related question, please click here.

Pension Communications Committee:

  Marilyne Boettger
  Joanne Goulet
  Stephen Lussier [email protected]

External Links
Pension Communication
Frequently Asked Questions
  1. What are the new pension rules?
  2. I understand that both AC and former CAIL can retire or terminate early, taking a lump sum transfer value option. I realize there are age penalties, but I want to take my lump sum pension and leave Air Canada. What is the latest date or combination of points and age, which allows this option?
  3. Am I required to make pension contributions while on a disability leave?
  4. When are pension statements distributed?
  5. What is the difference between a “Defined Benefit” pension plan, vs. a “Defined Contribution” plan?
  6. When do I know if I qualify for AC, full travel benefits when I retire?
  7. Do you know why on the T4 slips box 20 RPP contributions, and box 52 pension adjustment is more than twice the amount? I thought this should reflect dollar per dollar between employee and employer?
  8. What is the early retirement eligibility for a former Canadian employee?
  9. What is the earliest date that an employee with all years service in the Air Canada Pension Plan, can retire without a penalty?
  10. I know normal retirement age at Air Canada is age 65 but what if I want to go sooner?
  11. Pension options, on retirement or quitting?
  12. If I terminate and am entitled to the lump sum transfer value option, is it more advantageous to take my money out of the pension plan or to leave it in the plan?
  13. What happens to the pension payments made over the years by employees who have been laid off? What if they find another job while waiting to be called back? What happens if they don’t want to wait until then, which could be months away?
  14. Is there any way to get the payments sent directly to my RRSP without paying tax, or does AC not provide that service?
  15. I am a recently retired former employee of Canadian Airlines International. If Air Canada is liquidated, what will happen to the pension fund?
  16. Does a part time employee earn pensionable years equally as a full time employee with the pensionable money amount being approximately 50% or do they only accrue half time for years of service?
  17. Is my Air Canada pension indexed?
  18. Can a member who is planning on opting for the Voluntary Separation Package, over 2 years, plus pension, receive the 24 months of separation pay before opting to take the accelerated pension option?
  19. What is the “Front-End Loading Formula” (high level pension)?
  20. If I elect to take the Higher Pension Option (HPO) as above, when it is reduced at age 65, is this due to some government regulation that forces the reduction because I can then start collecting CPP and Old Age Security (OAS)?
  21. Have we ever been able to use RRSP monies to buy age instead of the VSP?
  22. Can you get tax credit for age make-up purchase?

1. What are the new pension rules?

The new pension rules come into effect Jan.01, 2014, therefore, the last date to retire under the old rules, was December 1, 2013. Remember, you can only retire on the 1st of a month.

Members still have the right to retire with a monthly pension before age 55, if you have 25 years of service or 80 points (service and age). However, your pension will now be reduced from age 65. This means your age penalty is now much greater under the new plan, approximately 6% a year from age 65.

Effective Jan.01/14, an unreduced pension is only available at age 55, with 85 points. Eg. age 55 plus 30 years of service.

  

2. I understand that both AC and former CAIL can retire or terminate early, taking a lump sum transfer value option. I realize there are age penalties, but I want to take my lump sum pension and leave Air Canada. What is the latest date or combination of points and age, which allows this option?

The lump-sum full-withdrawal is available if you’re pensionable and more than ten years from the unreduced age. The age for x-CAIL years is 60 (thus 50) and AC is 55 (thus 45). There is also a lump-sum transfer option but that is a separate item, for those who leave the company prior to retirement (covered later).

3. Am I required to make pension contributions while on a disability leave?

Pension contributions are not required during a disability leave. During that period the disability benefits are substituted for the basic earnings you would have been paid if actively employed for the purpose of calculating pension benefits. This means an employee continues to earn full pension service while on a disability leave.

 4. When are pension statements distributed?

Pension statements are normally distributed in June. They should be carefully reviewed to ensure that the amount of pensionable service is accurate. Also, one always has to remember the normal retirement age is 65 years old, anything else is considered early.

5. What is the difference between a “Defined Benefit” pension plan, vs. a “Defined Contribution” plan?

The difference between “Defined Benefit” and “Defined Contribution” plans is basically the employer’s role in the pension plan.
  
In a “Defined Benefit” plan, such as we have with Air Canada, there is a definite formula for pension payments which guarantees that a certain sum of money will be paid every month. If there is ever a shortfall in the funding of the pension plan the employer is obligated to put money into the plan to ensure there is enough money to cover all the liabilities. When an employee retires, the pension is payable for the rest of one’s life, and a spouse is then eligible for a survivor pension. The pension comes from a pooled sum of money from all contributions not just the employee’s.
  
In a “Defined Contribution” plan the employer matches the employee’s contribution and the employee is responsible for managing all the money. The total amount in the individual’s plan upon retirement is all that there will ever be. If there is insufficient money because the employee has mismanaged the money or invested poorly then that’s too bad. The employer is off the hook for all responsibility. Upon retirement the employee has a lump sum of money to live on for the rest of his/her life. If it runs out that’s the end of it.
  
