Canadian DB pensions plans take a drubbing in 2011

[dagger]

http://www.theglobea...article2291148/

Canadian pension plans saw their funding plummet in 2011 as falling interest rates sent their pension obligations soaring.

Towers Watson said its pension index -- which tracks a hypothetical pension plan using typical investment allocations -- fell to 72 per cent by the end of 2011 from 86 per cent at the beginning of the year. That means the model pension plan had assets equal to 72 per cent of its estimated pension liability, marking a severe funding shortfall.

[DEFCON]

How is this situation going to shake out? It doesn't seem to matter how much the corporations & governments pour into the pension sewer on an annual basis anymore, the cash just continues to flow smoothly from the other end of the pipe and into the pockets of persons external to the plan.

[dagger]

How is this situation going to shake out? It doesn't seem to matter how much the corporations & governments pour into the pension sewer on an annual basis anymore, the cash just continues to flow smoothly from the other end of the pipe and into the pockets of persons external to the plan.

Fees aside, it's not the cash that's flowing out, it's the deficiency formula that's killing the plans. Nevertheless, the issue is what to do, especially on the private sector side. When even plans that were fully funded and have continued to receive funding since the onset of the Great Recession are falling into a significant deficit position, you have a systemic problem. Addressing the pension plan issue becomes unavoidable for all stakeholders. You don't want the employer to go under, or to make payments that force it to retrench in a manner that causes it to lay off substantial number of employees, or take money out of wages and other benefit areas.

At a time when the federal government is allowing programs like tax free savings plans to grow without caps (whether that's wise or not fiscally is another matter) it begs the question of whether current employees would be better off with more in their pay packets and smaller future pensions (DB or DC) so they could make the maximum RRSP and TFSA contributions.

[Don Hudson]

It is no longer possible to just sock money away, put it under the mattress or just save for retirement. "Investing" is only way the poor man and the middle-class man can ensure something is in place for retirement.

Why doesn't that work anymore?

I have some ideas which I don't think are far off but maybe they are.

Why are we tied to "investing" for a "successful" retirement? Why/When did "the mattress" go out of fashion?

Don

[mrlupin]

It is no longer possible to just sock money away, put it under the mattress or just save for retirement. "Investing" is only way the poor man and the middle-class man can ensure something is in place for retirement.

Why doesn't that work anymore?

I have some ideas which I don't think are far off but maybe they are.

Why are we tied to "investing" for a "successful" retirement? Why/When did "the mattress" go out of fashion?

Don

Morning Don,

The Bank of Canada, (and most Federal Banks) have adopted a policy that discourages saving. The lowering of the overnight discount lending rate to 1% is done to stimulate growth in the economy. It keeps prices moving... Keeping prices moving might have many advantages for the government but in my opinion,it comes at the disadvantage of the citizens.

The short term bond rate in Canada is 1%. If you had millions socked away and were looking at the safety of saving bonds to fund your retirement, you would normally have money in treasuries. At the moment a million dollar would pay 10,000$ in interest if invested in the short term bonds (no one would invest solely in short term bonds but I am using the example). No one sensible would throw money in such an investment vehicle. Inflation is higher then the rate of return of the Canada Savings Bond. What I read from that, is that the government doesn't want people to save money. They want everyone to throw their money in various investment, businesses and real-estate. All of which are at the moment incredibly dangerous investments.

The present conjuncture is a strange one. I am trying to learn more about it but have to admit it doesn't fit with any model I have found. Take a look at the Canada Long Bond (30 years) as of today. It sits at 2.5%. A month ago, I had made some calculations (on the pension thread)about the price required to buy an annuity similar to what an AC pension would pay out. The rate then was approx 2.7%, the rate has since fallen and the perceived deficit in AC pensions has gotten bigger because of it. So we keep blaming the employer for our pension woes but the central bank is the major culprit in our loss of wealth...

A dollar under the mattress for a year no longer purchases a dollar's worth of goods in todays market.

