Thursday, December 31, 2009

Canada pension Plan: non-residents

For those of us who lived and worked in Canada for a number of years and are now living in the United States of America, the Canadian Pension is available as well as the Old Age Security Pension to help live in retirement. For those of us who have suffered losses as a result of the Nortel fiasco, the CPP, or QPP and OAS will be a welcome addition to our reduced retirement incomes.

Canada provides an excellent services web site You can find a lot of very useful information about the pension plans, direct deposit into foreign banks, tax rates etc.

To access your own personal information you need to obtain an epass by following the instructions at:, or by calling 1-800-277-9914.

Canada and the USA have a tax treaty for government pension plans. The tax rate is 0%between our two countries so you should be able to obtain the full monthly pension payment adjusted only for exchange rate. The income is taxable in the USA however and you need to be aware of the Windfall Elimination Provision for US Social Security pensions, which may take a bite out of your US pension. (See previous post)

The Old Age Security Pension is available for people living outside Canada. To qualify you must be 65 or older; you were a Canadian citizen or a legal resident of Canada when you left the country; and you lived in Canada for at least 20 years after reaching age 18. The OAS has a an income limit. For 2009 it is a world wide income of less than $64,000 Canadian. Above that amount you will have to pay back some or all of the OAS depending on your income. The income is based on individuals so a married couple who were Canadian citizens living out side Canada could only claim OAS if their individuals incomes were less than $64,000. Each person's income is examined separately to determine this eligibility.

To everyone I wish you a Happy New Year and I hope it is a lot better than most of 2009. For us ex-Nortelers we are still unclear what it will mean to our Canadian pensions and to the claims we may have on the Nortel US or Nortel UK. Let's hope that some sense returns to the Canadian Government and that action is taken to help protect our pensions, and that in the US the court ruling for claimants helps us recoup a large percentage of the pensions and severance we lost as a result of the bankruptcy.

Illegitimi non carborundum


Wednesday, December 30, 2009

US Social Security Windfall Elimination Provision

USA social security is a great program for retirees. People can opt to start taking social security payments at 62, though the payments are reduced quite a bit from a person's normal payment at full retirement age. To earn social security you have to contribute from your wages over 40 quarters. Once you have made those contributions then you and your spouse are eligible for a number of benefits including pension payments for both, even if only one had worked and contributed. The spouse who had not contributed will receive 50% of the partner's full social security payment at his or her retirement age. There are also benefits for disabled people and widows or widowers. Check it out at

One little known provision however in social security is the windfall elimination provision. (WEP). This was built into social security to ensure that payments are equitable. The formulae in place to determine individual payment is based on the total contributions made over a person's working career. If someone has not contributed for a period of time however, the calculation assumes that they were not earning money and adjusts to give a higher payment. This was intended to make sure poorer people and those who have been out of work for a long time are not disadvantaged by the calculation. if however a person has been contributing to another government retirement program sponsored by a state or a federal department, then the calculation needs to be adjusted to reflect the fact they they are receiving a separate pension payment from the other program.

As a result many people find that their social security payment is reduced when they receive these separate pension payments. This also applies to people who had contributed to the Canadian Social programs and are receiving CPP or QPP. Canada and the USA have a treaty which allows them to exchange information and also provide cross border assistance to help people gain the most pension payment possible. When you apply for social security, one of the questions asked is with respect to receiving government pensions from another country. If you answer yes then you will be subject to the Windfall Elimination Provision. Be careful not to mislead the social security administration or hide this information. They have the power to stop payments if there are questions regarding your status or your pension income.

To learn more about the WEP check:

Tuesday, December 29, 2009

Non Resident Canadian Tax Rates on Pensions

For many people who lived and worked in Canada and then moved to the US or another country and are now receiving a pension from Canada, paying taxes is complicated. The software packages such as Turbotax help provide a lot of guidance but you still have to enter some data manually and make decisions on how to treat income from Canada. It probably means filling in form 1116 and the alternative minimum tax form as well. For those who are not willing to take the time to understand the process its best to use a CPA or a tax professional to complete your filing.

As we near the tax filing deadline in 2010 I plan to upload posts that give some details on my experiences with this task. In the mean time I have a few comments about Canadian tax rates that may be of value to people who are living outside Canada but obtain income from retirement or other funds or pensions.

Pensions are taxed at a 15% rate for non residents. This rate applies to plans and funds that provide disbursements on a regular basis.

If a lump sum is disbursed to you, the tax rate charged will be 25%

Both of these types of taxation can be claimed on the US tax filing as either a deduction or a tax credit. Deductions will have an impact on your taxable income and may not provide as much benefit as taking a credit. The credit however requires completion of form 1116 and is more complicated and not all the Canadian taxes may be credited based on various factors related to other deductions.

Withdrawing lump sums from RRSPs or other pre-tax retirement vehicles will have 25% non-resident tax removed at source by Canada. So consider taking monthly disbursements which may mean converting some of the RRSP to a RIF or other pension funding mechanism.

