Notwithstanding a very positive valuation that shows a pension plan surplus of more than $700 million, CBC officials have advised the Pensioners National Association (PNA) and the unions that as Sponsor of the plan, the Corporation refuses to distribute any portion of the surplus to employees and pensioners.
The CBC also confirmed that it will take a contribution holiday as required by law when the surplus is greater than 105%, according to both the going-concern principle and the solvency principle (i.e. if the CBC were to stop its operations altogether). CBC’s annual contribution averages more than $50 million. As mentioned in the communiqué it sent to employees, the contribution holiday has taken effect on April 21 and will amount to close to $ 40 million for the rest of 2022.
According to the 2009 Memorandum of Agreement (MOA), when there is a surplus large enough to be distributed, pensioners and employees are entitled to a share of 50%. As a whole, they should receive the same amount as the CBC gets in contribution holiday.
The confirmation of this surplus gives new urgency to the arbitration begun in February to determine whether the agreement on pension sharing between the CBC, its unions and the PNA is still valid. The PNA and its union partners are challenging the position taken by the CBC that the MOA has expired.
The PNA is considering what action it should take now.
USEFUL TO KNOW
As reported in the latest communiqué of the Pension Plan, the going-concern funding ratio at the end of 2021 was 167.9%, and the solvency funding ratio was 113.1%, which means a record surplus in the order of $700 million.
The pension plan provides pensions to approximately 10,000 retirees and surviving spouses. Over these past two years, its assets have grown from $7 to 9 billion.
The main reason invoked by the CBC for refusing to share the surplus as agreed to in 2009 is that it considers the MOA expired at the end of December 2019.
According to the 2009 MOA, when the CBC has had to make a special contribution to the plan, it has first call on any surplus of the Pension Plan to recover the amounts contributed by covering the solvency funding deficit. This has happened nine times between 2009 and 2021. Given CBC’s position on not touching the surplus, it is not clear if the Corporation intends to prevail itself of that possibility.