Keeping inflation at the 2-3% mark also allows politicians to promise the world and push the repayment of everything to the future where the value to be repaid is going to be carried out,(they hope) with inflated dollars. The perpetual growth model has worked for the last 60 years but everything has it's limits. At 1%/2.5% for the short/long Canada bond and a ridiculous 0.01% return for the 3 month Tbills, 0.1% for the 1 year and 3% for the 30 year Tbill you have to wonder who would be buying these treasuries. I do not have the answer for the Canadian bonds but the US is effectively printing money to monetize it's debt. Europe is also doing the same.

Here is a quote from Thomas Jefferson,

"I place economy among the first and most important republican virtues, and public debt as the greatest of the dangers to be feared. To preserve our independence, we must not let our rulers load us with perpetual debt."

Our government are loading us with Debt. Under Conservative rule, our debt load had only increased. Most of it is due to economical conjuncture but a part of the blame can also be attributed to some of their policies and choices (the loading up of the CHMC with bad bank debt comes to mind but more examples are also easily found)

The entire debate on the pension plans becomes dishonest at this point. With the problem(as I perceive it) being that world banks and countries are now monetizing their economies by printing dollars, rendering safe investment very hard and markets very volatile. How can the individual investor expect to save? The DC plan does not address that, it merely shifts the burden from the corporations to the citizens.

In short, this economy doesn't appear to have a very solid foundation. Yet the Central Banks of the world have policies that are pushing us to throw our money in the financial markets which some might say, appear to be rigged. This can rapidly have very disastrous consequences...

Éric

[DEFCON]

Dagger

Thanks for the response. You stated; “Fees aside, it's not the cash that's flowing out”. I would argue; the sheer volume of cash (plan value) flowing through the drain surely includes far more than just ‘fees’? If so, this cash is being moved from our account and directly into someone else’s? Generally, we refer to that ‘process’, as a loss on investment? Pension plan performance seems to make it pretty clear; there are few safe harbours for the investor in the present clime.

Eric

I know things change over time, but as it is in the present day, change isn’t always for the better.

Not to pick on anyone in particular, but let’s say you’re either, an active or a soon to be AC retiree. Planning ahead, people contributed funds to a pension plan through which they ‘expected’ to enjoy a comfortable retirement. Unfortunately and due to no fault of their own, the plan and the economy have continued to backslide, leaving the plan member in a state of constant stress consequent to all the uncertainty.

Alternatively, consider a scenario in which the employee accumulates 1M in cash savings, which in turn is generating 10K on an annual basis. If we assume we are going to live until ninety (25 years) and we begin to pay ourselves a monthly stipend at retirement accordingly; we can extract approximately $3300 a month in after-tax dollars from our ‘Savings Account’. Add in Old Age Security and CPP on a non-taxable basis and I think you might agree; we’ve ensured we have the comfortable and ‘stress free’ retirement we always had hoped for?

It's also clear that we cannot trust the banks. That being the case, the 1930's 'mattress' approach to saving money suggested by Don, may in fact be returning?.

[dagger]

No money is leaving DB pension plans except to pay out pensions. What is happening is that low interests on AAA government bonds distort the amount of funds that would be required to wind up a plan and make good on all pension obligations. It's not as if real estate investments are paying the same 1% as the short term government bond rate, but low rates drive the solvency calculation higher, ergo rising deficits. If you take a different type of investment as the basis for the solvency calculation - let's say, AAA corporate bonds, or even AA bonds - the deficits fall. If government bond rates rise, the deficits fall. What is happening is that the government bond rates are at rock bottom and stuck there. Some would argue that the pension deficit issue is irrelevant in the real world. but that's the formula. That's the law. And that's problem for fund managers and stakeholders. Governments can raise taxes to pay public pensions. Corporations are constrained by demand in the economy and the presence of competitors. An employer can't just raise its prices arbitrarily to pay down pension deficits. The public will stop buying what it has to sell.

