Canada Post Pension Solvency Relief

Summary#

The Government registered the Canada Post Corporation Pension Plan Funding Regulations to give Canada Post temporary relief from certain pension solvency payments. In short, the rules pause solvency special payments for the Canada Post defined benefit pension plan until December 31, 2024, while keeping other funding requirements in place.

What it does#

• Applies to Canada Post’s defined benefit pension plan (certificate 57136).
• Removes the requirement to make solvency special payments for any plan year that ends after the rules came into force (the regulations came into force on the day they were registered — April 7, 2022).
• Sets the prescribed solvency ratio level at 1.05 (or 105%) for specific technical tests in the law.
• Prevents plan changes that would increase benefits unless the plan’s solvency ratio is above 105% and the change would not drop it below 105%.
• Requires Canada Post to tell members, retirees and beneficiaries:
  • the plan’s solvency deficit from the last actuarial report;
  • payments required for the plan year; and
  • the amount of solvency payments that would have been required if the relief were not in place.
• The relief ends on December 31, 2024; other funding rules (like going-concern funding and normal cost contributions) still apply while the relief is in effect.

Who's affected#

• Canada Post (the plan sponsor) and its pension plan.
• Plan members, including active employees, deferred members, retirees and other beneficiaries. As of year-end 2020 the plan included about 53,132 active members, 4,476 deferred members/survivors/beneficiaries and 42,711 retired members.
• Indirectly, communities and customers who rely on Canada Post services, because the relief is intended to free cash for operations and investments.
• The source says no new costs would be imposed on the government or on plan members and beneficiaries by these regulations.

Why it matters#

• Canada Post had a large solvency shortfall (about $6.3 billion as of December 31, 2020). Without relief, required solvency payments could have drained cash needed for operations and investments.
• The rules are meant to give Canada Post breathing room to fund operations and infrastructure and to avoid harming service or forcing extra borrowing in the short term.
• For plan members and retirees, the pension promises under the plan remain in place now, but recovering the pension plan’s fully funded status on a solvency basis is delayed while solvency payments are paused.
• The pause is temporary and ends on December 31, 2024; future solvency funding will depend on market conditions, plan experience, and any decisions after the relief ends.