Canada Post Pension Plan, Ottawa, could be moved into Canada’s Public Service Pension Plan to reduce its funding problems under options listed by a federal government task force on the overall future of Canada’s postal service.
The discussion paper said one option was to return the C$21.9 billion ($16.9 billion) Canada Post plan to the C$84.7 billion PSPP, Ottawa, from which the postal service plan was spun out in 2000.
Another option was removing the solvency funding requirement and moving to funding based solely on a going-concern basis. Solvency funding annually requires plans to be funded as if the plan were to be terminated at the start of that year, while going-concern valuations assume the plan will never be terminated. Under Canadian law, pension funds must be funded based on the higher contribution required by either of the two valuation methods.
According to Canada Post’s 2015 participant report, the pension plan had a going-concern funding ratio of 106.4% but a solvency funding ratio of 78.8%, both as of Dec. 31.
Other options offered in the paper were:
- Incorporate a shared-risk model in the plan in which benefits would not increase if a plan is underfunded;
- Begin a derisking investment strategy; and
- Introduce a defined contribution plan for general employees.
Canada Post has a DC plan for administrative and technical employees hired after May 2014 and for supervisors and employees in supervisory support groups hired after February 2015. That plan had C$18.2 million in assets as of Dec. 31, according to the 2015 participants report. Also, new rural employees hired on or after Jan. 1, 2017, will be placed in a new DC plan
Options presented by the task force in the paper will be taken up by a Canadian parliamentary committee that will make recommendations to the government.