[Don Hudson]

Eric

Thank you. Very helpful in "placing" some of my reading.

Re, "The entire debate on the pension plans becomes dishonest at this point. With the problem(as I perceive it) being that world banks and countries are now monetizing their economies by printing dollars, rendering safe investment very hard and markets very volatile. How can the individual investor expect to save? The DC plan does not address that, it merely shifts the burden from the corporations to the citizens."

Yes, I had the sense from reading in this area that monetizing economies has been underway for a number of decades - specifically the book is, "The Speculation Economy", by Lawrence Mitchell.

I grew up in a time when saving for retirement was an actual goal. Inflation was always a reality and a concern but the idea of saving-for-a-rainy-day co-existed with the threat of inflation. Apparently, the ability to successfully, predictably, save for that rainy day has been taken away. I can see no other reason for this than to benefit artificial wealth-creation.

We could argue that our unprecedented living conditions are some of the primary effects of such artificialities. Combined with imagination and planning, the money available to create such unique conditions for many millions of people has been made possible thereby.

Though perhaps innocent, it is a fraud of the first order to in any way state that stability and the possibility of a secure future is characteristic of such an economy. So what is being "sold" and why is it tolerated? I should have thought that some form of the Occupy Movement would/should have emerged twenty years ago.

I would never credit those who are viewed historically, (Reagan, Thatcher, Friedman, Volcker, Greenspan), with the originality to create such an economy. I think the goals were more pedantic and again, fraudulent. But it is a big study and a big read before the "islands" of such an argument can become one large "land mass", the goal of which is change, and I'm not sure the powerful would tolerate it - they've already signalled their levels of tolerance in their use of police crackdowns on the Occupy Movements.

The possible outcomes of such innocent fraud are, however, clear: Entire populations living as wards of the state because they do not have the means by which they may be sustained through self-support. That IS a legacy!

No pension plan can "address" this because the technical capabilties don't exist.

Don

[conehead]

Putting money under a mattress..

http://in.news.yahoo.com/greek-italian-cash-heads-hills-under-pool-043352533.html

[DEFCON]

“Some would argue that the pension deficit issue is irrelevant in the real world. but that's the formula. That's the law. And that's problem for fund managers and stakeholders.”

Hardly ‘irrelevant’ doesn’t apply should ones corporate sponsorship fall apart. Admittedly, I’m not an expert on anything pension, but I can see and measure the ongoing results. In AC’s case, a large amount of cash is fed into the plan to reduce / eliminate the ‘shortfall’, but the result proves negative? The ‘hard cash’ being funneled in is definitely being transferred to someone’s pocket after it leaves the account and is classified as an investment loss?

As before, I know a little bit about the rules overall, a tiny amount with respect to funding requirements and consequently can’t seem to appreciate how the interest on a given government bond could be responsible for the continuing shortfall, unless increasing the ‘risk’ to the plan member through ‘less secure investments is the only alternate considered?

From my pov and with hindsight being 20/20, I’d rather have placed an after tax corporate contribution with my own in a savings account versus the current pension plan. Although I can’t offer a true number crunch comparison, I’m pretty confident I’d have more ‘secure’ money available to me today and through my retirement than I can be sure of with today’s pension uncertainties?

[dagger]

In AC’s case, a large amount of cash is fed into the plan to reduce / eliminate the ‘shortfall’, but the result proves negative? The ‘hard cash’ being funneled in is definitely being transferred to someone’s pocket after it leaves the account and is classified as an investment loss?

You obviously don't understand if you think this is the case. A pension plan deficit is calculated by subtracting current assets from the solvency liability that would result if a company wound up its entire pension plan today. That liability would represent the full cost of all future pensions that have to be paid out to plan members.

With me so far?

