In a stunning example of just how much corporate pension systems gained as the markets climbed, Air Canada announced it projects its retirement system started 2014 with a slight surplus a year after posting a $3.32 (American dollars) billion deficit.

Investment returns of 13.8 percent, raising the discount rate used to determine future liabilities, a company contribution of $201.9 million to the system and a four-year strategy of matching investments to liabilities all contributed to eliminating the deficit, Canada’s largest air carrier said.

Over the last four years, the airline reported a total investment return of 11.8 percent. Final figures for 2013 are still being tabulated.

The rise of Air Canada’s pension fund is indicative of the industry as a whole. Data provided by Towers Watson showed that the average corporate retirement system was 95 percent funded at the end of 2013, a marked rise from a year earlier.

The company plans to match all of its liabilities to fixed income instruments. Currently, 70 percent of the pension fund’s portfolio is matched that way.

“Air Canada's three primary pension objectives are to ensure our employees’ and retirees’ pensions are secure, the pension solvency deficit is eliminated and the costs associated with maintaining the pension plans remain affordable, predictable and stable,” said Calin Rovinescu, said Air Canada’s president CEO, in a statement.

The government requires the airline to contribute at least $134.6 million annually to the pension fund with a seven-year average of $179.4 million.

If funding requirements dip below certain levels, the airline would be allowed to opt out of the regulations. It said it did not expect to do so this year.

Instant Insights /

Air Canada erases $3.32 billion pension deficit in one year

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