With the exchange rate at a 30 year high, a lot of people are taking advantage of moving Canadian funds into US dollars. Be sure you understand the tax implications and build a transfer plan so that you can maximize the value of your transactions.

Remember, the US tax code requires that all income from all sources is declared, so even if you take a disbursement into a Canadian bank account it is still income and needs to be properly handled.

Monday, December 28, 2009

Impact of NNI claim against NNL on cash settlements

The US$2.063 billion pre filing claim in favour of Nortel Networks Inc. (NNI=Nortel US Estate) is 53% of the current estimated Nortel businesses' sale proceeds of US$3.9billion. Plus, the US Estate had already hoarded a large percentage of the Nortel Global Estate's cash from operations, with a U.S. Estate gross cash balance at October 3, 2009 of $829 million out of a total Nortel Global Estate cash balance from operations of US$2.864 billion.

Diane Urquhart, an Independedent Financial Analyst who is very familiar with the Nortel situation and has been heavily involved helping retirees, LTD employees, and other ex-Nortel people, predicts the cash settlement ratio for the Nortel US Estate will be a multiple of more than two times higher than the Canada Estate, now that we have seen this December 23rd pre filing claim in favour of NNI.

Her current estimates would be cash settlement ratios of about 20 to 25 cents per dollar of claim in the Canada Estate, 60 cents per dollar of claim in the US Estate, 50 cents in the UK Estate, with an average cash settlement ratio in the Nortel Global Estate at about 50 cents per dollar of claim.

This action by the IRS and NNI has dealt another blow to the Canadian pensioners who stand to lose even more as their claim against Nortel (for unfunded pension trust funds) will yield a much smaller cash settlement. For the lucky bond holders and creditors in the USA and the UK, they may see a return of up to 60% and 50% respectively, on their claims. Somehow the priorities seem to be completely wrong. Pensioners in the UK and USA have protection through their government pension insurance programs. Pensioners in Canada are left out in the cold to sink or swim without any government assistance. You would think that Canada would be in there fighting for the rights of their citizens, but not a peep. What a bunch! Canadians need to take note and eviserate this pack of chickens in the next election.

Sunday, December 27, 2009

Georgia state income tax exemption for seniors

This may apply in other states as well but I am more familiar with Georgia and offer this advice to help seniors obtain as much relief as possible from excess taxation.

Georgia has a clause in the tax code that allows seniors over 62 years of age to claim an income exemption up to $35,000 (2008 tax year) on their income tax returns. The exemption applies to income obtained for retirement such as interest, dividends, payments from IRAs or pension plans. If a married couple files jointly it is possible to claim an income exemption up to $70,000 for the 2008 tax year.

The income has to be defined for each person, so there is a catch here if the couple has all their accounts under a single name, or jointly, then the amount of retirement type income for one spouse may not be enough to claim the full exemption. So check your bank accounts and mutual funds etc to make sure that you can claim the maximum exemption by having the person with least pension type income listed as the main owner on the accounts.

For example if a husband is being paid a pension and also taking payments from an IRA and receiving interest and dividends his income will probably be over the $35,000 maximum and so he can claim the full exemption.

If the wife does not have a pension or an IRA payment and both husband and wife are listed on the bank accounts or mutual funds then the interest or dividends will be split between them. In this case, the wife's income which may only be interest or dividends or social security may not reach the full amount of the exemption and so the couple will not be able to claim the full $70,000 exemption.

If her name is the primary owner on bank accounts or mutual funds then it may be possible to show her as the recipient of the income and that way maximize the exemption. Check with your CPA or tax preparer to make sure that the correct amount of interest and dividend income is being assigned to the spouse who has the least pension income. This may mean changing the name on the account and everyone will have to decide if they feel comfortable doing that.

If you use turbotax or another software package to prepare your taxes, check the assignment of the boxes on interest and dividend income to make sure that you have identified the ownership of the accounts properly to claim the maximum exemption.

See form IT-511 page 12 of the Georgia tax instructions at----

Saturday, December 26, 2009

Court Dockets 2205 and 2207 on NNI claim for $2B against NNL

Dockets # 2205 and 2207 filed on Dec 23 2009 and recorded on the Epiq site (See column on right hand side) contain the information on the IRS claim and their settlement with NNI as discussed in the Ottawa Citizen story in the previous post. This complicated situation could have huge impacts on the amount of money left in each country when Nortel ceases operation. The agreements between the IRS the Canada Revenue Agency, NNL and NNI include the Final Canadian Funding Agreement.

The motion is that NNI will pay NNL $190M to continue operations until the final wrap up of Nortel. The motion will only be approved contingent on a number of complicated deals. First that NNI and NNL agree that NNI overpaid NNL by $2Billion during the 2001 to 2005 period for R&D and other charges. That means that NNI's profits were understated and they will have to file amended tax returns for those periods with extra revenue and profit. It also means that NNL will have to re-file in Canada with less revenue and profit and will have tax owed to them by Canada. (Good luck getting anything back from them.-- where are they anyway?)

