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

LOU#30 – Pension Plans

LETTER OF UNDERSTANDING NO. 30

PENSION PLANS

 

The terms and conditions of the present Letter of Understanding establish pension terms and conditions applicable to all employees within the Air Canada CUPE bargaining unit.

 

For the purpose of this LOU, Air Canada CUPE Employees shall refer to CUPE employees other than former Canadian Airlines International Limited (hereinafter “CAIL”) employees.  CAIL CUPE Employees shall refer to CUPE employees who were in the employment of Canadian Airlines International Ltd as of June 30, 2000.

 

Letter of Understanding 11 in the collective agreement between CAIL CUPE and Canadian Airlines International Limited is rendered null and void by the present Letter of Understanding.

 

Letter of Understanding 3 in the collective agreement between Air Canada and CUPE continues to apply, save article L3.06 and L3.07, which are rendered null and void by the present Letter of Understanding.

 

Pension Arrangement

 

1.    The Pension Arrangement is defined as the registered plan or plans as provided under Articles 2 to 4 of this LOU.

 

2.    The Company may establish a Satellite Plan in order to provide certain pension benefits to Air Canada and/or CAIL CUPE Employees in accordance with the current or prior negotiations.  The Company will establish the terms of the Satellite Plan and will decide which benefits are to be included in the Satellite Plan.  To the extent that these benefits are not coming from the Satellite Plan, they will come from either the Air Canada or the CAIL plan, unless if specifically provided otherwise as per this LOU.

 

3.    The establishment of the Satellite Plan is subject to approval by the Canada Customs and Revenue Agency (CCRA) and the Office of the Superintendent of Financial Institutions (OSFI).

 

4.    At a date to be established by the Company but which shall be no later than January 1, 2006, the Company shall split the Air Canada Pension Plan in respect of Air Canada CUPE active and inactive members and merge this CUPE portion of the Air Canada Pension Plan with the CAIL CUPE Plan resulting in the new Air Canada CUPE Pension Plan.  The Company will also merge the Satellite Plan with the new Air Canada CUPE Plan.

 

5.    A Pension Committee shall be established for the Satellite Plan and the new Air Canada CUPE Pension Plan.  Such Pension Committees shall have the roles and responsibilities of the Pension Advisory Committee as described under the Pension Benefits Standards Act.

 

6.    Same-sex spouses will be recognized under the Pension Arrangement in accordance with applicable legislations.

 

Benefits for Air Canada CUPE Employees

 

7.    Effective January 1, 2003, the pension benefits for Air Canada CUPE Employees who retired, terminated or died on or after November 1, 2001, with respect to pension payments due on or after January 1, 2003, will be payable under the Pension Arrangement and shall be calculated using a 1.75%/2% formula for all years of pensionable service.  The difference between 1.5%/2% and 1.75%/2% formula will be paid out of Company general operating revenues for the period of November 1, 2001 to December 31, 2002.

 

8.    Effective January 1, 2003, the pension benefits for CUPE Cabin Personnel working at ZIP under LOU 24 who retire, terminate or die on or after January 1, 2003, will be payable under the Pension Arrangement and shall be calculated using a 1.75%/2% formula for all years of future pensionable service.   

 

9.    The Air Canada CUPE Employees and the CUPE Cabin Personnel working at ZIP under LOU 24 shall continue to be required to contribute to the Pension Arrangement based on a 4.5%/ 6% contribution formula.   However, the Company and the Union agree to submit to arbitration the issue of the contribution level negotiated in 1999.  Should the arbitrator rule in favour of the Union, the contribution level will remain at 4.5%/6%.  Should the arbitrator rule in favour of the Company, the contribution level will be increased to 5.25%/ 6% on July 1, 2005.

 

10. For members who retire, terminate or die on or after January 1, 2003, maximum pensionable earnings used in the calculation of pensions in respect of total service under the Pension Arrangement shall be equal to $80,000 for all years.

 

11. On January 1, 2003, an eligible retired member or survivor shall receive a lump sum payment payable from Company’s general revenues equal to 12 times the monthly increase in pension that would have been granted had the increase in pension in payment provided for as per L3.11 and L3.12 been applied on January 1, 2003.

 

12. On January 1, 2004, January 1, 2005, January 1, 2006 and January 1, 2007, the pension in payment payable under the Pension Arrangement to eligible retired members and survivors shall be increased as per L3.11 and L3.12.  However, the increased pension as of January 1, 2004 shall be calculated as if an increase as per L3.11 and L3.12 had been granted on January 1, 2003.

 

13. At the discretion of the Company, rather than providing for the improvements granted as per Article 11 of this LOU, the pension in payments payable under the Pension Arrangement to eligible retired members and survivors shall be increased as of January 1, 2003 as per L3.11 and L3.12.

 

14. Effective January 1, 2003, the Company shall establish a group RRSP.  For the duration of the collective agreement, the Company shall contribute for each Air Canada CUPE Employee and the CUPE cabin personnel working at ZIP, an amount equal to 1.5% of gross earnings (excluding bonuses, allowances and termination payments) up to CCRA maximum to an RRSP, any excess to be paid in cash.  

 

14. Air Canada has agreed to re-offer to Air Canada CUPE

Employees other than former CAIL CUPE employees, in    calendar year 2004, the opportunity to buy back maternity or child care leave, eligible part-time service, or approved special leaves of absence, under the terms and conditions already approved by the Company

 

Benefits for CAIL CUPE Employees

 

15. Effective on June 1, 2000 and for years of service following that date only, the Pension Arrangement for CAIL CUPE Employees shall provide for the same benefit
s and conditions as those applicable to Air Canada CUPE Employees.  Specifically, the pension benefits for CAIL CUPE Employees who retired, terminated or died on or after January 1, 2003 payable under the Pension Arrangement shall be calculated using a 1.75%/2% formula for years of pensionable service on or after June 1, 2000.   The pension formula in respect of pensionable service before June 1, 2000, will remain at 1.375%/2%.

