July 7, 2009 at 1:45 PM
CAW Local 2002 is encouraging its lifetime members to support the negotiated pension moratorium by taking the easiest action of doing nothing.
Last week all retirees received a package from Air Canada with thorough details regarding the pension moratorium and a ballot to send back only if they object to the proposal. If one-third of retirees submit their ballots, it will be deemed as a rejection of the proposal. This is the first time in recent memory that retirees have been called upon to vote on a negotiated settlement.
"Normally, collective bargaining deals mainly with issues outside of the pension plan," said Leslie Dias, Local 2002 President, "but these are anything but normal times. In addition to bargaining a collective agreement, we face a pension funding issue that overshadowed the normal process." The pension moratorium agreement required approval and negotiations of all unions, retirees, and the federal government. The moratorium agreement is over and above the collective agreements that were bargained concurrently.
The moratorium agreement calls for a waiver of past service payments for 21 months followed by three years of set payments that increase each year. This will be followed by the normal OSFI regulated payment schedule. The main effect is avoiding Air Canada’s certain bankruptcy filing by the end of July.
Last year's market collapse created a large debt and corresponding larger payments. Air Canada has clearly shown that, while also in a recession, there is in an inability to meet this obligation. This larger debt is on paper as part of the pension plan's financial statement but only comes to fruition if there is a plan termination. As of the beginning of the year, the funding was at approximately 75%.
If there is not an agreement to the moratorium, there will be a bankruptcy filing with the pension being half of the total debt and, under legal definition, an unsecured creditor. This means that after the secured creditors address their claims, any leftover equity (which will be minimal) will be negotiated with the unsecured creditors. It literally represents pennies to the dollar. The result from objecting, or voting no, to the moratorium will almost certainly ensure that all payments will have to be reorganized to cover the 25% shortfall.
The moratorium allows for continued pension payments at current rates. As well, any market returns benefit the funding levels directly. While nobody is certain of the future, we certainly know the past and present. Last year, the markets fell by 30%. This year started with a continued fall followed by a slow but continued growth that recovered that additional loss plus a small gain so far. As this trend of slow but steady recovery growth continues, the pension deficit reduces. To allow this to potentially happen, members are encourage to vote yes to the moratorium arrangement, which requires them to do nothing with their ballot.
"I have seen some erroneous information distributed by current and retired employees," stated CAW 2002 Pension Communications Committee member Darryl Draeger. "Some of it seems so credible and yet is wrong and misleading on every single count. It is important for members to not only make an informed decision, but more importantly a correctly informed decision." The company information is a little lengthy and intense, but accurate. As well, almost all unions have information posted directly on their websites that better reflects reality. We suggest you read all official documentation that, by law, must represent factual positions.
Once you have the correct information, we believe the best ability to fight another day is do nothing now. A non-response allows the pension plan to continue.