days until our Collective Agreement expires, we are preparing, we are united and we will make change.

Pension Committee Update #2 – June 2024

Defined Benefit vs Hybrid Plan:
How are pension benefits different at retirement?

We encourage members to read this bulletin in its entirety.
 
Dear members,

Ever wondered what the difference would be retiring under a Defined Benefit (DB) versus a Hybrid plan?

Members hired on or after November 7, 2011, are on a Hybrid plan.  Members hired before this date, are on a full Defined Benefit (DB) plan.  You can read a general explanation on the difference between a DB and Hybrid plan by clicking HERE.
 
What is the difference at retirement?
The following is to show members the difference between a pure DB pension plan versus a Hybrid plan in terms of pension benefits.

NOTE: This bulletin will compare the pure DB pension plan against the DB component of a Hybrid plan.  It is important to know that the DB component represents 50% of a Hybrid plan.  The other 50% of the Hybrid plan comprises of a Defined Contribution (DC) component which is managed by Manulife.

Also note, the contribution rate and the formula of the DB component of the Hybrid plan is almost half of the legacy DB plan.  As an example, for the pure DB plan, members contribute 4.5% up to the Year’s Maximum Pensionable Earnings* (YMPE) plus 6% above the YMPE.  Whereas, for the DB component of the Hybrid plan, the maximum a member can contribute between 15 to 35 years of service is 3%.  (Contribution rates and the pension formula for Mainline Hybrid members and Air Canada Rouge members are identical.)

*YMPE is set by the government every year.
 
Example 1** – Annual pension amount for members on a pure DB pension plan retiring at 65 years old:

A member on a pure DB plan retiring on January 1, 2016, at the age of 65 years old. 
With 35 years of allowable service.
Average Annual Compensation of $60,000.
Average YMPE of $52,400.
 
Would receive an Annual Pension of $37,415.
 
Example 2** – Annual pension amount from the DB component of the Hybrid plan, when retiring at 65 years old:

A member receiving pension benefits from the DB component of the Hybrid plan, retiring on January 1, 2051 at the age of 65 years old.
With 35 years of allowable service.
Average Annual Compensation of $60,000.
Average YMPE* of $52,400. (*Using 2016 figures and assuming no change until 2051.)
 
Would receive an Annual Pension of $13,572.

**The examples used are the last update provided by the company, which can be referenced in the Employee Pension Booklet.

There is a difference of $23,843 between the pure DB plan and the DB component of the Hybrid plan.  As stated above, the DB component represents 50% of the Hybrid plan, with the DC (Defined Contribution), representing the other 50% of the Hybrid plan.

Would the DC component of the Hybrid plan cover the difference of $23,843?
Projecting the return of a DC plan is difficult as there are many variables.  The return for a DC plan is dependent on the amount invested, the type of investment style one chooses, the annual rate of return, the length of time invested and the market condition upon retiring. 
 
Are you a member of the Hybrid plan? If yes, boost your pension contributions as soon as you can!
As shown above, it would be advantageous for members under a Hybrid plan can increase their contributions for the Defined Contribution (DC) component of their pension plan.

A new member who contributes $100 into their DC plan, are matched at 100%.  Therefore, a member who contributes $100 will have $200 in their DC account.

By taking advantage of this matching, members benefit by compounding their money.  The more money one puts in early in one’s career, the greater the benefit over time.

For more information about increasing your DC pension contributions at Manulife, click HERE.

Regards,

Your Component Pension Committee

Marc Roumy (Chairperson)
Henly Larden (Member)
Caroline Lozeau Gelinas (Member)
Stefanie Falotico (Rouge Member)

Special Leaves, Reduced Block Program, Buyback and Share Trust Update

Special Leaves and Reduced Block Program – Buyback:
This bulletin is to remind members who take a leave or apply for the RBP, at any point in their 35 years of serviceable time, that they should seriously consider buying back their pension.  Not doing so, can have a negative impact on one’s pension plan retirement benefit.  Be mindful that members stop contributing into their pension plan after 35 years of allowable service.

In the summer of 2021, over 420 members participated in the Early Retirement Incentive Program (ERIP).

More members could have participated in ERIP, unfortunately, some did not buyback their pension following their leaves; this attributed to lacking the required numbers to be able to retire early.

After a leave of absence, please call to Alight to speak to a representative to initiate your pension buyback, whether you are on a Defined Benefit or Hybrid pension plan.

Alight (English): 1-855-354-6944
Alight (French): 1-855-354-6943

For Air Canada Rouge members, contact the Air Canada Rouge Pension Services at 1-855-538-7799.

Note: Members have 90 days from return to duty to initiate a pension buyback. This applies for Mainline and Rouge members.