The agreement under an IRS APA ( Advanced Pricing Agreement) has to be agreed to by both NNI,NNL, IRS and CRA to make this all work. If that happens then NNI will pay the IRS $37.5 M and the IRS will extinguish its liens and also will no longer look for the claims filed earlier. In return the IRS will also allow the $814M tax credit claims that NNI has to help offset taxes owed from 2001 to 2005 as a result of the extra $2B income. What is Canada doing to help the NNL side of this mess?

There are a large number of other whats, ifs, and buts in the deal however it looks to me that it will probably happen and the Canadian group will end up with enough money to keep going until the wind up sometime in 2010. At that time however the $2B claim by NNI may wipe out any gains made in Canada from the sale of assets This is truly a huge FUBAR. The Canadian government is nowhere in sight as the IRS virtually dictates how the assets will be divided with their APA claims. Considering that both the IRS and the CRA were supposed to be involved at each step of the way from 2001 to 2005 during this APA process something smells really fishy to me.

Nortel US overpayment of $2B to Nortel Canada from 2001 to 2005

Story by James Bagnall in the Ottawa Citizen.

Court documents filed this week suggest that Nortel's U.S. subsidiary overpaid by $2 billion for R&D and other services provided by the Canadian subsidiary from 2001 to 2005. A court filing said this was "despite the best efforts of the Nortel companies to accurately calculate payments" under a cross-border transfer pricing agreement. Like other multinationals, Nortel uses a system of accounting that allocates costs and profits among its divisions according to a formula negotiated with the various tax authorities.

The overpayment by Nortel's U.S. unit vastly increased its costs and reduced the taxes owing. This was the basis, in part, for a massive claim submitted in August by the Internal Revenue Service, which sought $1.8 billion in taxes owing from 1998 to 2008 and $1.2 billion in penalties.

However, earlier this week, the IRS settled this claim in exchange for a cash payment of $37.5 million and an understanding that Nortel's Canadian and U.S. subsidiaries will negotiate unresolved transfer pricing issues with their respective tax authorities. It's not clear what amounts would be involved in such a settlement. The court documents note merely that taxes owed by the U.S. subsidiary would rise while those owed by the Canadian unit would drop.

Of great concern to Nortel's Canadian creditors – suppliers, retirees and employees on long-term disability -- is a separate condition attached to the deal with the IRS. Nortel's Canadian subsidiary will recognize a $2.1 billion claim against its assets by the company's U.S. unit, in recognition of the overpayments for R&D and other services over the years.

If such a claim succeeded, it would substantially dilute the amount of money available for the other Canadian creditors. However, it's still not known what percentage of the $3 billion in proceeds from the sale of Nortel assets will be allocated to Canada. The money for the moment is held in escrow, to be distributed when all the company's assets have been sold, probably by mid-2010.

Thursday, December 24, 2009

Letter to Canadian Prime Minister re Pension and Bankruptcy law reform

Prime Minister Stephen Harper
Office of the Prime Minister
80 Wellington Street
Ottawa K1A 0A2

Dear Prime Minister Harper,

I am writing to you again to request your assistance in formulating a better approach to the current pension and bankruptcy law in Canada. Whilst other countries such as the USA and the UK provide insurance protection to retirees who suffer the trauma of having their pension source dry up due to company bankruptcy, Canada provides no protection whatsoever. In fact the Canadian government appears to have a complete hands off approach, and stands by whilst bond holders and other creditors gather to take the lion’s share of the assets.

These other creditors have their own insurance schemes to protect them but retirees don’t have that luxury, and in fact the law reduces the amount of personal retirement insurance we can build by limiting contributions to RRSPs.

One way of protecting retiree pensions without incurring taxpayer expense is to provide them “secured creditor” status in the event of bankruptcy. That way the underfunded pension trust can be augmented before the unsecured creditors divide the remaining assets of a bankrupt company. Is that so unreasonable? Given the probability that the other creditors have insurance, or are in a much better state to absorb losses that they can claim tax benefits on, it seems the right course of action to me.

As a long term employee of Nortel (35 years), I have seen my retirement dreams wither as I face the prospect of losing a huge portion of my income. It is further exacerbated by the fact that the Canadian Government took no steps to help save this great company, or to protect the citizens who built it over the years, and who now depend on the promised pension for their livelihood.

You have an opportunity to help. Senator Pierrette Ringuette has introduced Bill S-245 - An Act to amend the Bankruptcy and Insolvency Act and other Acts (unfunded pension plan liabilities). It has had a first reading in the Senate. I urge you to support and pass this bill as quickly as possible, and to enact the bill retroactively to Jan 1st 2009.

This bill has no financial cost to the government, and it has huge support by the millions of current and potential retirees across the country. There will be no negative impact on the general public if this bill is enacted, and in fact your government will be looked upon favorably by the majority of Canadians for taking this step. Your party should gain popularity and votes as a result. This bill will also save tax payer money by reducing additional OAS because of lost income for some pensioners, and it will make directors of corporations more accountable.

