Not obvious. p55: “changing the iCloud password won’t invalidate existing backups.“
But you’re right, the paper doesn’t say they do encrypted iCloud backups yet. The infrastructure is there to store encrypted backup keys in the keychain and escrow them so they’re recoverable yet Apple never has access. It’s probably the same foundation for iMessages in iCloud which they are just rolling out. That lets them store your very sensitive messages in the cloud and restore them to new devices and reset your password, all without them ever having access to your keys.
See the section on keychain escrow and recovery for more detail. It’s a game changer and makes storing data in adversarial clouds feasible.