Share Trust Update:
In October of this year, the company posted a Share Trust Update on Aeronet.  The company stated it is waiting for certain conditions to be met, such as a positive tax ruling, from the CRA and other regulatory bodies, and that no VSP’s or lump sum payments for pensioners will be offered until such time. They do not foresee any decisions will be made before at least the third quarter of 2024 and there is also the possibility of further delays.

This process is complex.  Members who seek further details are recommended to read the Share Trust Update and the Share Trust FAQ on Aeronet.  It can be found by using the search bar on Aeronet or finding it on the main page on Aeronet under Spotlight!.

Are you a member of the Hybrid plan?  If yes, then take advantage to boost your contributions!
Members under the Hybrid pension plan can increase their contributions for the Defined Contribution (DC) component of their pension plan.

A new member who contributes $100 into their Defined Contribution plan, are matched at 100%.  Therefore, a member who contributes $100 will have $200 in their DC account.

By taking advantage of this matching, members benefit by compounding their money.  The more money one puts in early in one’s career, the greater the benefit over time.

For more information about increasing your DC pension contributions at Manulife, click HERE.

As it is December, we would like to wish everyone Happy Holidays and a very Merry Christmas, as well as safe travels to all who will be working.

Regards,
Your Component Pension Committee

Marc Roumy (Chairperson)
Henly Larden (Member)
Caroline Lozeau Gelinas (Member)
Stefanie Falotico (Rouge Member)

pensions@accomponent.ca

Did you know?
The number of members who retired within June, July, and August of 2021 by participating in the ERIP program, (429 retired), was almost the equivalent of the number of members who retired in the previous two years.

Retirement Update:
For 2023, 51 members have retired. Click HERE to look at the breakdown between bases. Best wishes to all retired members.

 

Pension Committee Update – September 2023

All Mainline and Air Canada Rouge members contribute into a Defined Benefit pension plan.

But contribution rates and retirement benefits are not the same between DB and Hybrid members.

In our previous bulletin, we briefly explained our membership is split between members under a pure Defined Benefit (DB) pension plan and members under a Hybrid plan.  We also gave a general explanation about the differences between Defined Benefit (DB) and Defined Contribution (DC) pension plans.  Click HERE to read the bulletin.

Even though we are all contributing into a Defined Benefit pension plan, there is a difference between the pure DB pension plan and the DB component of the Hybrid plan, in terms of contribution rates and the formula used in determining pension benefits.

The following is to explain this difference.

(IMPORTANT REMINDER: The DB component represents 50% of the Hybrid plan.  The other 50% is the DC component that is managed by Manulife.)

Contributions

DB pension plan:
Under the DB pension plan, members contribute 4.5% up to the YMPE* and 6% above the YMPE.  Pension contributions stop after 35 years of continuous service.

*YMPE: is the Yearly Maximum Pensionable Earnings.  This is set by the government every year.  For 2023, the YMPE is $66,600.

Hybrid plan:
For the DB component of the Hybrid plan, contribution rates vary depending on one’s years of continuous service.  Contribution rates increase with an increase of continuous service.  It is not a fixed rate compared to the pure DB pension plan and it is also a lower percentage contribution rate.

Members contribute:

2% with less than 5 years of continuous service.

2.5% for members between 5 and less than 15 years of continuous service.

3% for members with 15 up to 35 years of continuous service.

Retirement benefits

DB pension plan:
A formula is used to determine an annual pension benefit.  The percentage used is higher than the one for the DB component in the Hybrid plan.

1.75% is multiplied with the AAC** up to the average YMPE.

And 2% multiplied with the AAC above the average YMPE.

**AAC: Annual Average Compensation, is the average earnings based on one’s best 36 consecutive months.  Which is also known as one’s best three years.

Hybrid plan:
For the DB component of the Hybrid plan, the percentage rate to determine a member’s annual pension benefits, is almost half compared to the percentage rate in the pure DB pension plan.

0.595% is multiplied with the AAC up to the average YMPE.

And 1% is multiplied with the AAC above the average YMPE.

Summary

Every member in our membership contributes to a Defined Benefit pension plan; currently, almost half are on a pure DB pension plan and the other half are on a Hybrid plan.  (Members hired on or after November 7, 2011, are on a Hybrid plan.)

Even though we all contribute into a DB pension plan, the percentage used to determine contribution rates and retirement benefits are not the same.

Members in a pure DB pension plan contribute more into the DB pension plan and have a higher (almost double) percentage rate amount to determine pension benefits.

For more information regarding your pension plan, please refer to the Employee Pension booklet found on the Alight/HR Connex website.

