CAW Agreement With Onex


CAW Agreement with Onex
November 1, 1999

Pension & Severance Examples

Prepared by CAW-Canada
November 3, 1999

Retirement Incentives and Severance Packages

The CAW-Canada negotiated retirement incentives, so senior, long service members will be able to retire with a good package. Younger members will have job security and job opportunities. As well, members with 8 or more years service who are not eligible for the early retirement incentives, may take voluntary severance packages.

The packages will be offered by seniority in mainline bases where downsizing occurs. Here is an overview of the Options.

Options for Employee Groups

Summary of the Incentive

Option 1.

Immediate Unreduced Early Retirement1

Air Canada: Age 55 and 80 points

CAI: Age 55 and 25 years or age 60 and 80 points

  • Retire with a monthly pension

  • Receive a monthly allowance to age 65 (or lump sum equivalent)

  • The allowance + pension will equal 60% to 80% of earnings (varies by years of service)

  • Life insurance and health care continued to age 65

Option 2A.

Within 5 years of Unreduced Early Retirement

(Unreduced Early Retirement is defined in Option 1.)

  • Receive a monthly bridge to early retirement date
  • Bridge equal to 50% of earnings (if within 5 years of retirement or up to 65% (within 1 year of retirement)
  • Continue to accrue pensionable service as if at full earnings.
  • Life insurance and health care continue to age 65

Option 2B.

Within 2 years of Unreduced Early Retirement

  • May opt for 2.5 weeks pay per year of service in lieu of Bridge in Option 2A above.
  • No cap on payment for employees within 1 year of retirement; 60 weeks cap on employees within 2 years of retirement.

Option 3.

Not eligible for Options 1 or 2 and has at least 8 years service

  • Severance payment of 2 weeks pay per year of service to a maximum of 52 weeks pay.
  • Life insurance and health care continue to for a period of 2 weeks per year of service.

Note: The company pension plans will remain separate. The early retirement provisions are different in the two plans. At Air Canada an unreduced pension is payable at age 55 if age plus service equals 80. At Canadian Airlines an unreduced pension is payable at age 55 and 25 years service or at age 60 if age plus service equals 80.

Regional Carriers

There will be no forced layoffs and every effort will be made to avoid relocation. However, if relocation is necessary, relocation expenses will be covered. A Severance Payment Plan will provide 2 weeks pay per year of service to a maximum of 52 weeks pay for employees with 2 or more years service.

Travel Passes

Retiree travel benefits will be available to employees if they have age plus service equal to 60 and a minimum of 10 years service.

Examples for Option 1 and Options 2A and 2B

The examples are estimated from 1999 figures. Individual member's packages will vary according to their age, service and earnings. Because earnings are lower at Canadian Airlines, the examples are slightly different for Air Canada and Canadian members. The estimates are rounded off for easier reading. Note the following for the examples:

  • For pension calculations, the examples use best average monthly pensionable earnings of $3,600. The Canadian Airline pensionable earnings have been re-adjusted to remove the 1992 wage freeze. (The adjustment for CAI members is only for calculating the pensionable earnings.)
  • The pension benefit formula is lower at Canadian Airlines than Air Canada.
  • The Option 1 Monthly Separation Allowance is in addition to any higher income options that a member may select under the terms of the Air Canada Pension Plan.
  • For Option 2, the examples use an Air Canada member with regular monthly earnings at $3,710 and a Canadian Airlines member at $3,005 (the highest level at each airline).
  • For Option 2A the Bridge benefit is a percentage of regular monthly earnings at the date of Bridging.

The percentage is as follows:

  • Within 1 year of retirement: 65%
  • Within 2 years of retirement 60%
  • Within 3 years of retirement 55%
  • Within 4 years of retirement 50%
  • Within 5 years of retirement 50%

Option 2B is available to those within 1 or 2 years of unreduced early retirement. For those within 1 year of retirement, a lump sum based on 2.5 weeks pay per year of service (no cap). For those within 2 years of retirement, a lump sum based on 2.5 weeks pay per year of service capped at 60 weeks pay.

Assumes the member is eligible for maximum government benefits. [To find out your personal Canada Pension Plan benefit call Human Resources Development Canada ("Government of Canada" blue pages in the phone book.) In Quebec, call the Regime de Rentes.]

Air Canada Examples
Option 1. Eligible for Unreduced Early Retirement

The member is age 55 with 30 years pensionable service. Their Monthly Separation Allowance (MSA) is based on 70% of pensionable earnings or $2,500 until age 65.

