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Employee Benefit Plans

12 Months Ended

Dec. 31, 2021

Disclosure of employee benefits [text block] [Abstract]

32. EMPLOYEE BENEFIT PLANS

The Company maintains defined benefit pension plans for Telesat Canada employees (“Canadian Pension Plans”). In October 2013, the Company ceased to allow new employees to join certain defined benefit plans, except under certain circumstances, and commenced a defined contribution pension plan for new employees.

On completion of the Transaction, the Company also took over the defined benefit pension plans for certain former employees of Loral (“US Pension Plans”). Under the US Pension Plans, certain former Loral employees hired prior to July 1, 2006 contributed until November 18, 2021 in order to receive enhanced pension benefits.

In addition to the pension plans, the Company provides certain health care and life insurance benefits for some of Telesat Canada’s retired employees and their dependents (“Canadian Other Post-employment Benefit Plans”). Participants are eligible for these benefits generally when they retire from active service and meet the eligibility requirements for the pension plan. These benefits are funded primarily on a pay-as-you-go basis, with the retiree generally paying a portion of the cost through contributions, deductibles and coinsurance provisions.

The Company also provides medical coverage for certain of its retired employees and dependents including certain retired Loral employees (“US Other Post-employment Benefit Plans”). Under the US Other Post-employment Benefit Plans, an annual subsidy is provided to cover for medical benefits to the retired employees and their dependents. For the Loral retired employees, the coverage ends when the retiree reaches age 65.

The Company’s funding policy is to make contributions to its defined benefit pension funds based on actuarial cost methods as permitted and required by pension regulatory bodies. Contributions reflect actuarial assumptions concerning future investment returns, salary projections and future service benefits. Plan assets are represented primarily by equity securities, fixed income instruments and short-term investments.

The defined benefit plans typically expose the Company to actuarial risks such as investment risk, interest rate risk, longevity risk and salary risk. Investment risk is managed by specifying allowable investment types, setting diversification strategies and determining target asset allocations. The investment objectives of the fund are to optimize the return on investments, taking into account the risks associated with the securities for the protection of the pension benefits of the members of the plan.

As part of the risk management process, for Canadian Plans, the Investment Committee establishes a Statement of Investment Policies and Procedures which includes a diversification strategy and processes to manage foreign currency, credit and other risks. Given the long-term nature of plan liabilities, it is considered appropriate to invest a

reasonable portion of the plan assets in equity securities and thus ensure higher return. The Statement of Investment Policies and Procedures is reviewed on an annual basis by the Management Level Pension Fund Investment Committee with approval of the policy being provided by the Audit Committee.

As regards the US Pension Plans, the funding policy is to fund the qualified pension plan in accordance with the Internal Revenue Code and regulations thereon. Plan assets are generally invested in equity, fixed income and other investments. The expected long-term rate of return on pension plan assets is selected by taking into account the expected duration of the plan’s projected benefit obligation, asset mix and the fact that its assets are actively managed to mitigate risk.

A decrease in interest rate will increase the plan liability. However, it will be partially offset by an increase in the return on fixed income instruments. The present value of the plan liabilities is calculated by reference to the best estimates of the mortality and the future salaries of plan participants. Accordingly, an increase in life expectancy or salary will increase the plan liability.

Assets-liability matching strategies are geared towards maintaining an appropriate asset mix to ensure that liquid assets are available to discharge the liabilities as and when they become due. Any potential liquidity issue arising from mismatching of plan assets and benefit obligations is compensated by a broadly diversified investment portfolio, including cash and short-term investments, and cash flows from dividends and interest.

For Canadian Pension Plans, the pension expense for 2021 was determined based on membership data as at December 31, 2019. The accrued benefit obligation as at December 31, 2021 was determined based on the membership data as at December 31, 2020, and extrapolated one year based on December 31, 2021 assumptions. For US Pension Plans, the pension expense for 2021 was determined based on membership data as at December 31, 2020. The accrued benefit obligation as at December 31, 2021 was determined based on the membership data as at December 31, 2020, and extrapolated one year based on December 31, 2021 assumptions.

For Canadian Post-employment Benefit Plans, the expense for 2021 was based on membership and eligibility data as at September 30, 2018 and the accrued benefit obligations as at December 31, 2021 was based on membership data as at September 30, 2021. The accrued benefit obligation for US Post-employment Benefit Plans as at December 31, 2021, related to certain retired Loral employees, was determined based on membership data as at December 31, 2020 and adjusted to exclude from the valuation those members reported active as of December 31, 2020 if, as of the November 18, 2021, they were not eligible to retire from the plan. For other US Post-employment Benefit Plans, the accrued benefit obligation as at December 31, 2021 was determined based on membership data as at January 1, 2021 and extrapolated, based on December 31, 2021 assumptions.

