The pension plans for General Motors of Canada Ltd. retirees have improved, but their combined deficit is well in excess of $3-billion and the value of assets in the plans fell in the most recent period, even as other Canadian pension plans posted big gains.
The combined deficit of the plans for GM Canada's salaried and hourly workers stood at $3.7-billion on a wind-up basis as of Sept. 1, 2013, an improvement of about $1-billion on the $4.6-billion deficit a year earlier.
The state of the plans is a worry for the 36,500 salaried and unionized retirees, who have expressed concerns about how the company will reduce the solvency deficiency in the plans later this decade. That's when $4-billion that flowed to the plans as part of the $10.8-billion contribution Canadian taxpayers made to the bailout of General Motors Co. dries up.
That 2009 contribution set up what is called a prior year credit balance, in effect a bank account from which GM Canada was able to draw down over the past five years to help finance annual contributions. It was also required to contribute $200-million annually for five years.
The combined prior year credit balance stood at $1.074-billion, as of the most recent valuation on Sept. 1.
The value of assets in the two plans fell to $10.79-billion from $11.01-billion a year earlier, despite a return on assets of 5.5 per cent in the salaried retirees' plan and 4.81 per cent in the hourly workers' plan.
The assets in the unionized plan would cover 72 per cent of the liabilities as of Sept. 1, up slightly from 69 per cent a year earlier. The plan for salaried retirees is 83-per-cent funded, compared with 75 per cent a year earlier.
"The improvement does sound very positive, but we're definitely lagging other pension plans in Ontario," one GM retiree said. "Most of them are over 90 per cent and many are fully funded."
Examinations of other Canadian pension plans found that investment returns soared last year and the funded status of plans also improved substantially.
A review of 120 defined benefit plants undertaken by RBC Investor & Treasury Services showed the average plan posted returns of 14.2 per cent for the year, helped in part by an average gain of 6.1 per cent in the final quarter of 2013. Any fourth-quarter gains made by the GM Canada plans are not reflected in its valuation because of the Sept. 1 valuation date.
A study by Toronto-based DBRS Ltd. released Monday shows 64 Canadian funds had an aggregate-funding status of 94.7 per cent last year, well above the 80 per cent threshold that the rating agency considers the danger zone for the funded status of plans.
GM Canada spokeswoman Faye Roberts said the plans improved in several ways last year, including as measured on both going-concern and wind-up ratios and the solvency ratio.
"GM Canada has recently made significant contributions to the company's pension plans and has committed to making an additional annual contribution in 2014 and to fund the plans on a solvency basis thereafter," Ms. Roberts noted, which will reduce the risks for the auto maker's retirees.
The GM Canada plans cover about 36,500 retirees from the company's head office in Oshawa, Ont., as well as its factories in that city and in St. Catharines, Ont., Windsor, Ont., and Sainte- Thérèse, Que.
The plants in Windsor and Sainte-Thérèse are closed. The company has about 6,300 active unionized and salaried employees.
Editor's Note: An earlier online version of this article incorrectly stated the pension funds' prior year credit balance in the fifth paragraph. This version has been corrected.