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Rail News: Rail Industry Trends

Favorable interest rates, business outlook enable CPR to prepay pension plan costs


The timing appears to be right for Canadian Pacific Railway to absorb some future pension program costs now. On Nov. 21, the Class I announced plans to voluntarily prepay about $230 million into its "Canadian defined" pension plan next month, using funds from existing cash balances.

"CPR's pension fund is in a solid position, but three years of bear markets and extremely low interest rates require some adjustments to how we manage our funding obligations," said CPR President and Chief Executive Officer Rob Ritchie in a prepared statement. "The prepayment … puts the funding requirement firmly in our control for the medium term and does not increase the risk of a significant surplus arising should improvements in the plan's financial performance or interest rates exceed our assumptions."

The railroad also expects freight revenue – spurred by a recovering grain market, and burgeoning coal and intermodal business – to increase between 4 percent and 6 percent next year compared with 2003.

CPR provides the defined pension plan for Canadian and U.S. employees, and supplemental plans for management and executive personnel. The prepayment does not include 2003 pension-plan service costs of $42 million.

Contact Progressive Railroading editorial staff.

More News from 11/21/2003