The assets are concrete, cash, stock, real estate, etc, whatever is invested by the pension plan managers. The solvency liability is a formula. It has nothing to do with meeting the plans current pension payments but is an actuarial accounting for what would be needed "if" the plan were to be wound up immediately. Under Canadian law, a key component of that formula is the interest rate on AAA federal government short-term bonds, the assumption being that a sovereign national government will not renege on bonds it issues in its own currency. That formula predicts how much the fund investments can generate if they were ALL invested at that AAA federal government bond rate. The fund's actual investments might be doing better than that, especially if they are invested in real estate or other investments paying a few percentage points higher, but that is irrelevant in calculating the solvency formula and hence the deficit. What is relevant is the government bond rate. If that rate goes up, then value of the fund's investments for purposes of calculating the solvency formula go up, and hence the deficit goes down because the fund is deemed from an actuarial standpoint to be capable of covering a greater percentage of its future obligations. However, if the government bond rate goes down, then the investments are deemed to cover LESS of the future obligations, hence the deficit goes up.

If government bond rates were to rise 200-300 basis points, there would be no pension crisis - at Air Canada or anywhere else. If they went up 500 basis points, plans would likely be generating healthy surpluses, even scraping up against the maximum surplus allowed by the Canada Revenue Agency before it would tax that overage.

So more money can be going into pension funds, and yet their deficits can be increasing. When rates are this low for so long, it mean plan sponsors have to plough even more money into their plans just to keep the deficit from rising. It's like making the hamster run faster on the treadmill by speeding up the treadmill.

And no, money isn't being diverted from the Air Canada plan to the CEO's vacation fund or the IAM beer fund. That would violate the airline's agreement with its unions and the OSFI.

Canada is ultra-conservative in what it mandates as the pension plan solvency formula. The US uses more liberal benchmarks. The Canadian approach might be better, so long as it doesn't sink employers or otherwise cost jobs or take away salary and other benefits from current employees.

[Fido]

Daggare

As an example

Until recently an employee who met the criteria of 25 years of service and yet still 10 years from regular retirement could ask for their pension in cash.

If the calculated pension was $20,000 a year then:

If interest rates are 10% then they would get $200,000

If interest rates are 1% then they would get $2,000,000

[dagger]

And it ain't just private sector pensions under water.

I mean, she 26 years, retired at 55 (or earlier, the story is a little vague), gets a pension of $25,000, and is having a tough time? How wise was it to retire at that age, with no other income, no CPP?

http://www.thestar.com/news/article/1112303--pension-troubles-in-store-for-retired-workers-as-plans-across-canada-face-deficits?bn=1

[Leading Edge]

Man, you guys really like drinking the corporate kool aid don't you... Ever stop to think that you are the one being manipulated??

I'll quote for you:

"The latest figures from Statistics Canada through the third quarter of 2011 show Canadian business sitting on more than $583 billion in Canadian currency and deposits, and more than $276 billion in foreign currency."

http://www.winnipegfreepress.com/breakingnews/rising-corporate-cash-reserves-raise-questions-about-jan-1-federal-tax-cut--136499968.html

[DEFCON]

Dagger

Thank you; I did learn a couple of things.

Back to my problem and resprecting the 'funding formula rules'; if a plan requires a dollar to fund all its liabilities and it only has $0.70 in it, it is underfunded by definition. As it is; AC's been pouring millions in, but that money hasn't resulted in any gain in the plan's relative value. Fees and pension benefits create a drain as they're paid out for certain, but isn't the lack of performance in the 'market' as a whole the bigger drain on plan value?

[IFG]

Thank you; I did learn a couple of things .... Back to my problem and resprecting the 'funding formula rules'; if a plan requires a dollar to fund all its liabilities and it only has $0.70 in it, it is underfunded by definition. As it is; AC's been pouring millions in, but that money hasn't resulted in any gain in the plan's relative value. Fees and pension benefits create a drain as they're paid out for certain, but isn't the lack of performance in the 'market' as a whole the bigger drain on plan value?

