Canada Gazette, Part I, Volume 147, Number 51: Canada Post Corporation Pension Plan Funding Regulations

December 21, 2013

Statutory authority

Pension Benefits Standards Act, 1985

Sponsoring department

Department of Finance


(This statement is not part of the Regulations.)


Canada Post is responsible for making current service contributions to its pension plan as well as special payments to cover any funding shortfalls. As of December 31, 2012, Canada Post’s pension plan had a solvency deficit of $6.5 billion.

Amendments made to the Pension Benefits Standards Act, 1985 (PBSA) and Pension Benefits Standards Regulations, 1985 (PBSR) effective in April 2011 permit agent Crown corporations, such as Canada Post, to reduce solvency payments by up to 15% of plan assets with the consent of the Government, as the Government is ultimately responsible for the financial obligations of agent Crown corporations.

Canada Post had reduced its solvency special payments in accordance with the PBSA by $1.3 billion as at December 31, 2012. Canada Post expects to reach the 15% solvency reduction limit permitted under the PBSA by early 2014. Therefore, under the PBSA, Canada Post would need to make an additional cash solvency payment of approximately $1 billion in 2014 and an aggregate of over $2.5 billion by the end of 2017.

Canada Post is facing financial challenges due to Canadians’ decreasing use of transaction mail in favour of digital communications. Mail volumes are declining faster than Canada Post’s ability to reduce costs, given its current letter mail service obligations. According to Canada Post’s third quarter of 2013 financial projections, Canada Post will require additional liquidity by mid-2014 to support its operations, based on the expectation that it will reach the maximum permitted solvency reduction limit in early 2014. Canada Post’s current business model does not allow it to achieve sufficient profitability to support its operations, contributing to this cash shortfall.


Under the Office of the Superintendent of Financial Institutions Act, the PBSA and the PBSR, the Office of the Superintendent of Financial Institutions (OSFI) regulates and supervises private pension plans in federally regulated businesses such as banking, telecommunications and interprovincial transportation. OSFI is also the regulator for pension plans established in respect of employment in the Yukon, the Northwest Territories and Nunavut. Canada Post’s defined benefit pension plan is subject to the PBSA and the PBSR.

The PBSA requires that federally regulated pension plans fund promised benefits in accordance with the prescribed tests and standards for solvency that are set out in the PBSR. Defined benefit pension plans must file actuarial valuations; where these valuations show a pension plan’s assets to be less than its liabilities, special payments must be made into the plan to eliminate the deficiency over a prescribed period of time.

Actuarial valuations are conducted using two different sets of actuarial assumptions: “solvency valuations” use assumptions consistent with a plan being terminated on the valuation date, while “going concern valuations” are based on the plan continuing in operation. If a valuation reveals a solvency deficiency, the PBSR requires the plan sponsor to make special payments into the plan sufficient to eliminate the deficiency. In general, the payments that a plan sponsor must remit to a plan in a given year include the amount necessary to cover the ongoing normal costs associated with the plan, plus any “special payments” required in that year to pay down a funding deficiency over the prescribed period.

One of the main objectives of federal pension regulation is to set out standards for the funding and investments of pension plans so that pension plan assets are sufficient to meet pension plan obligations, which serves to protect the rights and interests of pension plan members, retirees and other beneficiaries. At the same time, the PBSA takes into consideration that pension plans may, at times, be in deficit positions as a result of a variety of factors such as changes in actuarial assumptions, resulting in actuarial losses to the fund, and downturns in the financial markets. These deficits may be too large for employers to absorb at once. The PBSA allows a plan to carry a deficit with the provision that the plan sponsor (the employer) make payments aimed at making up the shortfall within a period of 5 years for a solvency deficiency and 15 years for a going concern deficiency.


The objective of the proposed Canada Post Pension Plan Funding Regulations (proposed Regulations) is to provide Canada Post with temporary relief from making special payments to its pension plan.


The proposed Regulations would provide Canada Post with temporary relief from making special payments to its defined benefit pension plan. The relief would commence when the proposed Regulations come into force and cease to apply on December 31, 2017. While the relief is in place Canada Post would continue to be responsible for paying its normal costs.

In the event that the plan is terminated, the full amount of payments under the proposed Regulations for that year would be owed immediately, after which the payment rules in case of termination under the PBSA and PBSR apply.

The proposed Regulations would prescribe a solvency ratio of one for the purposes of provisions of the PBSA that prohibit plan amendments in certain circumstances. These prohibition provisions apply to amendments that would have the effect of granting a benefit improvement unless the plan’s solvency ratio is above the prescribed level (set at one) and the amendment in question would not reduce the ratio below that level.

In addition to the usual disclosure requirements under the PBSR (e.g. a statement to plan members including contributions made to the plan, benefits accrued), Canada Post would be required, under the proposed Regulations, to provide information to members and retirees annually on the plan’s solvency deficit, the fact that Canada Post is not required to make special payments in respect of plan years 2014 to 2017, and the payments that would have been required under the normal funding rules.

