Canada Post Pension Funding Relief

Summary#

The federal government published the proposed Canada Post Corporation Pension Plan Funding Regulations on December 11, 2021. If made, the rules would let Canada Post pause required solvency special payments for its defined benefit pension plan from January 1, 2022 to December 31, 2024 (this is a proposal, not law yet — there is a 30-day comment period).

What it does#

• Stops required solvency special payments for the Canada Post defined benefit pension plan during the relief period (from January 1, 2022, or the day the rules are registered, until December 31, 2024).
• Keeps other funding rules in place, such as going-concern funding and normal employer contributions.
• Prevents plan changes that increase benefits unless the plan’s solvency ratio is above 105% and the change would not lower it below 105%.
• Requires Canada Post to tell members, retirees and beneficiaries:
  • the plan’s solvency shortfall from the last actuarial report,
  • what payments would be required for the plan year, and
  • how much solvency payment relief was received.
• Leaves supervision with the Office of the Superintendent of Financial Institutions (OSFI).

Who's affected#

• Canada Post (the employer and plan sponsor).
• Active employees, retirees, deferred members, survivors and other beneficiaries of the Canada Post defined benefit plan — as of year-end 2020 that included 53,132 active members, 4,476 deferred members/survivors/beneficiaries, and 42,711 retired members.
• Employee and retiree representatives such as the Pension Advisory Council (PAC) and the Communications and Consultation Group (CCG), which were consulted about the plan.
• The Department of Finance and OSFI are involved as the government and regulator, though the government’s analysis says there would be no new costs to government, plan members, retirees or beneficiaries.

Why it matters#

• Canada Post would keep cash that would otherwise go to solvency payments. That cash can be used for operations, capital investments, or strategic changes to respond to falling mail volumes and growing parcel business.
• The measure delays reducing the pension plan’s solvency deficit. The plan’s solvency position will change during the relief period based on interest rates, investment returns and other factors rather than employer solvency payments.
• As of December 31, 2020, the plan’s solvency deficit was about $6.3 billion; Canada Post had already reduced solvency payments by $4.1 billion and was approaching the agent Crown reduction limit of 15% of plan liabilities. The plan was funded at 115.9% on a going-concern basis at that date.
• The relief is temporary and targeted. If finalized, it ends on December 31, 2024. Comments from the public and stakeholders during the 30-day comment period may affect whether and how the rules are finalized.