Nathalie Henderson, the Senior Director, AC Pensions, recently wrote the Component President with several important observations of CUPE’s Hybrid Defined Contribution (DC) pension plan members (all flight attendants hired after November 7, 2011 are in the Hybrid plan). We thought it would be appropriate to pass this information along to our DC plan members.
The gist of what Ms. Henderson wrote is that many of our DC plan members are not taking full advantage of the company’s matching contributions and, secondly, are not making any decision regarding the investment of their pension plan contributions thereby accepting the default investment option. As Ms. Henderson puts it: “The default investment option may not suit the employee’s investor profile, expected retirement age and may not be appropriate for the employee’s long-term retirement planning.” Ms. Henderson provided the following statistics to demonstrate the above points.
Statistics for DC plan as of Dec 31, 2017
DC Assets: $4,201,600
Number of members in the hybrid plan: 1,620
No matter the number of years of continuous service, most employees do not contribute at the maximum level, leaving money on the table. The default rate for employees who do not make a decision is the minimum rate (1.5%); 76% of employees do not contribute at the maximum level and 24% do.
Most employees do not make their investment decisions; 86% of employees do not provide investment instructions and 14% do.
The following chart outlines Air Canada’s matching Contributions in % of Employee Contributions.
|Years of continuous service
||Employee Contributions in % of Pensionable Earnings
||Air Canada’s Contributions in % of Employee Contributions
|Less than 2
||1.5% or 2.0%
|2 or more but less than 5
||1.5% or 2.0%
|5 or more but less than 15
||1.5%, 2.0% or 2.5%
|15 or more
||1.5%, 2.0%, 2.5% or 3.0%
For example, an employee with 5 or more but less than 15 continuous years who had pensionable earnings of $30,000 for the year, if they chose a 1.5% contribution rate would contribute $450 ($30,000 X 1.5%) on their own, matched by $787.50 ($450 X 1.75) from Air Canada. If they chose a 2.5% contribution rate would contribute $750 ($30,000 X 2.5%) on their own, matched by $1,312.50 ($750 X 1.75) from Air Canada. In this example, selecting 2.5% instead of 1.5% provides the employee with an additional $525 matching contribution from Air Canada.
To state the obvious, we recognize many flight attendants, especially during the initial years of their career, do not have sufficient disposal income for anything above life’s necessities. Nevertheless, we believe it is important for our DC plan members to take full advantage of the company’s contributions, when feasible, and to maximize their returns by consulting with the Manulife PlanRight Advisors which is free of charge. DC plan members can access information about the DC plan via the HR Connex call centre and online tools.
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