Morally and ethically, this is the right thing to do. Pensioners have provided services to Canada during their working careers and it is only fitting that they have some security for their pensions. On this Christmas Eve, I hope the spirit will move you to act on our behalf.

New Canadian Bill Introduced to give Pensions secure status in the event of bankruptcy

There was a new bill introduced in the Senate Dec 14 2009 to give pension funds secure status in the event of bankruptcy. Earlier, a similar amendment was proposed to be included in Bill-51 but was declared out of order.

The new bill has had first reading in the Senate on 14 December. The bill proposes to ensure that unfunded pension plans' liabilities are accorded the status of secure debts, plus other items.\-plan-liabilities

Bill S-245 - An Act to amend the Bankruptcy and Insolvency Act and other Acts
(unfunded pension plan liabilities)

Sponsor: Senator Pierrette Ringuette


This enactment amends the Bankruptcy and Insolvency Act and the Companies' Creditors Arrangement Act to ensure that unfunded pension plans' liabilities are accorded the status of secure debts in the event of bankruptcy proceedings.

The enactment also amends the Canada Business Corporations Act to provide an efficacious procedure by which former employees of a bankrupt corporation who are owed amounts by the corporation can proceed with claims against its directors.

As well, the enactment amends the Employment Insurance Act to specify that payments made to a claimant out of the proceeds realized from the property of a bankrupt or by a government in the event of bankruptcy will not be deducted from benefits payable to an employment insurance claimant.

Finally, the enactment amends the Wage Earner Protection Program Act to include proposals, compromises and arrangements.

For more information, visit LEGISinfo

Text of the Bill available at:\

Status of the Bill
The bill has had a first reading in the Senate. It has a long way to go before it can ever become law. At this point we need as many people as possible to write to their MPs and the Prime Minister to support passage of this bill as quickly as possible with retroactive application to January 1st 2009.

Wednesday, December 23, 2009

Nortel objects to some filed US claims

Notel has filed 3 dockets in the US bankruptcy court objecting to a number of claims. Most of the ojections are to duplicate claims. The dockets are 2188, 2189, and 2190. Exhibit A lists the people affected and spells out the surviving claim. It is in everyone's interest who has filed a claim to review those dockets carefully to ensure that their claim in not adversely affected. You can go to the Epic site from this page using the link on the right hand column. Then click on dockets and look through the images. The list of names is divided into 3 and split between the dockets.

Saturday, December 19, 2009

John Roth files against Nortel for $1billion insurance

Extracts from story by Jeff McIntosh/Canadian Press.

Former Nortel CEO John Roth filed a U.S. creditor claim on Dec. 1 seeking $1 billion from Nortel if he loses a series of class-action lawsuits filed by former employees. Roth, who took millions with him when he left the company in 2001, wants Nortel to cover up to $1 billion of his costs if he loses a series of class action lawsuits filed by former employees.

John Roth, who was in charge when the company's stock soared in 1999 and 2000, filed a U.S. creditor claim in a U.S. bankruptcy court on Dec. 1 seeking a $1 billion U.S. indemnification from Nortel of his personal assets with respect to those lawsuits. When he left the company he took $130 million with him.

Essentially, Roth is seeking insurance to cover him in case U.S. courts decide he must pay an award to the plaintiffs.

U.S. Nortel employees and former employees filed the lawsuits around four years ago against Nortel and those at the company who were responsible for managing the company-sponsored investment plan.

One of them claims that the defendants were "intimately familiar with the company's ailing finances" in the preceding five years but still helped and encouraged plan participants to invest in the company " despite the unsuitable nature of such an investment."

" John Roth must be concerned that there is merit," said Diane Urquhart, (an independent financial analyst who is helping some former Nortel employees), "It is his own personal assets that are at stake."

She added that Roth is a "good target" for the lawsuits because he left the company in 2001 with more than $130 million in stock options, bonuses and retirement benefits.

Melanie Johannik, who was laid off from Nortel this past year and is still looking for a job, chairs a group called the Nortel Bankruptcy Justice Committee, which is also lobbying on behalf of laid off, retired and disabled Nortel workers.

She wasn't impressed by the news of Roth's latest court filing and has been wondering where all Nortel's money went.

"All now all of a sudden you can get lawyers and insurance to help claim for another billion dollars in insurance," she said. "It just doesn't make sense."

Nortel filed for bankruptcy protection in January and has been selling off units ever since. The company is expected to cease operations once that process is complete.

Laid-off and retired Nortel workers are considered unsecured creditors and are at the back of the line to receive payouts from bankruptcy proceedings, including severance packages, pensions and disability. That means they would have to fight with other creditors for a share of whatever is left of the company in the end.

Roth, who lists an address in Orangeville, Ont., on his court filing, first joined Nortel as a design engineer in 1969. He was named president and CEO in 1997 and presided over the company as its stock price soared in 1999 and 2000. The company's fortunes began sliding in 2001, and Roth retired that year.