The most recent valuation of the pension plans for funding purposes was as of December 31, 2020. Valuations will be performed for the pension plans as of December 31, 2021.

The expenses included on the consolidated statements of income and the consolidated statements of comprehensive income were as follows:

For the year ended December 31, 2021	Pension Plans									Other Post-employment Benefit Plans
For the year ended December 31, 2021	Canadian			US			Total			Canadian		US			Total
Consolidated statements of income
Operating expenses	$	7,893		$	74		$	7,967		$	166	$	—		$	166
Interest expense	$	743		$	53		$	796		$	552	$	92		$	644
Consolidated statements of comprehensive income
Actuarial (gains) losses on employee benefit plans	$	(55,582	)	$	(798	)	$	(56,380	)	$	987	$	(29	)	$	958

	Canadian Pension Plans		Other Post-employment Benefit Plans
For the year ended December 31, 2020	Canadian Pension Plans		Canadian		US		Total
Consolidated statements of income
Operating expenses	$	7,188	$	145	$	—	$	145
Interest expense	$	423	$	618	$	128	$	746
Consolidated statements of comprehensive income
Actuarial losses on employee benefit plans	$	11,390	$	1,686	$	617	$	2,303

	Canadian Pension Plans			Other Post-employment Benefit Plans
For the year ended December 31, 2019	Canadian Pension Plans			Canadian		US		Total
Consolidated statements of income
Operating expenses	$	6,198		$	116	$	—	$	116
Interest expense	$	524		$	665	$	150	$	815
Consolidated statements of comprehensive income
Actuarial (gains) losses on employee benefit plans	$	(3,325	)	$	1,533	$	658	$	2,191

The Company made contributions of $2.4 million for various defined contribution arrangements during 2021 (December 31, 2020 — $1.9 million).

The balance sheet obligations, distributed between pension and other post-employment benefits were as follows:

As at December 31,	2021		2020
Included in other long-term liabilities
Pension benefits	$	17,927	$	22,070
Other post-employment benefits		27,294		25,914
Accrued benefit liabilities (Note 23)	$	45,221	$	47,984
Included in other long-term assets
Pension benefits (Note 15)	$	30,105	$	—

The amounts recognized in the balance sheets and the funded statuses of the benefit plans were as follows:

	Pension Plans								Other Post-employment Benefit Plans
As at December 31, 2021	Canadian			US		Total			Canadian		US		Total
Present value of funded obligations	$	348,526		$	72,906	$	421,432		$	—	$	—	$	—
Fair value of plan assets		(379,740)			(54,979)		(434,719)			—		—		—
		(31,214	)		17,927		(13,287	)		—		—		—
Present value of unfunded obligations		1,109			—		1,109			22,429		4,865		27,294
(Pension benefits) accrued benefit liabilities	$	(30,105	)	$	17,927	$	(12,178	)	$	22,429	$	4,865	$	27,294

	Pension Plans								Other Post-employment Benefit Plans
As at December 31, 2020	Canadian			US		Total			Canadian		US		Total
Present value of funded obligations	$	375,222		$	—	$	375,222		$	—	$	—	$	—
Fair value of plan assets		(354,385	)		—		(354,385	)		—		—		—
		20,837			—		20,837			—		—		—
Present value of unfunded obligations		1,233			—		1,233			21,403		4,511		25,914
Accrued benefit liabilities	$	22,070		$	—	$	22,070		$	21,403	$	4,511	$	25,914

The changes in the benefit obligations and in the fair value of plan assets were as follows:

