Most major Canadian pension plans underfunded -supervising body

* 93 pct of federally regulated plans underfunded atend-2011

* Up from 76 percent at end-2010

* OSFI doubles number of plans of serious concern on itswatch list to 115

OTTAWA, Oct 5 (Reuters) - All but 7 percent of Canada'sfederally regulated, private defined-benefit pension plans wereunderfunded at the end of 2011, the government's Office of theSuperintendent of Financial Institutions reported on Friday.

An underfunded plan is one in which liabilities would exceedassets and employees or retirees would not get all that waspromised if the company were terminated.

OSFI's annual report for fiscal 2011-12 showed that theproportion of those plans that were underfunded had risen to 93percent on Dec. 31, 2011, from 76 percent at the end of 2010.

Employers have struggled with yawning pension gaps on theirdefined-benefit plans - under which employers commit to regularpension payments regardless of what stock markets may do - dueto historically low yields on investments. This has caused somelike Air Canada to seek adjustments and concessions.

Air Canada, the country's largest airline, had separatelyrevealed that its pension deficit had doubled to C$4.4 billion($4.5 billion) during 2011, and it is trying to get a cap on itspayments extended from 2014 to 2024.

Private pension plans under federal regulation registered a4 percent return on their investments in 2011, down from 11percent in 2010 and 13 percent in 2009, OSFI said.

OSFI supervises 1,354 private pension plans covering 646,000employees in federally regulated areas including banking,inter-provincial transportation and telecommunications. Ofthese, 358 are defined benefit plans, covering the vastmajority of assets in the federally regulated plans.

"Although the impact of lower solvency ratios on pensionplans' funding requirements will be moderated by recentlyimplemented changes to federal funding rules, OSFI expects manydefined benefit pension plans to face materially higher requiredcontributions in 2012," it said.

The number of plans on OSFI's watch list - the ones forwhich it has serious concerns - more than doubled to 115 at theend of March 2012 from 49 a year earlier. Of these 115 troubledplans, 104 are defined-benefit plans.

The average estimated solvency ratio - the ratio of assetsover liabilities if a plan were terminated - of thedefined-benefit plans it supervises declined to 0.81 on Dec. 31,2011, from 0.93 a year earlier.

($1=$0.98 Canadian)

(Reporting by Randall Palmer; Editing by Gary Hill)


Messaging: randall.palmer.thomsonreuters.com@reuters.net))