Age 55

Age 60

Age 65

Government
Old Age Security
CPP/QPP

Sub Total

$
--
--

--

$
--
525

525

$
415
525

940

Employer
MSA
Lifetime pension

Sub Total


585
1,915

2,500


585
1,915

2,500


--
1,915

1,915

Total

2,500

3,025

2,855

The Monthly Separation Allowance (MSA) of $585 is also available in a lump sum amount which can be rolled over (tax free) to an RRSP.

Option 2. Within 5 Years of Unreduced Early Retirement

The member is age 54 and has 30 years of service. The monthly Bridge is 65% of regular earnings. A member with earnings of $3,710 would receive a monthly Bridge of $2,410. They retire at age 55 with 31 years of service.

Age 54

Age 55

Age 60

Age 65

Government
Old Age Security
CPP/QPP

Sub Total

$
-
_

_

$
-
_

_

$
-
525

525

$
415
525

940

Employer
Bridge
Lifetime pension


2,410
--


-
1,975


--
1,975


--
1,975

Total

2,410

1,975

2,500

2,915

Because the member is within 1 year of an unreduced early retirement, they could trade the $2,410 monthly Bridge for a lump sum under Option 2B: 2.5 weeks pay per year of service - 75 weeks pay or about $65,000 in this example. No cap if within 1 year of unreduced early retirement.

See attached "Table 1: Estimate your benefits".

Canadian Airlines Examples

Option 1. Eligible for Unreduced Early Retirement

The member is age 60 with 20 years pensionable service. Their Monthly Separation Allowance (MSA) is based on 60% of pensionable earnings or $2,140 until age 65.

Income Source

Age 60

Age 65

Government
Old Age Security
CPP/QPP

Sub Total

$
--
525

525

$
415
525

940

Employer
MSA
Lifetime pension

Sub Total


1,080
1,060

2,140


--
1,060

1,060

Total

2,665

2,000

The Monthly Separation Allowance (MSA) of $1,080 is also available in a lump sum amount which can be rolled over (tax free) to an RRSP.

Option 2. Within 5 Years of Unreduced Early Retirement

The member is age 53 and has 30 years of service. Their monthly Bridge is 60% of regular earnings. A member with earnings of $3,305 would receive a monthly Bridge of $1,985. They retire at age 55 with 32 years of service.

Income Source

Age 53

Age 55

Age 60

Age 65

Government
Old Age Security
CPP/QPP

$
-
--

$
-
--

$
-
525

$
415
525

Employer
Bridge
Lifetime pension


1,985
--


-
1,700


--
1,700


--
1,700

Total

1,985

1,700

2,225

2,640

The member is within 2 years of an unreduced early retirement, so they could trade the $1,985 monthly Bridge for a lump sum under Option 2B: 2.5 weeks pay per year of service capped at 60 weeks pay or about $41,600 in this example.

See attached "Table 1: Estimate your benefits".

Table 1: Estimate Your Benefits

Years of Pensionable
Service

Percent of Pensionable Earnings

Payment to age 65

35 or more

80%

$2,890

34

78%

2,785

33

76%

2,715

32

74%

2,640

31

72%

2,570

30

70%

2,500

29

68%

2,430

28

66%

2,355

27

64%

2,285

26

62%

2,215

25

60%

2,140

24

60%

2,140

23

60%

2,140

22

60%

2,140

21

60%

2,140

20

60%

2,140

19

60%

2,140

18

60%

2,140

17

60%

2,140

16

60%

2,140



Air Canada

Canadian Airlines

Monthly Separation Allowance

Pension

Monthly Separation Allowance

Pension

$650

$2,240

$1,015

$1,875

615

2,170

980

1,805

610

2,105

965

1,750

600

2,040

940

1,700

595

1,975

925

1,645

585

1,915

910

1,590

580

1,850

890

1,540

570

1,785

870

1,485

565

1,720

855

1,430

555

1,660

835

1,380

545

1,595

815

1,325

610

1,530

865

1,275

675

1,465

920

1,220

735

1,405

975

1,165

800

1,340

1,025

1,115

865

1,275

1,080

1,060

930

1,210

1,130

1,010

990

1,150

1,185

955

1,055

1,085

1,240

900

1,135

1,020

1,290

850



Note: Table 1 is for estimating Option 1, but can also be used to estimate pension benefits under Option 2. The pension amounts may be slightly less than in the Table. The member on Bridging has earnings fixed at 100% of the pay rate in effect at the Bridging date, but the Year's Maximum Pensionable Earnings will increase.


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