Conservative Canada is taking a different tack than Washington on the thorny issue of helping companies fund their widening pension gaps, shrugging off corporate pleas for relief even as the United States lets businesses slash their contributions.
A frightening prospect for workers, retirees and companies, yawning pension deficits have gone from arcane accounting entries to front page news on fears that massive shortfalls could even cause some corporations to fail.
As a growing number of employers look to roll back benefits to the alarm of unions, others are pouring cash into their pensions funds only to see the hole get deeper.
With no sign the problem is going away any time soon, six big Canadian corporations have banded together to ask the government for measures such as more time to pay down deficits in their defined-benefit pension plans.
But the federal government, which provided companies with three rounds of pension funding relief between 2006 and 2010, has no plans to do the same again.
"We're not looking at any changes," Finance Minister Jim Flaherty told Reuters in a recent interview in California.
"At the end of the day, these are pension funds that need to be worked out between the employers and their employees. It's a private matter, except that there's a legislative vehicle in place, if they want to follow the distressed pension plan model. There's a way of proceeding," he said.
Mr. Flaherty was referring to 2010 reforms that relaxed funding rules for stricken plans but which some say don't go far enough to address the fundamental problems companies face.
Canada is not unique, and as in the United States, generous public sector pensions are a hot-button issue. But the federal government is taking a more hands-off stance than U.S. President Barack Obama, who signed a bill last month that changes how companies calculate what they must contribute to their pension funds, effectively allowing them to pay less.
"I have heard of some very large sponsors here who are saying: 'What the heck, look at what they're doing down there. Don't our finance ministers understand that the world has changed? That long bond yields are very low?," said Ian Markham, senior consulting actuary at Towers Watson Canada.
"The U.S. gets it, Denmark gets it, the U.K. are thinking about it, so we need to do something here," he said, repeating company arguments.
Even some of Canada's provincial governments, which regulate pensions within their jurisdictions, have various forms of funding relief in place.
Softening the rules implies letting plans stay underfunded for longer, a risk financially prudent Ottawa may be reluctant to accept. After all, the country's conservative banking culture helped it survive the global financial crisis better than most.
As in other countries, the scope of the Canadian problem is huge. Ninety per cent of the roughly 400 defined-benefit pension plans overseen by Canada's federal regulator are underfunded, meaning they cannot meet their liabilities should their plans be wound up today, as is required by law.
Air Canada's is perhaps the most extreme example, with its eye-popping $4.4-billion pension shortfall raising "grave existential questions" about the future of the company itself, according to Michel Picher, an arbitrator who settled a labour dispute there in June.
The problem for most companies arises from historically low yields on investments, and that is expected to last for some time yet.
Long-term Canadian government bond yields hit record lows last month, with some forecasters predicting they could sink further as major central banks ease monetary policy to battle the global economic slowdown.
These lower returns mean companies must put aside more money for their pension funds to cover what they owe in the future.
The federal Conservative government may make an exception for Air Canada, which could be in serious trouble unless Mr. Flaherty extends a cap on special pension payments that is set to expire early in 2014.
But that is a standalone agreement with one company. Others want in the game too.
The six companies – branding themselves the "G6" – have joined forces off and on since 2004, and this year again lobbied for temporary relief, said Canadian National Railway Co. spokesman Mark Hallman. That was denied in the federal budget in March.
"The G6 was looking for measures similar to what had been approved in other Canadian provinces such as the 10-year amortization period (as opposed to five) for solvency special payments," Mr. Hallman said.
The other companies in the G6 are Canadian Pacific Railway , telecom providers Bell Canada and MTS Allstream, Canada Post and NAV Canada.
Historically, Canada has preferred relief measures such as lengthening amortization periods. Permanent rule changes in 2010 let companies average their solvency ratios over a three-year period instead of one, so that a sudden bad year doesn't force them to make big cash infusions.
But some critics say it is dancing around the real problem – the very low "discount rate" used to assess a plan's solvency, which is the focus of the recent measures in the U.S., Denmark and Sweden. This rate, based on long-term government bonds, helps actuaries judge how much assets will earn over time.
Companies complain the rate has never been lower and artificially inflates a plan's deficit. The lower the discount rate, the bigger the deficit.
Air Canada's chief financial officer, Michael Rousseau, told analysts on a recent conference call that a 1.5 or 2 percentage point rise in the rate would eliminate more than $3-billion from the airline's deficit.
That wishful thinking effectively became reality last month, not for Canadian companies but for their U.S. competitors. The new law there lets companies use a 25-year average of the discount rate rather than two years.
In Europe, Denmark and Sweden have tinkered with how the discount rate is used and the United Kingdom is thinking of following in their footsteps.
But Jacques Lafrance, president-elect of the Canadian Institute of Actuaries, says the idea would be seen as too risky in Canada.
"I know that some companies are looking for that. My reading of the situation is the federal government doesn't seem to be interested," he said.
"At the end of the day it's a political decision. If you're a politician and you do allow more funding relief ... you increase the risk of the company going bankrupt and you will have retirees knocking at your door complaining that they will have pension cuts."
Politicians haven't forgotten the case of one-time high-tech titan Nortel Networks, whose messy 2009 bankruptcy led to angry protests by retirees who felt they'd been shafted.
Bob Farmer, who represents 250,000 pensioners as president of the Canadian Federation of Pensioners, says softer rules for companies mean bigger risks for workers. Tough luck about the low yields, he says. "That happens to be the world we're living in."
Companies certainly aren't waiting around for answers from Ottawa, resorting to various ways of shrinking deficits with mixed results.
CN and CP have made voluntary contributions to their pension funds, on top of special deficit payments that are required by law, and Bell Canada switched to a defined-contribution plan for new employees in 2004.
Still, the problem is not solved and there is no quick fix for policy makers.
"The biggest social issue in the next 10 years is going to be pensions," said Rick Robertson, associate professor at the Richard Ivey School of Business, part of the University of Western Ontario.
"What do I tell the 64-year-old person who may not have a chance to rebound if the company doesn't succeed. Who's my duty to? There's no easy answer."