Canada’s largest publicly traded companies could have eliminated their defined benefit pension deficits five times over with the value of their shareholder payouts in 2017 alone, according to a new report by the Canadian Centre for Policy Alternatives.

“Despite the decline in DB plans, a third of Canada’s biggest companies actually maintain a DB plan of some kind,” says David Macdonald, a senior economist at the CCPA. “However, over the period of the study, from 2011 to 2017, we’ve seen a fairly large increase in the amount that these companies pay out to shareholders. But at the same time, we’ve seen them maintain pension deficits that they could readily pay off.”

Read: Sears Canada pensioners going after 2013 dividend paid to shareholders

In 2011, S&P/TSX companies with DB pensions paid twice as much to shareholders as it would have cost to eliminate their pension deficits. By 2017, payouts to shareholders reached $66 billion, more than five times the value of these companies’ pension deficits, at $12 billion. 

“So they pay off, in 2017, five times more to shareholders, and then the total pension deficit, which isn’t an ongoing deficit . . . will be in essence a one-time payment,” says Macdonald. 

The report found the majority of the 10 companies with the largest pension deficits pay out more annually to shareholders than the value of a one-time payment to eliminate their pension liability. However, it noted that pension deficits have shrunk since 2011.

Read: Pension deficits, dividend payments among topics in new government consultation

“Broadly speaking, the pension funds are better funded today than they were in 2011,” says Macdonald. “Despite that, though, about two-thirds of companies with these DB plans appear to continuously keep them slightly underfunded instead of fully funding them, despite the fact that they appear to have the resources to do so given what they’re paying out to shareholders.”

Canada’s current pension legislation leaves it to companies to decide whether to eliminate their pension deficit, as long as they meet minimum funding obligations, the report concluded. “It’s time for more co-ordinated pension regulation that considers firms’ financial strength rather than simply focusing on the financial status of the pension plan.”

Read: A look at the landscape for pension solvency funding reform across Canada

Copyright © 2020 Transcontinental Media G.P. Originally published on

Join us on Twitter

See all comments Recent Comments

Joe Nunes:

“…companies with these DB plans appear to continuously keep them slightly underfunded instead of fully funding them…”

You missed the end of the thought..”because sponsors have no clear access to surplus assets”

Friday, August 30 at 7:15 am | Reply

Add a comment

Have your say on this topic! Comments that are thought to be disrespectful or offensive may be removed by our Benefits Canada admins. Thanks!

* These fields are required.
Field required
Field required
Field required