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New union hires at Air Canada to get modified plan

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MONTREAL—New Air Canada workers represented by the Canadian Auto Workers will be placed in a new retirement plan with defined benefit and defined contribution components rather than the airline’s traditional pension plan, under a decision handed down Sept. 16 by a Canadian government arbitrator, according to a news release from the union.

The Canadian Auto Workers union, which represents about 4,000 Air Canada employees, has been in arbitration with the Montreal-based company since June 27, arguing against replacing the defined benefit plan with a defined contribution plan.

Under the new plan, employees will be part of the Air Canada defined benefit pension plan under a reduced formula and also a new defined contribution plan contributed to by both the employer and employees.

Jo-Ann Hannah, CAW director of pensions and benefits, said in an interview that the union does not “hold this model up as the best way to go,” but the arbitrator’s decision did prevent Air Canada from setting a nationwide precedent of companies eliminating their DB plans.

“Many employers would have seen that as a license to demand DC plans for new hires,” she said. “What we did was really give some inspiration to unions and workers who have DB plans that they have a right to have those plans.”

Air Canada has 10 defined benefit plans with a combined $10.9 billion Canadian ($11 billion) in assets and a defined contribution plan for nonunion members worth $11 million Canadian.

Air Canada spokesman Peter Fitzpatrick declined comment.

Timothy Inklebarger is a reporter for Pensions & Investments, a sister publication of Business Insurance.