This is why most worker pensions, certainly those in unionized workplaces, are Defined Benefit plans. The onus is on the employer to ensure that there are sufficient funds to continue making all the pension payments to every retiree.

6. When do I know if I qualify for AC, full travel benefits when I retire?

Employees who retire under the Company’s Pension Plan will receive their normal allowance of travel privileges for themselves, their spouse, dependent children and parents on retirement.
  
In order to receive a pension an employee have either 25 years of qualifying service, age plus service equal to 80, or be age 65.
  
Special conditions for passes apply to employees who retire with less than 10 years of continuous service whereby fewer passes and available at a lower priority.
  
This info comes from the company’s travel policy. “A retired employee who meets AC retirement criteria is entitled to personal travel privileges”. Company policy on which retires qualify, can be reviewed on Aeronet under:
  
My Travel >  Employee Travel > News and Policies > Policies > Retired Employee

 

7. Do you know why on the T4 slips box 20 RPP contributions, and box 52 pension adjustment is more than twice the amount? I thought this should reflect dollar per dollar between employee and employer?

Box 20 is just the member’s contribution to the pension plan. Box 52 is the PA or Pension Adjustment, which is a calculation of the total benefit earned during the year, measured in dollars per year at retirement. In theory it should be more than two times as much, since it consists of our contributions, a matching company contribution, and then an extra amount which represents the benefit amount.
  
This is what makes Defined Benefit Pensions like ours so beneficial to members. In a Defined Contribution Plan (which the company wanted to switch to) you just have your contributions with the matching amount. No extra is required.
  
You have highlighted the reason our pension is so valuable to our members and also why buying back any pension service (if available), is usually a good return on your money.

8. What is the early retirement eligibility for a former Canadian employee?

All service after June 2000, is treated as Air Canada Pension Plan time.  Prior service comes under the x-CAIL Plan.  Under the x-CAIL Plan, early retirement without penalty is at age 60, with age and service equal to 80 points; or at age 55 with 25 years service.
 After Jan.01/14, a member would need 85 points to receive a pension without penalty.  E.g. age 55 plus 30 years of service.  However, service prior to June 2000, is still eligible to be unreduced in the x-CAIL portion, but all AC service will have a penalty.
 

 9. What is the earliest date that an employee with all years service in the Air Canada Pension Plan, can retire without a penalty?

Age 55 and age plus qualifying service equal 80 points. For example, age 55 and 25 years service, up until Jan.01, 2014. After this date, a member would need 85 points to receive a pension without penalty. E.g. age 55 plus 30 years service.

  

10. I know normal retirement age at Air Canada is age 65 but what if I want to go sooner?

Presently the Plan allows early retirement with a penalty if you met certain conditions as of Jan.01/14.
You can retire with 25 years OR
When the sum of age and qualifying service equal 80 or more
 
However, the penalty can be costly, for those leaving early. Effective Jan.01, 2014 as your pension will be reduced from age 65, at about 6% a year (not age 55 as under current plan).
 
The best and most up to date information available, comes from your personal pension calculator, found under. Aeronet, under My HR > Main Menu > Total Rewards >My Pension >Information and Tools > Defined Benefit, choose either long or short term calculator. Let it run and then open the report when completed. This can take several minutes of processing, it’s a big calculation.

 11. Pension options, on retirement or quitting?

I have 5.5 years with the company. I am not sure how much I have contributed to the pension but if I assume it is $10,000 do I get that money in my pocket? Is it automatically rolled into an RRSP (locked in until a certain age). What about the company’s contribution? Each year, they are expected to contribute a certain amount on behalf of me to my pension. Or is it only when I retire that they put in a huge lump sum? Will I see anything in addition to the money that I have contributed (interest or company contributions)?
 
After 2 years your pension is vested, which means you also own the company’s contributions. If someone terminates with less than 2 years they only get their contributions refunded. Assume you’ve contributed $10,000,,, the amount you would be dealing with is the company’s matching $10,000 plus accumulated interest. You have the following options:
  
1. leave the vested benefits in the AC plan to provide for a small pension at normal retirement age (65). The company will give you the amounts in an information package when you terminate. The amounts are shown on your pension latest statement.
 
2. transfer the vested benefits to another plan with a new employer, if the rules of each plan permit.
 
3. transfer the amount to a locked-in RRSP (called a LIRA) Locked In Retirement Account, which under pension legislation can only be used to provide retirement income.
 
4. transfer the funds to an insurance company, to purchase a deferred annuity.

These rules are in the PBSA (Pension Benefits Standards Act) that cover federal pensions. It looks like a lot of options but they all amount to the same thing…providing an income for retirement. The rules were different prior to 1987, when you could get a refund of all contributions.

Most of the above rules also apply to members hired after Jun 30/11, however, your pension benefits fall under a pension hybrid plan. See the following link: Overview of Pension Arbitration Award

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12. If I terminate and am entitled to the lump sum transfer value option, is it more advantageous to take my money out of the pension plan or to leave it in the plan?