See the filing by John Roth at:

Thursday, December 17, 2009

Letter to the Canadian Finance Ministers

My Letter to the Canadian Finance Ministers. Feel free to share it and use it.

Ladies and Gentlemen,

As you meet in Whitehorse this week, I'm sure there will be many heavy and serious topics on your mind. No doubt your concern for your political future will influence much of what is decided. Even though you are the elected and appointed representatives of the people, I would guess that the real wishes of the people don't feature as strongly as they should in directing the future of such an important topic as Pension Reform. I say this because of the apparent apathy that various governments have shown towards retirees of companies which have gone bankrupt and left their pensioners with underfunded trusts. As the bondholders and insured creditors walk away from the carcass of the bankrupt companies carrying their spoils, the people who put their heart and soul into making the company successful in the first place are left scrabbling for crumbs. In a country such as Canada that prides itself on looking after its people and especially its older citizens, this is a dismal reality for thousands of retirees who once thought their country would never let them down.

A bold fix is possible that will endear you to your electorate and will move the country towards a more rational consideration of retirees caught in this awful situation. The United States, and the United Kingdom treats their retirees fairly when their company goes bankrupt. Each of those countries has thought it through and has in place an insurance net that protects the pensions of retirees who fall victim to the greed and incompetence of company managers. All you have to do is enact a change to the BIA and CCAA that would give pension trusts top priority in the event of a company bankruptcy. That would help refill the trusts to avoid pension wind up and the resulting slash in monthly income that these people face.

Spurred by the awful fate of Nortel Networks and the thousands of pensioners facing just that situation, a few thinking MPs have tried to make this happen, only to be stalled and dry-gulched by the uncaring majority. What shameful behaviour. Obviously the bankers and fat cat companies have huge sway among the government since that is the only explanation I can see for your inaction and total hands off attitude towards the men and women of Nortel who have helped put Canada on the world stage of telecommunications and trade.

Perhaps as you ponder the weighty problems of your re election you might consider taking a stand for the people who are relying and depending on you to do the right thing. It may actually work.

Epiq - Nortel Cala Bar date January 25,2010

Recently I received a set of proof of claim forms from Epiq for the Nortel CALA subsidiary. A bar date of January 25, 2010 has been set for all creditors who believe they have a claim specifically against Nortel CALA. Since I have already registered a claim against the main Nortel company in the US, (Nortel Networks Inc) I was surprised to receive these proof of claim forms from Epiq.

I called Epiq to obtain clarification and a representative told me that these proof of claim forms have been mailed out to all known creditors. Only those who believe they have a creditable claim specifically against Nortel CALA should fill the forms in and submit them before the bar date.

You can contact Epiq Systems at 1-866 -897-6435.

Canadian Finance Ministers Meeting in Whitehorse this week

The Canadian provincial and federal finance ministers are meeting this week in Whitehorse to discuss pension reform. This is a chance to influence them. Send emails to the addresses shown on the previous post with your comments and wishes to alter the Canadian Bankruptcy Act to provide pensioners some protection.

Canwest News ServiceDecember 17, 2009

Finance Minister Jim Flaherty says he will consider "all options" for pension reform at meetings with his provincial and territorial counterparts this week in Whitehorse, although he cautioned it could take roughly a year before all sides agree on how to encourage Canadians to save more for retirement.

In an interview Wednesday, Flaherty said he wasn't ruling out any options when Canada's finance ministers meet today and Friday in the Yukon capital: from bulking up private pension plans to better educating Canadians about saving for retirement to expanding the scope of the Canada Pension Plan through some kind of supplementary plan.

"We have to look at all options. I wouldn't rule out anything," the finance minister said. "But we have to, as I say, make sure we deal with this deliberately, carefully, with expert advice, including advice from the private sector."

Flaherty said it could be "another year or so" before the exact details of the pension reforms become clear. "There's certainly a sense of urgency to it, but I think that has to be considered in light of the seriousness of the discussion and the complexity of the issues. These are generational decisions. This isn't like we're going to stimulate the economy for a year. This will change people's lives for generations."

One of the federal government's goals will be not to "damage" the Canada Pension Plan through the reforms, Flaherty said, adding CPP was "renowned around the world."

Suspense hinges mostly around whether the ministers will agree to pursue a "pan-Canadian" approach or whether one or more provinces will decide to be the first out of the gate with a supplementary pension plan over and above the Canada/Quebec pension plans.

British Columbia and Alberta have led the charge on creating a voluntary supplemental pension plan atop the CPP. Their finance ministers, Colin Hansen and Iris Evans, say their first choice would be to have all the provinces and the federal government working together to build such a plan.

However, they have also made clear they are not willing to wait much longer for a consensus.

Tuesday, December 15, 2009

Canadian Finance Ministers- writing campaign.

The following is a list of provincial, territorial, and federal finance ministers. For those of you resident in Canada, or Canadians residing in other countries for that matter, you can help influence the government by writing to these ministers and explaining your dissatisfaction with the current bankruptcy laws that allow pension funds,LTD, and severance to be cut or eliminated by companies that don't protect their employees and retirees adequately.