“One-for-One” Rule

The “One-for-One” Rule does not apply, as the proposed Regulations do not affect administrative costs to business.

Small business lens

The small business lens does not apply, as the proposed Regulations do not impose costs on small business.


Canada Post is supportive of the proposed Regulations. Unions representing Canada Post employees (Public Service Alliance of Canada, Association of Postal Officials of Canada, Canadian Postmasters and Assistants Association, and Canadian Union of Postal Workers) and retirees will be consulted on the proposed Regulations.


Canada Post has a mandate to provide a standard of postal service that meets the needs of Canadians by providing quality postal services to all Canadians in a secure and financially self-sustainable manner. A financially viable Canada Post is in the interests of Canada Post employees, pension plan beneficiaries, businesses that depend on mail service for their operations and all Canadians. However, Canada Post continues to face serious challenges due to declining revenues from the fundamental changes in the long-term viability of the postal business. At the same time, large pension liabilities are putting significant pressure on the Corporation’s financial resources. As a result, Canada Post is projecting that it will run out of cash in mid-2014 without solvency payment funding relief.

The proposed short-term relief on special payments would reduce the pressure the pension plan is placing on Canada Post’s short-term cash flow in order for the Corporation to focus on transforming its business to deliver on its mandate within the context of the decreasing demand for traditional letter mail.

Implementation, enforcement and service standards

The Superintendent of Financial Institutions is responsible for the control and supervision of the administration of the Act. As a result, the Superintendent would be responsible for enforcing the proposed Regulations.


David Murchison
Financial Sector Division
Finance Canada
L’Esplanade Laurier, East Tower, 20th Floor
140 O’Connor Street
Ottawa, Ontario
K1A 0G5


Notice is given that the Governor in Council, pursuant to section 39 (see footnote a) of the Pension Benefits Standards Act, 1985 (see footnote b), proposes to make the annexed Canada Post Corporation Pension Plan Funding Regulations.

Interested persons may make representations concerning the proposed Regulations within 15 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part Ⅰ, and the date of publication of this notice, and be addressed to David Murchison, Director, Financial Sector Division, Finance Canada, L’Esplanade Laurier, East Tower, 20th Floor, 140 O’Connor Street, Ottawa, Ontario K1A 0G5 (email:

Ottawa, December 12, 2013

Assistant Clerk of the Privy Council


Words and expressions

1. Except as otherwise provided, words and expressions used in these Regulations have the same meaning as in the Pension Benefits Standards Regulations, 1985 (the “PBSR”).


2. These Regulations apply to Canada Post Corporation’s defined benefit plan (the “plan”) in respect of which certificate of registration number 57136 has been issued by the Superintendent under the Act.


3. Subsections 9(1) to (13), paragraph 9(14)(b) and subsections 9.3(1) and (3) of the PBSR do not apply to the plan.


4. The funding of the plan is considered to meet the standards for solvency if the funding is in accordance with the provisions of these Regulations.

Annual contribution

5. The plan must be funded in each plan year by contributions equal to the normal cost of the plan and by the amounts required to be paid by the employer under a defined contribution provision.

Special payments

6. Subject to section 8, no special payment is required to be made in respect of plan years 2014 to 2017 after the day on which these Regulations come into force.

Prescribed solvency ratio

7. For the purposes of paragraphs 10.1(2)(c) and (d) of the Act, the prescribed solvency ratio level is 1.0.

Plan termination

8. If the whole of the plan is terminated, these Regulations cease to apply, and the plan must be funded in accordance with the Act and the PBSR.

Prescribed information for subparagraph 28(1)(b)(iv) of Act

9. (1) In addition to the information referred to in subsection 23(1) of the PBSR, the following information is prescribed for the purposes of subparagraph 28(1)(b)(iv) of the Act:

  • (a) the amount of the plan’s going concern deficit as shown in the last actuarial report filed with the Superintendent;
  • (b) the amount of the plan’s solvency deficiency as shown in the last actuarial report filed with the Superintendent;
  • (c) the fact that no special payment is required to be made in respect of plan years 2014 to 2017 after the day on which these Regulations come into force; and
  • (d) the amount of special payments that would have been paid to the plan for the plan year covered by the statement if the plan had been funded in accordance with section 9 of the PBSR during that plan year.

Prescribed information for subparagraph 28(1)(b.1)(ii) of Act

(2) The information referred to in paragraphs (1)(a) to (d) is prescribed for the purposes of subparagraph 28(1)(b.1)(ii) of the Act.


(3) The prescribed information must be addressed to the member or former member of the plan and that person’s spouse — or, if that person is cohabiting with a common-law partner, to that common-law partner — as shown on the records of the plan administrator and must be

  • (a) given to the member of the plan at the place of employment; or
  • (b) mailed to the residence of the member or former member of the plan and that person’s spouse or common-law partner, as the case may be.



10. These Regulations are repealed on January 1, 2018.



11. These Regulations come into force on the day on which they are registered.