Relief Again for Canada Post Solvency Payments

The ongoing pension plan crisis at Canada Post is not going to go away in 2018—at least not until the new contract is ratified in the summer of 2018 and the Canada Post Pension Plan is overhauled.

Canada Post was given relief from making any solvency payments from 2014 to 2017.[1] If Canada Post was forced to make such payments, which would have averaged about $1 billion dollars annually, the company would have been forced into bankruptcy. However, 2018 is a little different than the last formula. Canada Post has declared they don’t have to make any payments. They do not expressly state why. Nor did the Government extend the relief formula used from 2014 to 2017.

Instead, on June 23rd, 2017, the Federal Government annexed special changes in the Pension Benefits Standards Regulations that gave Canada Post one more year’s worth of breathing space before they have to start the massive repayment.[2]

The change in in the PBSR legislation grants a years worth of wiggle room. They are allowed to acquire a Letter of Credit up to 15% of $6 Billion owing to the solvency shortfall. 15% is $975 million dollars of the grand total.

If one uses 2.9% as an estimate of interest over a one year period, this arrangement may cost around $28 million in financing fees. However, this is just a guess. The actual formula for such an arrangement may be completely different and more complex. Those internal numbers will likely not be made public.

What will happen in late 2018? The Federal Government intends to wind up the Canada Post Pension Plan and transfer the funds into life annuities. Bill C-27, which has passed first reading on October 2016 proposes such a future for the Canada Post Pension Plan.[3] (As of February 2018, it has not been ratified or made into law.) One of the stipulations of this proposed legislation requires employee approval of their defined plan to convert.

This may be the biggest ticket coming onto the negotiation table for the upcoming CUPW contract.

Canadasmodernpost is looking into Bill C-27 and its ramifications but has yet to complete an analysis.


[1] Canada Post Corporation 2017 Second Quarter Financial Report. Pg. 3
[2] See Canada Post Corporation 2017 Second Quarter Financial Report. Pg. 3
https://www.canadapost.ca/assets/pdf/aboutus/financialreports/2017_Q2_report_en.pdf; The Gazette announcement: http://www.gazette.gc.ca/rp-pr/p2/2017/2017-07-12/html/sor-dors145-eng.html; Canada Post Bulletin: https://www.cpcpension.com/db/documents/Funding_Relief_letter_20170824_E.pdf
[3] http://www.parl.ca/DocumentViewer/en/42-1/bill/C-27/first-reading

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