It has been shown that letters are more influential than emails, and hand written letters carry much more impact than printed letters. So if you have the time and inclination and can afford the postage please consider writing to these people to let them know how despicably we all are being treated. Your voice and your vote counts. Don't let them make us victims.

Please pass this on to friends and neighbours, and share this web site address if you wish. The more people writing the more likely there will be some effect. Even if it is not happening to them right now, these pro-business, anti-employee laws could change their lives in the future, if they are unlucky enough to work for a company like Nortel that goes bust without taking care of their current and previous employees.

Honourable Minister Iris Evans
Alberta Minister of Finance
(780) 427-8809;

Honourable Minister Colin Hansen
British Columbia Minister of Finance
(250) 387-3751;

Honourable Minister James Flaherty
Federal Minister of Finance
(613) 992-6344;

Honourable Minister Rosann Wowchuk
Manitoba Minister of Finance
(204) 945-3952;

Honourable Minister Greg Byrne
New Brunswick Minister of Finance
(506) 444-2627;
New Brunswick

Honourable Minister Tom Marshall
Newfoundland & Labrador Minister of Finance
(709) 729-4712;
St. John's

Honourable Minister Graham Steele
Nova Scotia Minister of Finance
(902) 424-5720;
Nova Scotia

Honourable Minister Michael Mittenberger
Northwest Territories Department of Justice
(867) 669-2355;
Northwest Territories

Honourable Minister Keith Peterson
Nunavut Minister of Finance
(867) 983-3777;
Cambridge Bay

Honourable Minister Dwight Duncan
Ontario Minister of Finance
(416) 325-0400;

Honourable Minister Wesley Sheridan
Prince Edward Island Minister of Finance
(902) 368-4050;

Honourable Minister Raymond Bachand
Quebec Minister of Finance
(418) 643-5270;

Honourable Minister Rod Gantefoer
Saskatchewan Minister of Finance
(306) 787-6060;

Premier Dennis Fentie
Yukon Premier & Minister of Finance
(867) 393-7053;

Saturday, December 12, 2009

Still not too late to change the Canadian Bankruptcy law

The Canadian Bankruptcy law has multiple components just as in the USA and other countries. Currently Nortel is in bankruptcy protection in Canada called the Companies Creditors Arrangement Act (CCCA) something like chapter 11 in the US. When a company moves to completely liquidate it does so under the Bankruptcy and Insolvency Act (BIA). Nortel has not yet reached that stage but will probably do so in 2010. Some people estimate that will occur around June 2010 but may happen sooner. When it happens the pension plan will be wound up, and court proceedings then address the value of the company and what gets paid to creditors. At this point, underfunded pension plans and other employee creditors are seen as unsecured and take a second place to any secured creditors or institutions with priority.

There have been attempts to change the BIA so that pension plans and other ex-employee claims have first priority. That way any underfunding would be addressed first before other creditors receive payment on their claims. The recent attempts to change that law have been voted down by the Conservative government, but that doesn't mean it can't be changed. For Nortel Canadian retirees we have to redouble our efforts to have the BIA changed to provide priority for pensioners, LTD employees, and severed employees. Make sure you understand the implications and write to your MPs, the PM, and the media to have your voice heard. See the information on the NRPC web-site and also the Canadian Pension Law web site shown on the links in the right hand column on this page.

Some More detail on what happens when a company goes bankrupt in Canada

An insolvent company is a company which is not capable of paying all of its debts. Bankruptcy is a legally declared inability of an individual or an organization to repay its creditors. In Canada, the Bankruptcy and Insolvency Act (BIA) and Companies' Creditors Arrangement Act (CCAA) are the two important laws that have been established by the federal government to deal with insolvent or bankrupt individuals and corporations. All provinces have their own bankruptcy related laws that apply only to the individuals and corporations residing or carrying out business there. Bankruptcy laws are designed to preserve the rights of both insolvent debtors and their creditors who have a financial interest at stake. They also facilitate the insolvent debtor to resolve his debts through the division of his assets among his creditors. Federally incorporated banks and insurance companies are excluded from the BIA and CCAA and are dealt with under the Federal Winding-up and Restructuring Act. The following articles discuss some of the important bankruptcy provisions in the BIA and CCAA. They also discuss the impact and remedies available to creditors and shareholders in the event of default by an insolvent corporate debtor during the bankruptcy proceedings.

Bankruptcy and Insolvency Act

The provisions in the Bankruptcy and Insolvency Act (BIA) set out the rights and responsibilities of all individuals and institutions involved in the affairs of a bankrupt person or a corporation. The BIA excludes railways, savings banks, loan companies and building societies. Until 1992, the BIA focused solely on liquidation, providing a legislative framework for the liquidation of assets of an insolvent individual, corporation or partnership, and the distribution of the proceeds among the creditors. In 1992, the scope of BIA was broadened to provide ways for insolvent debtors to avoid bankruptcy by negotiating reorganizations. The act governs all bankruptcies in Canada and serves the following general purposes:

To provide for the financial rehabilitation of insolvent persons and corporations
To permit an honest but unfortunate debtor to secure a fresh financial start
To provide for an orderly and a fair distribution of property of a bankrupt among his or her creditors
To allow for the investigation of the affairs of the bankrupt or insolvent person
To permit the setting aside of preferential or other fraudulent transactions so that all ordinary creditors may share equally in the realizations from the bankrupt's assets.

