Legal departments are in the trenches when it comes to the
battle being staged to tackle solvency issues around
defined benefit plans, stay on top of provincial pension laws,
and help their companies mitigate the risk of
growing pension obligations.
F
red Headon and the in-house labour law
team at Air Canada have learned more about
pension law in the last 18 months than most
lawyers will learn in a career. Over the last
decade, Canada's national airline has been
steadily hit with a series of economic hardships — from
the New York terrorist attacks in 2001 to the SARS crisis
in 2003 and the credit crunch in 2008 — which decimated air travel and led to a series of restructurings.
During 2011 and 2012, Canada's national airline was
locked in bargaining and arbitration with its unions,
which Headon, assistant general counsel, labour and
employment law, says "had a major pension component."
The company sponsors a number of defined-benefit
and defined-contribution pension plans, which were a
major sticking point. Under a DB plan, the employer
guarantees a set pension and is on the hook for any shortfall, making it riskier than a DC plan, where employees
make investing decisions and their pension depends on
the performance of those investments.
In the beginning of 2012, Air Canada's 10 DB plans
were running a $4.2-billion solvency deficit and the
company was making past service catch-up payments
under federal regulations. It needed to deal with pension
issues to move forward.
"Through that process, about three of us — on a pretty
full-time basis — were involved in the bargaining given
the role that pensions played. We were plugged into the
discussion in a way that took up a fair bit of time."
By Jim Middlemiss
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2013
INHOUSE
INHOUSE
