Interesting article from Michael Warren in the Toronto Star today:
For our young readers, Michael Warren was CEO of Canada Post a few decades ago.
"I have a problem with the claim that the pension plan is a drag on the corporation."
Unfortunately, it is a real problem and it is a very complex situation that cannot fully be answered in a post here. There would be no problem if Canada Post covered the cost of pension every year. It does not because the previous government allowed them not to when doing their books. So Canada Post is left with a very substantial unfunded liability.
If Canada Post were to accrue their defined pension liabilities every year - like all other corporations - they would show huge losses, year after year.
In other words, the revenues generated by shippers do not fully cover the costs of operations when you included everything and pension liabilities.
They had that problem at Nortel.
" I hope the pension funds, contributed by both management and employees, are in money earning investments."
Yes but the plan does not earn enough money to cover the cost of the plan. Relatively low interest rates in the last few years have helped make the matter worse. Benefits paid and accrued are higher than contribution + income. Total (invested) assets of the plan are about $22 billion while liabilities to retirees and future retirees are $28 billion.
Overall, there are 90,000 members of the plan including over 33,00 retirees. And the ratio of retirees increases every year meaning fewer members are contributing in relation to the total.
Somehow someone somewhere will have to make that $6 billion dollar deficit (and it is growing year after year) and I do not think Canadian taxpayers are willing to do that, are they?
PS - The plan paid out $880 million in benefits to 33,500 retirees in 2015 alone, and that figure is set to ratchet higher in the coming years.
"And CUPW claims..."
Frankly I do not care what CUPW or CP management claim. Their arguments are tiring on both sides.
I prefer to read the information provided by accountants and auditors in the notes to the financial statements.
There is no credibility - as far as I am concerned - by management or the union on the subject as both try to prove their points, regardless of actuarial facts (when I entered university back in the '60's, I wanted to become an actuary. I have the greatest respect for that profession).
" ...'fat gold-plated pensions' that the Cons rave on about average about $26,000 a year ?"
I do not think Canadians generally complain about the size of the pensions paid to retired workers.
The problem at Canada Post is not accounting for the liabilities accruing every year. Not enough money coming in from customers to properly account for defined benefits that will be paid to retirees - as the plan is currently structured.
Now, let us not kid ourselves: postal retirees will get their pension. The question is who will pay for it?
"so what information from an accountant or auditor leads you to conclude that the solvency deficit is increasing?"
The information is available to all by reading the notes from the accountants in the Canada Post annual financial reports - available online.
Page 125 of the 2015 report (Notes from the auditors)
"Over the past few years, low solvency discount rates increased the pension plans’ solvency obligations and deficits significantly. Changes to pension legislation were implemented by the Government of Canada providing Crown corporations with funding relief on special solvency contributions if certain conditions are met. Under these regulations, the aggregate amount of the relief was limited to 15% of the fair value of plan assets. In February 2014, the Government of Canada introduced the Canada Post Corporation Pension Plan Funding Regulations.
Under these regulations, the Corporation is exempt from making special contributions into its registered pension plan from 2014 to 2017. Temporary measures were implemented to address the Corporation’s operational challenges and provided immediate relief on its capital resources. The Corporation continues to evaluate options in order to ensure the financial sustainability of its pension plan. The Corporation is expected to resume special contributions in 2018, at the end of the temporary relief period.
Without relief, an additional $1.4 billion in special contributions would have been required by the Corporation in 2015.
Based on the latest estimate of the Canada Post Corporation Registered Pension Plan’s funding position as of December 31, 2015, the special contributions without pension relief would be $1.2 billion in 2016.
Sorry. I can't help you.
The auditors are clear on the amount of liabilities in 2015 NOT included in the books.