Companies Creditors Arrangement Act

The Companies' Creditors Arrangement Act (CCAA), is similar to Chapter 11 of the U.S. Bankruptcy Code. It is a federal bankruptcy law in Canada that governs the insolvency of only companies and corporations and not individual debtors. The primary purpose of this act is to preserve the rights of an insolvent company and its creditors so that a plan can be arranged and implemented for the benefit of all parties. While the BIA allows for both the reorganization and liquidation of insolvent businesses and individuals, the CCAA deals only with reorganization of corporations. The CCAA applies to a company with liabilities in excess of C$5 million.

Canadian companies file for protection from their creditors under CCAA which essentially gives them time to try and work out their financial difficulties with their creditors including unpaid suppliers and bondholders. As long as a CCAA order remains in place, creditors are not allowed to take any action to collect money owed to them. They can't seize the company's property or petition it into bankruptcy. Meanwhile, the company can try to strike a deal with its creditors to find a compromise . While the company’s management generally remains in charge as a debtor in possession, a monitor is appointed by the court and has certain authority at the company.

Thursday, December 10, 2009

Amendment to Canadian Bill C-51 defeated on point of order

Once again, attempts to have the Canadian Government do the right thing and rule that pension fund claims should take priority in bankruptcy cases, has been defeated. It would appear that the business lobby has been able to keep the change off the table, and so the prospect of our underfunded pension taking a place of priority when Nortel finally disappears is dead in the water. That's not to say there won't be other attempts, but time is running out, and the Canadian Government doesn't seem to have any concern for us and the impact this will mean on our lives and our standard of living. For all of you who have voting rights in Canada, make sure your MP knows what you think of this despicable treatment.

Yesterday's ruling as follows (from Hansard):

This said, the summary of Bill C-51 indicates that the amendments it proposes
to the Bankruptcy and Insolvency Act are "to correct unintended consequences
resulting from the inaccurate coordination of two amendment Acts." The
amendments proposed by the twelfth report, on the other hand, deal with unfunded
pensions of retirees and employees when a corporation files for bankruptcy,
placing them on the same level as creditors. Without in any way speaking to the
desirability of the changes proposed by the report, they exceed the quite
limited nature of the amendments the bill proposes.

The ruling is that the point of order is established, and the amendments that
the report proposes are out of order.

Hon. Pierrette Ringuette: Your Honour, if I may, before you put the question
for third reading, I do not agree with your ruling. Nevertheless, I will accept
it. With the blessing of 6 million Canadian workers and retirees who have
underfunded pension plans, I wish all of you a very merry Christmas.

Koskie Minsky Webinar - Jan 7, 2010

For Canadian retirees and ex-employees of Nortel, Koskie Minksy/NRPC are planning to hold another webinar on Jan 7, 2010. I listened to the last two and found a lot of useful information. Although it is mainly focused at Canadians, those of you in the USA and UK may also hear useful discussions that could apply to your situation. Koskie Minksky and the volunteers at NRPC made a very good attempt at answering all the questions submitted. Following the webinar, the slides used during the presentations and the answers to all the questions were published on the NRPC web site.

It is now almost a year since Nortel entered bankruptcy protection, and the time is approaching when they may opt to fully liquidate and wind up the pension plan and on going health plans. Hence this webinar may be a very important review of what we can expect and what we can do to ensure we recoup as much as possible of our impacted benefits.

The following information may be found on the NRPC web site. See the link on the right hand column.

Koskie Minsky Webinar - Jan 7, 2010
Mark your calendars. We will be holding another webcast with our legal representatives, Koskie Minsky LLP, on Thursday, January 7, 2010, at 3:00 PM. Instruction on how to register and join the webinar will follow shortly. Hundreds of former employees found a similar webinar last August to be very valuable and we expect this one to be just as beneficial to you in understanding the issues around your lost benefits, the processes involved, and what progress is being made

Wednesday, December 9, 2009

Proposed Canada pension reform to aid Nortel retirees

Bill c-51 being read by the Canadian government contains an amendment that would help provide priority to pensioners whose trust fund has suffered due to company bankruptcy. It would also give priority status to employees who lost promised severance payments. The text of the amendment can be found at The amendment to the bill was passed by the Senate National Finance Committee but still requires reading and agreement by the entire Senate.

The following is an article in today's Ottawa Citizen which addresses this effort and also the Ontario Provincial effort on pension reform.