Hi, DEFCON - You've still completely missed Dagger's explanation (as well as M. Lupin, Fido), but you're certainly not the only one here. It's really frustrating to read these thread's on pension issues, because the firmness of opinion seems inversely proportional to the apparent grasp of the problems and issues. Let's try another little analogy: Two neighbours are saving up to buy something expensive (house, Farrari, Bertram, whatever?). They're contributing annually to their 'fund', plus the fund accumulates investment income. In a year, both of their funds increase by 5% from income, and 5% from new contributions. Neighbour DB observes that the price of the [house/car/boat?] has gone up by 15%. Neighbour DC doesn't bother to keep track of that. What seems to happen in these threads is that when DB talks about the fact that he is 5% behind the game since last year, DC, blessed with blissful ignorance of what's going on, congratulates himself on his increased fund balance and, quite incredibly, procedes to flaunt the utterly false equivalance of his 10% 'gain', and his neighbour's 5% 'loss'. The crucial part to understand about these published valuations, particularly any "deficits", is the aspect of comparison to the 'cost' (or present-day-value) of future payment oligations. When these rise, they rise for everybody that's saving for retirement, by whatever means. DC does NOT insulate folks from the difficulties of funding their retirement in times of depressed returns. It would be a lot more honest if the heading of the thread said simply "Pensions plans take a drubbing in 2011" instead of prefixing "Canadian DB" onto it. There are no easy fixes here. Proving what's 'better' between DB and DC is difficult because the structures are so different. Not that this will stop many from making flawed comparisons anyway. But I know which way I'd rather go. Cheers, IFG

[dagger]

Hi, DEFCON - You've still completely missed missed Dagger's explanation (as well as M. Lupin, Fido), but you're certainly not the only one here. It's really frustrating to read these thread's on pension issues, because the firmness of opinion seems inversely proportional to the apparent grasp of the problems and issues.

Let's try another little analogy: Two neighbours are saving up to buy something expensive (house, Farrari, Bertram, whatever?). They're contributing annually to their 'fund', plus the fund accumulates investment income. In a year, both of their funds increase by 5% from income, and 5% from new contributions. Neighbour DB observes that the price of the [house/car/boat?] has gone up by 15%. Neighbour DC doesn't bother to keep track of that.

What seems to happen in these threads is that when DB talks about the fact that he is 5% behind the game since last year, DC, blessed with blissful ignorance of what's going on, congratulates himself on his increased fund balance and, quite incredibly, procedes to flaunt the utterly false equivalance of his 10% 'gain', and his neighbour's 5% 'loss'.

The crucial part to understand about these published valuations, particularly any "deficits", is the aspect of comparison to the future payment oligations. When these rise, they rise for everybody that's saving for retirement, by whatever means. DC does NOT insulate folks from the difficulties of funding their retirement in times of depressed returns. It would be a lot more honest if the heading of the thread said simply "Pensions plans take a drubbing in 2011" instead of prefixing "Canadian DB" onto it.

There are no easy fixes here. Proving what's 'better' between DB and DC is difficult because the structures are so different. Not that this will stop many from making flawed comparisons anyway. But I know which way I'd rather go.

Cheers, IFG

I know you're trying to make a point about the uncertainty of DC plans, and they do shift more of the responsibility to the future pensioner. However the issue with a DB solvency deficit is that the law requires the employer to put make up the deficit NOW, not later. First, the formula inflates the problem by linking it to a AAA government bond trading at an historically low rate, and requires the employer to make up the shortfall NOW, when the economy is going through a restructuring. Now if that company happens to be in an industry that's going through challenging times, making up that deficit out of dwindling cash reserves raises a major problem for current employees, since the failure of the company will not only deprive them of some or all of their future pension, it will cast them onto the job market. For an airline like Air Canada, it might mean putting an increasingly percentage of cash flow into a DB pension plan to make up a solvency deficit that might not even be a factor in five years as opposed, for example, to replacing its Airbus narrow-body fleet with newer NEO versions of with the 737 or A320 families. Pouring money into a pension plan above and beyond normal contribution levels doesn't make it more competitive. Buying next generation aircraft that are more fuel efficient certainly does make it more competitive.

