Wednesday, October 28, 2009

Quebec to aid Nortel pensioners

Article published in the Montreal Gazette yesterday regarding the Nortel Defined Pension for people who retired from Quebec.

'You've given enough': Minister: Régie des rentes will step in to manage pension funds if company backs out


Former Nortel employee Claude Gauthier scrapped his planned holiday in the Gaspé this summer.

He didn't feel a vacation was affordable after getting word the indexed company pension he'd received since 1996 likely would be reduced about 31 per cent as Nortel gets disassembled from within the confines of creditor protection. It'll cost him about $800 a month.

Health, dental and life-insurance benefits also are being dropped.

"I'm lucky: My house is paid for. But this affects our lifestyle completely. Nothing's going down in price. The car will need to be smaller and use less gas. I won't be able to go to the osteopath as often for my back pain," said Gauthier, 67, a Châteauguay resident for worked 34 years for Nortel, setting up telephone offices across the country.

An estimated 3,000 Nortel retirees in Quebec will be affected by the shortfall in the corporate pension, and though their appeals to the federal government for changes to protect pensioners better have so far produced nothing concrete, there's been some movement at the provincial level.

The Quebec government announced yesterday it's prepared to help by allowing their funds to be managed by the Régie des rentes du Québec for a five-year period if and when Nortel's defined-benefit pension plans are terminated.

They'll be guaranteed a minimum return equal to what an annuity would have generated, and may do significantly better, depending on how markets evolve and its "prudent" managers perform.

"You have given enough for society. It's our turn to give back to you," Employment Minister Sam Hamad told about 50 Nortel retirees at a gathering in LaSalle.

A law passed earlier this year allowed Quebecers receiving or entitled to defined-benefit pensions from companies that went bankrupt to have their funds administered by the Régie for a five-year period with the goal of generating better returns for the beneficiaries, but it did not cover companies like Nortel, which is liquidating under creditor protection.

Hamad said the government is making an exception for Nortel, but would consider it for other companies in a similar situation, if their employee pension committees request it.

To date, the Régie des rentes du Québec has taken over pension management for one group, former employees of the Aleris aluminum plant in Trois Rivières.

Nortel retirees won't be obliged to place their pension money with the RRQ.

If they want an annuity, or to manage the funds themselves through a life-income fund, they have those options as well.

"My choice is certainly to let the Régie do it," said Ken Lyons, spokesman for the Nortel Retirees and Former Employees Protection Canada Committee.

"To me, it's the logical thing to do."

Even if the RRQ delivers better returns over five years, and Nortel's asset liquidation were to generate more cash than expected for unsecured creditors like the pension fund, retirees still won't receive as much as they're getting now.

"Because we had a pension plan, we were limited in what we could contribute to RRSPs, so we don't have that backup," Gauthier noted.

The plight of the Nortel pensioners has resonated nationally, and it may be a sign of things to come.

"Over 90 per cent of pension funds in Canada have taken an average hit of 20 per cent," Lyons said. "If your company's in difficulty, you too may end up losing big-time."

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