Hello. My name is Katherine Thompson. I'm the president of the Air Canada Component of CUPE. I'm here with you today representing the 6,600 flight attendants who are employed by Air Canada.
Our members participate in a defined benefit pension plan sponsored by Air Canada. It is regarding the state of this plan that I'm speaking with you today.
Ours is not a profession that creates wealthy people. Our salaries are a reflection of our demographics. Given our limited ability to generate substantial savings during our careers, we rely on the security and stability of our pension plans to provide us with a dignified retirement.
Air Canada's pension plans cover over 30,000 employees and retirees. Had these pension plans been terminated and wound up as of January 1, 2009, employees and retirees would have received only 76% of their promised pensions.
While the plan's funding levels may have improved somewhat in the last year, the plans are still seriously underfunded, despite the sacrifices that Air Canada's employees have made to protect our pension plans. This places the plan participants--in our case, predominantly women and minorities--at an unacceptable risk and clearly demonstrates the inability of the current federal pension regulatory system to protect plan members.
Air Canada's pension experience should be a flashing warning sign for all of us. Air Canada's pension plans were threatened by the CCAA insolvency in 2003 and again during a second pension restructuring in 2009.
In the 2003 CCAA, the normal PBSA funding rules were set aside for Air Canada and replaced with a weaker set of funding requirements. In 2009 Air Canada was unable to meet even these diluted requirements and we faced another pension crisis and further pension restructuring.
As a result of that restructuring, Air Canada is only required to protect against further deterioration in the plan funding until 2014. There is no prospect that the Air Canada plans will make any progress towards full funding before then.
This is not acceptable for a private pension plan. The entire point of pension regulation is to ensure full pension protection regardless of the corporate sponsor's survival.
Current regulations have failed the employees of Air Canada, and the fulfillment of Air Canada's pension promise is now contingent on the survival of the company.
In retrospect, it's clear that Air Canada not only should have been allowed but required to fund a cushion, as is standard in some European jurisdictions, and that Air Canada should not have been permitted to take contribution holidays during the good times. PBSA reforms have started to move in this direction, but this is too little and, hopefully for Air Canada plan members, not too late.
The pension crisis that we've experienced at Air Canada presents learning opportunities for all of us. Our first lesson is that pension funding rules must be strictly applied and sufficiently rigorous as to protect pensions. They must be structured in a way that ensures pension plans are cushioned against inevitable financial fluctuations.
The only acceptable alternative to stricter funding regulations is, as the CLC suggests, a federally sponsored pension insurance program. Pension insurance, which already exists in the U.S., the U.K., and even closer to home in Ontario, would be funded through premiums paid by all plans and would ensure pension benefit protection in much the same way that other financial products, such as bank deposits and insurance annuities, are insured against corporate loss.
A second lesson is that the task of providing adequate pensions has become onerous, even for large corporations like Air Canada. The CPP component of retirement income must be improved and the private pension share reduced. The cost of CPP funding would be shared across the widest possible base, making for the most secure possible benefit, ensuring that a company's bankruptcy wouldn't completely decimate an employee's retirement planning.
In conclusion, we share the CLC's view that displacing a more significant share of our collective pension funding expense from workplace pension plans to the public sector will be good for Canadian corporate competitiveness and will result in more secure pensions for Canadians.
With these comments, I wish to close and thank the committee for its time and the invitation to address you.