OSFI (the Federal pension regulator) has put conditions on these requests, due to a current deficit in the pension plan. Please contact a Trustee for the amounts as it is subject to change. Presently, the rules allow a member to take about 80%, with the balance at the end of 5 years.

  

13. What happens to the pension payments made over the years by employees who have been laid off? What if they find another job while waiting to be called back? What happens if they don’t want to wait until then, which could be months away?

When an employee is laid off their pension contributions remain in the pension plan and continue to accrue interest. During the period of lay off they do not accrue any more pensionable service nor are they permitted to buy back laid off service when they return to active employment with Air Canada.
  
The only way they can get a refund of their pension monies, assuming they are not eligible for early retirement is to terminate.
  
If a terminated employee is vested (having more than two years of pensionable service) any monies applicable to service which is accrued on or after January 1, 1987 must either be transferred to a locked-in RRSP or they can take a deferred pension (when eligible). for service which accrued prior to 1987 there are different options and there are also age restrictions for refunds applicable to service which accrued on or after January 1, 1987.
  
If, during a period of lay off, the employee works for another employer it should not have any effect on his/her current company pension plan.

  

14. Is there any way to get the payments sent directly to my RRSP without paying tax, or does AC not provide that service?

If you are retiring, pension payments cannot be paid into an RRSP. This is not allowed by Canada Customs and Revenue Agency (CCRA). At one time it was but the Income Tax regulations were changed about 15 years ago to prevent pension payment from being “rolled” over into the RRSPs.
  
The payment of “severance pay” directly into an RRSP is no longer allowed. This was a decision made by the company because of administrative concerns.

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15. I am a recently retired former employee of Canadian Airlines International. If Air Canada is liquidated, what will happen to the pension fund?

The Air Canada pension plan has a deficit and the amount changes each year. It has recovered from its worst point, due improving markets. What the pension fund really needs to gain solvency, is higher interest rates. Remember, as long as the company is operating, your pension benefits remains as is.
  
If however the company declares bankruptcy, your pension payments could be reduced by a percentage, to cover any solvency shortfall. There is a complicated pecking order within the plan, as to which internal group gets what. That is the worst that could happen, which would also include a loss of health benefits.
  
The only good news is that “pension funds”, are not part of the company’s assets and creditors such as banks, have no claim on them.

  

16. Does a part time employee earn pensionable years equally as a full time employee with the pensionable money amount being approximately 50% or do they only accrue half time for years of service?

Their service is based on hours worked each year, divided by 2080 hours. Therefore, someone who works 1040 hours would get 6 months pensionable service and one year of qualifying service

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17. Is my Air Canada pension indexed?

NO. However if a pension plan is in surplus, future contract negotiations could negotiate an improvement like this.

 18. Can a member who is planning on opting for the Voluntary Separation Package, over 2 years, plus pension, receive the 24 months of separation pay before opting to take the accelerated pension option?

YES. To the current rate of inflation as determined by the Federal government.

19. What is the “Front-End Loading Formula” (high level pension)?

The high level pension✎ EditSign (aka. accelerated pension) provides a pension increase up to the age of 65. If you opt for the higher amount, your payback will begin at age 65, which means that you AC pension will then be reduced; mathematically by the amount you received earlier.

  

20. If I elect to take the Higher Pension Option (HPO) as above, when it is reduced at age 65, is this due to some government regulation that forces the reduction because I can then start collecting CPP and Old Age Security (OAS)?

The payback for your AC pension begins at age 65 and has nothing to do with CPP or OAS. There is a common misunderstanding that the government is taking money away, but in fact the HPO is adjusted only from the Air Canada plan.

21. Have we ever been able to use RRSP monies to buy age instead of the VSP?

Yes, but, it is possible to use RRSP monies to purchase improvements in the AC pension plan – for example contribution deficiencies can be paid from RRSP monies. The member is shifting money from one registered pension plan to another.
  
If the Air Canada age make up were being paid from the AC Pension Plan, it would be possible to use RRSP monies to buy the age. However the age make-up is being paid from general revenues and therefore is NOT a tax sheltered pension plan. If someone used their RRSP monies which are tax sheltered to buy age make up from AC’s general revenues, they would have to pay tax on the RRSP monies that were withdrawn.
  
It appears that AC set up the age make-up so that there would not be withholding tax. That is, AC deducts the lump sum required to buy age make up from the VSP so the member did not receive that portion of the VSP and does not have to pay tax on it. They will pay regular income tax on their pension top up as they receive it.

22. Can you get tax credit for age make-up purchase? A member had called Revenue Canada who advised if you get a receipt from Air Canada then you can claim it on your income tax.

No, you cannot get a tax credit for contributions to the age make-up because the age make-up is paid from general revenues and is NOT a registered retirement savings plan. But, the member did not pay withholding tax on the amount that they received in the VSP and then put toward the age make-up.
2009 Air Canada Share Trust Agreement

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