Canada’s largest pension plans remain underfunded by tens of billions of dollars.
An August 2011 report by credit-rating firm DBRS found that the 20 poorest defined-benefit (DB) pension plans collectively had a funding deficit of more than $14.1 billion.
Canadian companies with the biggest absolute funding deficit included Air Canada with a $2.1 billion deficit, Nortel ($1.5 billion) and BCE ($1.47 billion).
BC Hydro, the only B.C.-based company on the list, had the 11th poorest pension plan with a $364 million deficit.
On a percentage basis, Catalyst Paper’s pension plan was the third worst. Only 65% of the plan is funded to meet pension liabilities. Canfor Corp., was the only other B.C. company to make the worst-funded list: 16th with a 78% funding rate.
DBRS noted plans that are less than 80% funded require annual contributions to make up for the deficit. About 45% of DB plans in North America now fall into that category, compared with only 13.2% in 2007.
The number may be higher longer term, however.
Another DBRS report released in April concluded that the current funded status of the 25 largest DB plans is overstated due to aggressive discount rates that don’t reflect the current low-interest rate environment.
Such financial assumptions put the benefits of future pensioners at risk. DBRS said it anticipates pension payouts to increase dramatically until 2029, which will lead to shortfalls to plan members by the middle of the century.