	Pension Plans									Other Post-employment Benefit Plans
As at December 31, 2021	Canadian			US			Total			Canadian			US			Total
Change in benefits obligations
Benefit obligation, January 1, 2021	$	376,455		$	—		$	376,455		$	21,403		$	4,511		$	25,914
Initial balance from transaction		—			74,113			74,113			—			646			646
Current service cost		7,462			74			7,536			166			—			166
Interest expense		9,872			235			10,107			552			92			644
Remeasurements
Actuarial gains arising from plan experience		(556	)		(70	)		(626	)		4,895			246			5,141
Actuarial gains from change in demographic assumptions		—			—			—			—			(1	)		(1	)
Actuarial gains from changes in financial assumptions		(33,099	)		(942	)		(34,041	)		(3,908	)		(274	)		(4,182	)
Benefits paid		(11,067	)		(488	)		(11,555	)		(590	)		(388	)		(978	)
Contributions by plan participants		1,001			1			1,002			—			—			—
Foreign exchange & other		(433	)		(17	)		(450	)		(89	)		33			(56	)
Benefit obligation, December 31, 2021		349,635			72,906			422,541			22,429			4,865			27,294
Change in fair value of plan assets
Fair value of plan assets, January 1, 2021		(354,385	)		—			(354,385	)		—			—			—
Initial balance from Transaction		—			(55,511	)		(55,511	)		—			—			—
Contributions by plan participants		(1,001	)		(1	)		(1,002	)		—			—			—
Contributions by employer		(4,796	)		—			(4,796	)		590			388			978
Interest income		(9,129	)		(182	)		(9,311	)		—			—			—
Benefits paid		11,067			488			11,555			(590	)		(388	)		(978	)
Remeasurements
Return on plan assets, excluding interest income		(21,927	)		214			(21,713	)		—			—			—
Administrative costs		431			—			431			—			—			—
Foreign exchange & other		—			13			13			—			—			—
Fair value of plan assets, December 31, 2021		(379,740	)		(54,979	)		(434,719	)		—			—			—
(Pension benefits) accrued benefit liabilities, December 31, 2021	$	(30,105	)	$	17,927		$	(12,178	)	$	22,429		$	4,865		$	27,294

As at December 31, 2020	Canadian Pension Plans			Other Post-employment Benefit Plans
As at December 31, 2020	Canadian Pension Plans			Canadian			US			Total
Change in benefits obligations
Benefit obligation, January 1, 2020	$	332,823		$	19,399		$	4,109		$	23,508
Current service cost		6,695			145			—			145
Interest expense		10,723			618			128			746
Remeasurements
Actuarial gains arising from plan experience		2,212			—			184			184
Actuarial gains from change in demographic assumptions		—			—			11			11
Actuarial gains from changes in financial assumptions		33,278			1,735			373			2,108
Benefits paid		(10,294	)		(494	)		(232	)		(726	)
Contributions by plan participants		1,018			—			—			—
Foreign exchange		—			—			(62	)		(62	)
Benefit obligation, December 31, 2020		376,455			21,403			4,511			25,914
Change in fair value of plan assets
Fair value of plan assets, January 1, 2020		(324,257	)		—			—			—
Contributions by plan participants		(1,018	)		—			—			—
Contributions by employer		(5,497	)		(494	)		(232	)		(726	)
Interest income		(10,300	)		—			—			—
Benefits paid		10,294			494			232			726
Remeasurements
Return on plan assets, excluding interest income		(24,100	)		—			—			—
Administrative costs		493			—			—			—
Fair value of plan assets, December 31, 2020		(354,385	)		—			—			—
Accrued benefit liabilities, December 31, 2020	$	22,070		$	21,403		$	4,511		$	25,914

For the Canadian Pension Plans, the weighted average duration of the defined benefit obligation and weighted average duration of the current service cost as at December 31, 2021 are 15 years and 22 years, respectively. For the Canadian Other Post-employment Benefit Plans, the weighted average duration of the defined benefit obligation and weighted average duration of the current service cost as at December 31, 2021 are 14 years and 27 years, respectively. For the US Pension Plans, the weighted average duration of the defined benefit obligation as at December 31, 2021 is 13 years.

The estimated future benefit payments for the defined benefit pension plans and other post-employment benefit plans until 2031 are as follows:

	Pension Plans		Other Post-employment Benefit Plans
2022	$	15,169	$	1,056
2023	$	15,361	$	1,072
2024	$	16,416	$	1,222
2025	$	17,244	$	1,263
2026	$	18,232	$	1,298
2027 to 2031	$	101,879	$	7,121

Benefit payments include obligations to 2031 only as obligations beyond this date are not quantifiable.

The fair value of the plan assets were allocated as follows between the various types of investments:

Canadian Pension Plans

As at December 31,	2021		2020
Equity securities
Canada	22.8	%	22.9	%
United States	19.3	%	19.7	%
International (other than United States)	13.5	%	14.3	%
Fixed income instruments
Canada	42.3	%	41.0	%
Cash and cash equivalents	2.1	%	2.1	%

US Pension Plans

As at December 31,	2021
Equity securities
United States	33.4	%
International	22.8	%
Fixed income instruments
United States	29.9	%
Canada	0.4	%
International	4.8	%
Other investments
United States	4.4	%
International	4.3	%

Plan assets are valued at the measurement date of December 31 each year.

The following are the significant assumptions adopted in measuring the Company’s pension and other benefit obligations:

Pension plans

	Canadian	US	Canadian
As at December 31,	2021	2021	2020
Actuarial benefit obligation
Discount rate	3.20%	2.85%	2.60	%
Benefit costs for the year ended
Discount rate	2.80%	2.75%	3.20	%
Future salary growth	2.50%	N/A	2.50	%