It is a complex issue, but the ramifications can't be measured solely in terms of the pension plan.

[IFG]

Amen, Dagger, but you're way past the initial step of grasping exactly what the valuation process is saying. Once we've got that down, then there can be an inforrmed discussion, whether it revolves around changing the yardsticks that you're focused on, or perhaps restructuring DB plans to mitigate or reduce some of the extra underwriting risks for the plan sponsors (early retirement options, basing on best 5 yrs etc). Without the initial "aha" about valuations and deficits, that discussion just can't take place.

Cheers, IFG

[dagger]

Amen, Dagger, but you're way past the initial step of grasping exactly what the valuation process is saying. Once we've got that down, then there can be an inforrmed discussion, whether it revolves around changing the yardsticks that you're focused on, or perhaps restructuring DB plans to mitigate or reduce some of the extra underwriting risks for the plan sponsors (early retirement options, basing on best 5 yrs etc). Without the initial "aha" about valuations and deficits, that discussion just can't take place.

Cheers, IFG

You're right about that, but DEFCON's intervention was at a very basic level, and focussed on a belief that the current pension problems reflect a high degree of malfeasance. Now that we've gotten through that, there is a chance for an informed debate about solutions to tide these plans through what is hopefully a transitory problem.

[Leading Edge]

One thing that the Dagger spin machine is not telling you, is that AC has already had several pension payment deferrals to the tune of up to 10 years. The fact that the pensions are underfunded lies in the pension payment holidays that AC booked in the past. So in this case, the employer of neighbour with the DB plan failed to put sufficient funds into the plan. This created an exponentially larger liability because they are now liable for the original contributions plus past growth. They were warned about this repeatedly by all the unions...

Non payment of pension obligations is especially punitive to employees, because AC books the liability to you, you cannot top up RRSP's due to pension adjustments. When the loss of pension occurs due to corporate failure to pay, you lose twice. You lose the original pension obligation,and you lose the RRSP room + growth. Make no mistake about it, pension underfunding was a government allowed planned manoeuvre that has been accelerated by the market.

Similarly, pension revaluation scheme in TA1 is simply a way of transferring corporate pension underfunding to the employee. They must be laughing all the way to the bonus bank on that one...

[Homerun]

Leading edge, you don't know what you're talking about. The deficit in AC's pension is almost entirely due to dropping interest rates and the effect they have in the valuation calculation. Have a look at the total asset value. It's several billion higher than it was a few years ago.

Blaming funding holidays is for simpletons.

[Leading Edge]

Really, genius, maybe you need a little history lesson:

Pension regulator tells Air Canada to resolve $1.2 billion shortfall issue

Last Updated: Friday, March 26, 2004 | 7:39 PM ET

CBC News

Video

Amanda Pfeffer reports for CBC-TV (Runs: 1:52)

play: RealMedia »

play: RealVideo »

play: QuickTime »

Air Canada was told by the federal pension regulator Friday that it needs to move quickly to resolve issues surrounding the $1.2 billion shortfall in its pension plan.

In a letter to the airline, the Superintendent of Financial Institutions, Nick Le Pan, reiterated his dissatisfaction with Air Canada's plan to repay the pension deficit over 10 years.

Le Pan reminded the company that it had undertaken to submit a revised payment schedule by the week of March 14, but OSFI has yet to receive it.

Nick Le Pan (file photo)

"These are important matters that should not be deferred as the last issues to be resolved as part of the [Companies' Creditors Arrangement Act] process," Le Pan said.

Federal regulations require that pension plan shortfalls be made up within five years.

• FROM:Feb.19, 2004 Air Canada solves one pension problem, but another looms
  

OSFI advised Air Canada in early February that its proposal to make up the deficiencies over 10 years would require cabinet approval.