For Air Canada Rouge employees, your employee pension booklet can be found on ACAeronet by following these steps: ACAeronet > Rouge > Human Resources > Human Resources Tools & Forms > Category: Rouge Pension CUPE > Rouge Pension CUPE.pdf

New phone numbers to contact Alight and Manulife

For questions about your DB pension plan, call:

Alight (English): 1-855-354-6944
Alight (French): 1-855-354-6943

For questions about your DC investment plan or to speak to a financial advisor, call:

Manulife (English): 1-888-727-7766
Manulife (French): 1-888-388-3288

For Air Canada Rouge members***:

Contact the Air Canada Rouge Pension Services at 1-855-538-7799.

***Note: Air Canada Rouge members who flow through to Mainline, remain on the Air Canada Rouge Hybrid Pension plan.

Are you a member of the Hybrid plan?  If yes, then take advantage to boost your contributions!
Members under the Hybrid pension plan can increase their contributions for the Defined Contribution (DC) component of their pension plan.

A new member who contributes $100 into their Defined Contribution plan, are matched at 100%.  Therefore, a member who contributes $100 will have $200 in their DC account.

By taking advantage of this matching, members benefit by compounding their money.  The more money one puts in early in one’s career, the greater the benefit over time.

For more information about increasing your DC pension contributions at Manulife, click HERE.

Safe travels,

Your Component Pension Committee:

Marc Roumy (Chairperson)
Henly Larden (Member)
Caroline Lozeau Gelinas (Member)
Stefanie Falotico (Rouge Member)

pensions@accomponent.ca

Did you know?
Air Canada has 31,442 pensioners and survivors in receipt of a monthly pension and pension amounts totaling $891,933,000 were paid to them in 2022.

Pension Committee Update – July 2023

Defined Benefit vs Defined Contribution.
What’s the difference?

Our membership both at Mainline and Rouge, are contributing into a Defined Benefit (DB) pension plan.

That said members that were hired on or after November 7th, 2011, are part of the Hybrid plan.  Members in the Hybrid plan contribute 50% into a Defined Benefit (DB) pension plan and 50% into a Defined Contribution (DC) pension plan.

The following is a general explanation of the difference between a DB and DC pension pertaining to pension payment benefits, contributions and who is liable for pension deficits.

Pension Payment Benefits When Retiring:

Defined Benefit (DB):
Members know the exact pension payments they are to receive, no matter what happens in the financial markets or if there is a deficit in the pension plan.  That is why a DB plan is called Defined Benefit: the benefit is defined.

Defined Contribution (DC):
In a DC plan, the pension payments are dependent on market conditions.  Therefore, pension payments are hard to project ahead of time.  If the financial markets are high, the value of the funds in the DC plan will be higher. If the financial markets drop, then the value of the investments in a DC plan would drop as well and thus would lower the amount one would receive once retired.

Contribution Amounts:

DB: The contribution amounts are set and cannot be changed by the member.

DC: Each member can choose their contribution amounts.  That is why a DC plan is called Defined Contribution: the contribution amount is defined by the member.

Who Is Liable When There Is a Deficit?

DB: the employer is liable for any pension deficits.

DC: the employee is liable for any deficits in their Manulife plan.

One Is a Pension Plan (DB), The Other Is a Saving Plan (DC):

DB: is a pension plan.  Our DB pension is a managed by an Air Canada subsidiary called Trans-Canada Capital “TCC”.  Contributions are pooled together; therefore, members do not choose how or what their money is invested in.

DC: is a savings plan.  It is currently managed by Manulife.  Members are responsible in choosing what to invest with their contributions.  Advisors are available through Manulife for those who are unfamiliar and are seeking assistance or clarification with their investment choices.

This briefly summarizes the difference between a DB and DC pension plan.

For more information about your pension plan please refer to your Pension Employee Booklet that can be found on the Alight website.

Are you a member of the Hybrid plan? If yes, then take advantage to boost your contributions!

Members under the Hybrid pension plan can increase their contributions for the Defined Contribution (DC) component of their pension plan.

Reminder: Members of the Defined Benefit pension plan are unable to change their contribution amounts.

A new member who contributes $100 into their Defined Contribution plan, are matched at 100%.  Therefore, a member who contributes $100 will have $200 in their DC account.

By taking advantage of this matching, members benefit by compounding their money.  The more money one puts in early in one’s career, the greater the benefit over time.

For more information about increasing your DC pension contributions at Manulife, click HERE.

Safe travels,

Your Component Pension Committee:

Marc Roumy (Chairperson)
Henly Larden (Member)
Caroline Lozeau Gelinas (Member)
Stefanie Falotico (Rouge Member)

pensions@accomponent.ca

Did you know?
Currently, 65% of Hybrid members are not contributing the maximum in their DC plan at Manulife.  A year ago, it was at 73%.

This is a small but positive improvement; 8% more members have maximized their contributions in their DC plan within a year.