 

16. Subject to regulatory approval, the pension benefits for CAIL CUPE Employees who retired, terminated or died between November 1, 2001 and December 31, 2002 payable under the Pension Arrangement shall be calculated using a 1.75%/2% formula for years of pensionable service on or after June 1, 2000.  No other changes will be made of their pension benefit.  The pension formula in respect of pensionable service before June 1, 2000 will remain at 1.375%/2%.  The difference between 1.375%/2% and 1.75%/2% formula may be paid out of Company general operating revenues for the period of November 1, 2001 to December 31, 2002.

 

17. CAIL CUPE Employees actively participating in the Pension Arrangement shall be required to contribute to the Pension Arrangement based on a 4.5%/ 6% contribution formula.  However, the Company and the Union agree to submit to arbitration the issue of the contribution level negotiated in 1999 as per paragraph 9 above.  Should the arbitrator rule in favour of the Union, the contribution level will remain at 4.5%/6%.  Should the arbitrator rule in favour of the Company, the contribution level will be increased to 5.25%/ 6% on July 1, 2005.

 

18. All CAIL CUPE Employees who have never joined the CAIL CUPE Plan or have opted out of such plan, shall be required to join or resume active participation in the Pension Arrangement on a date which shall not be later than the date of establishment of the new Air Canada CUPE Pension Plan except for any former CAIL members who are age fifty-five or older as of October 1, 2002, who will have a one-time opportunity not to join the Air Canada Pension Arrangement.

 

19. For CAIL CUPE Employees who retire, terminate or die on or after January 1, 2003, maximum pensionable earnings used in the calculation of pension in respect of total service under the Pension Arrangement shall be equal to $80,000 for all years.

 

20. On January 1, 2003, an eligible retired member or survivor shall receive a lump sum payment payable from Company’s general revenues equal to 12 times the monthly increase in pension that would have been granted had the increase in pension in payment provided for as per L3.11 and L3.12 had applied on January 1, 2001, January 1, 2002 and January 1, 2003 provided that the January 1, 2001 increase shall be equal to eleven twelfth of the increase calculated as per L3.11 and L3.12.  However, the payment as of January 1, 2003 shall be calculated as if an increase as per L3.11 and L3.12 had been granted on January 1, 2001, January 1, 2002 and January 1, 2003.

 

21. On January 1, 2004, January 1, 2005, January 1, 2006 and January 1, 2007, the pension in payment payable under the Pension Arrangement to eligible retired members and survivors shall be increased as per L3.11 and L3.12.  However, the increased pension as of January 1, 2004 shall be calculated as if an increase as per L3.11 and L3.12 had been granted on January 1, 2001, January 1, 2002 and January 1,2003.

 

22. At the discretion of the Company, rather than providing for the improvements granted as per Article 21 of this LOU, the pension in payment payable under the Pension Arrangement to eligible retired members and survivors shall be increased as of January 1, 2003 as per L3.11 and L3.12.

 

23. Ancillary benefits provided under the Pension Arrangement may be harmonized by the Company to facilitate the administration and communication of the Pension Arrangement.  Such harmonization shall not decrease the actuarial value of the benefits payable.

 

24. A CAIL CUPE Employee who retires early at age 55 or older and who has 80 points will be allowed, subject to Company’s consent which shall not be unreasonably withheld, to retire under the Pension Arrangement without a reduction in his pension.  For a member who retires before attaining age 55 or before reaching 80 points, the pension benefit in respect of pensionable service before January 1, 2003 will be calculated as per the provisions applicable on December 31, 2002 in the CAIL CUPE Pension Plan.

 

25. Paragraph 3 of LOU No. 11 contained in the CAIL collective agreement No. 2 will not apply to retirements on or after January 1, 2003.

 

26. For the duration of the collective agreement, the Company shall continue to contribute for each CAIL CUPE Employee, an amount equal to 1.5% of gross earnings (excluding bonuses, allowances and termination payments) up to CCRA maximum to an RRSP, any excess to be paid in cash.

 

26.A CAIL CUPE Employee who retires, dies or terminates before

     the expiry of the collective agreement and who has at least 25

     years of pensionable service will finance not more than 50% of

     the pension benefit accrued upon date of retirement, death or

     termination.

 

27. CAIL CUPE Employees will be given the option to buy back an additional benefit equal to 0.375% of the final average Y.M.P.E. for years of pensionable service before June 1, 2000. 

 

The buy back program will be implemented in 2003 and      Employees wishing to buy back such additional benefit will have four (4) months to make their election.  The buy back of such additional benefit shall be at no cost to the Company.  It shall be subject to any requirements or restrictions under the applicable legislations and shall be made in accordance with the administrative practices established by the Company.

 

28. All CAIL CUPE Employees who have never joined the CAIL CUPE Plan or have opted out of such plan will be given the option, upon joining the Plan, to buy back years of pensionable service for the period between June 1, 2000 and the effective date they are joining the plan.  The benefits for these years of service shall be calculated using a 1.75%/2% pension formula.  The employee shall be required to contribute for these years of service an amount calculated as 4.5% of earnings up to YMPE and 6% of earnings in excess of YMPE times the number of years of service (complete or partial) bought back.  The earnings and YMPE used for the purpose of calculating buy-back contributions shall be those applicable in the Calendar year preceding the year the member joins the Plan.  The election to buy back these past years of service will have to be made by the member upon joining the Plan.  The buy back of such additional benefit shall be subject to any requirements or restrictions under the applicable legisla
tions and shall be made in accordance with the administrative practices established by the Company.