It said the minister of finance would seek OSFI's views on any proposed changes before making a recommendation to cabinet and that "time continues to be of the essence" if the matter is to be resolved within a timeframe envisaged by Air Canada, the court-appointed monitor handling the restructuring and Trinity Time Investments.

Air Canada spokesperson Laura Cooke said the airline would address the issues raised by the federal regulator.

"While there are still some outstanding issues to be resolved with OSFI on the funding of the pension deficit, we are encouraged with the progress made to date," Cooke said.

On Thursday, Finance Minister Ralph Goodale warned that he has several concerns about the pension proposal, including its implications for other companies and their pensioners.

"I would want to make sure that whatever the decision is, that it is absolutely fair to and respectful of those who hold pension rights," Goodale said. "That is an absolute imperative."

The shortfall issue is a further complication in a growing crisis over pensions that threatens Air Canada's survival.

[dagger]

Yes, Air Canada took pension payment deferrals and the deficit is larger than it would be otherwise, but in your BS mode you aren't telling people that it would be in deficit even without those deferrals, just as most DB plans are in the hole. The whole concept of DB pensions, like most whole life insurance policies, and annuities and the like did not anticipate an economy like we have experienced since the middle of 2008. Even federal law which capped the size of DB surpluses - arguing that over the limit, pension plans were being used to dodge taxes - did not anticipate a situation like this. Nor did they anticipate the cost of providing fully indexed public sector pensions and a lot of other types of benefit concepts built on the idea that we would never face a global de-leveraging of the kind we're seeing now.

That's just the way it is. So what are you going to do about it? F@Q yourself over?

(As for the bonus, since any bonuses at AC are being paid as stock options, I doubt there is much to take to the bank with a $1 stock).

[deicer]

So to acknowledge that most DB plans are in a hole, then why is the Exec plan fully funded?

[Leading Edge]

Yes, Air Canada took pension payment deferrals and the deficit is larger than it would be otherwise, but in your BS mode you aren't telling people that it would be in deficit even without those deferrals, just as most DB plans are in the hole. The whole concept of DB pensions, like most whole life insurance policies, and annuities and the like did not anticipate an economy like we have experienced since the middle of 2008. Even federal law which capped the size of DB surpluses - arguing that over the limit, pension plans were being used to dodge taxes - did not anticipate a situation like this. Nor did they anticipate the cost of providing fully indexed public sector pensions and a lot of other types of benefit concepts built on the idea that we would never face a global de-leveraging of the kind we're seeing now.

That's just the way it is. So what are you going to do about it? F@Q yourself over?

(As for the bonus, since any bonuses at AC are being paid as stock options, I doubt there is much to take to the bank with a $1 stock).

According to the 2007 AC statements the Pension liabilities were $1.8Billion. So all this talk about de-leveraging and the stock market are at best, misleading. If the plans had been fully funded, AC would be looking at a $1B shortfall, which would be manageable. But because management decide to transfer $2B out and underfund the pension obligations we are where we are today. So lets call a spade a spade.

Where do we go from here, well there are lots of options other that the employee taking it on the chin yet again... Maybe AC should start transferring assets (unencumbered) to the pensions. LHR slots for example, 777 equity, Jazz Stock etc...

The bottom line is that AC owes that money to the plan, and anything is better than a free gift back to the company by the employee's. The worst part is the utter contempt that this management has for the employee group, and yet here they sit begging for more money. I think its about time that this management be forced to bear the responsibility for their F@ck Ups. For th employee, what is the difference between getting F@cked over, or agreeing to get F@cked over?? TA1 destroys my pension, so what do I have to lose?? I can absolutely guarantee you that when the DB pension is gone, Pilots will leave AC in droves...

Maybe, if you worked at an airline, instead of just pontificating about it you might understand where the people are at. Working for an airline like AC is no longer a pleasant experience, and if they succeed in the walmatization of it, Emirates will have no shortage of qualified applicants. Lots of people are looking at it, and you would be a fool to think otherwise.