Liberals in two places jump on pension reform

Ontario to spell out overhaul plans today, while federal party urges CPP changes to help those 'stranded' by bankrupt firms. By Jordana Huber, Andrew Mayeda and Bert Hill, Canwest News Service; The Ottawa CitizenDecember 9, 2009

With federal Finance Minister Jim Flaherty days away from a meeting in Whitehorse with his provincial counterparts to examine the country's pension system, the Liberals have moved first -- at Queen's Park and in Ottawa.

First, the Ontario government will introduce the first of two pieces of legislation to modernize the province's pension laws as early as today.

The legislation is expected to clarify the benefits of plan members affected by layoffs and corporate restructuring and to improve regulatory oversight.

Second, the federal Liberals joined the call Tuesday for reform with an expanded Canada Pension Plan capable of rescuing the plans of insolvent companies like Nortel Networks.

Ontario's pension laws have not seen major reform in more than 20 years and the changes will be based on recommendations made by former York University president Harry Arthurs, Finance Minister Dwight Duncan said last month.

In November, Duncan confirmed the first part of the legislation will not deal with the Ontario Pension Benefits Guarantee Fund.

The fund totals about $100 million and exists to provide workers stripped of their defined pensions with up to $1,000 per month, but has been woefully underfunded by corporations, critics say. The second part of the pension reform legislation is expected next year.

Meanwhile, the federal Liberals proposed several reforms to Canada's pension system Tuesday, including a "supplementary" Canada Pension Plan that would enable Canadians to sock away more of their savings in the national pension plan.

Under the proposals, the Liberals would create a Supplementary Canada Pension Plan.

Canadians could contribute to it on a voluntary basis. Employees currently make set contributions to the plan based on salary.

The party would also give employees whose pensions are "stranded" when their employer -- such as Nortel -- goes bankrupt, the option of rolling their corporate pensions into the Canada Pension Plan.

Now, if a company goes bankrupt, pension assets are converted into annuities, which can lead to major losses in the value of the pension during tough financial markets.

Third, the Liberals said they would give people on long-term disability status as preferred creditors during bankruptcy proceedings, so they stand a better chance of collecting their long-term disability benefits.

"Everywhere I go, Canadians are worried about pensions and security in retirement," Liberal leader Michael Ignatieff said after announcing the proposals. "This is not going to solve the pension crisis, but it's a good start."

Nortel pensioners and former employees welcomed the federal Liberal proposals. While they said they didn't go far enough, they said that it showed more political parties were getting involved in the issue.

"We embrace any changes that might prevent the pension plan from being wound up and our members taking a haircut of 30 per cent to 40 per cent to their benefits," said Tony Marsh, a spokesman for the 5,000-member Nortel Retirees and Former Employees Protection Canada lobby group.

"We need something to buy a little more time. This is really a federal and provincial issue and hopefully they will act together rather than propose policy changes."

He said the federal Liberal proposals could still mean significant reductions in pension benefits if, as it appears, they didn't include a guaranteed share of proceeds from the sale of Nortel assets.

With the auction of Nortel assets nearing an end, with just $3 billion raised so far from divisions that $8.5 billion in sales last year, time is working against the Nortel pensioners.

"We have been talking to the federal government but we are still waiting for answers," said Don Sproule, national chairman of the protection group.

The federal Liberal announcement comes as the party, which has been foundering in the polls, strives to stake out positions on key issues following a shakeup in Ignatieff's office. Liberal Senator Art Eggleton revealed Tuesday that he planned to table legislation in the Senate that would enable employees on long-term disability to become preferred creditors.

According to some estimates, only about one-third of Canadian households are saving enough to cover their basic expenses in retirement.

The premiers of Alberta, British Columbia and Saskatchewan have all supported the notion of a supplementary CPP.

In October, Flaherty announced a series of reforms, including a restriction on the ability of federally regulated employers to defer making contributions to their pension plans. The government has also pledged to hold bigger pension surpluses for a rainy day. Currently, plan sponsors can hold surpluses up to 10 per cent of liabilities, but that threshold will be raised to 25 per cent.

The government has commissioned a study by University of Calgary economist Jack Mintz on the subject, and the results are expected to be presented at the Whitehorse meeting, which begins Dec. 17.

Tuesday, December 8, 2009

Nortel Monthly Operating report on Epiq Web Site

The 9th Monthly operating report for Nortel has been issued as docket #2088 on the Epiq website. It contains financial data for October 2009 and year to date information. The following are some notes on two particular items that are of interest to US and Canadian retirees and creditors.

There have been 5773 timely filed claims sent to Epiq. They total $16.890 Billion US in liquidated and unliquidated claims. Only one proof of claim has been objected to so far by Nortel. It is the IRS claim for $3.017 Billion. No orders regarding the claims have been entered yet by the US courts and all are considered part of a group subject to compromise.

The Canadian company, NNL, has been operating using funds provided by NNI as part of an Interim Funding and Settlement agreement. (IFSA) The normal Transfer Pricing Agreement (TPA) was suspended as of January 2009. The Canadian company and the US company with the support of the creditor's committee and the bondholder group entered into the IFSA in June 2009. This agreement only covered costs up to September 30th 2009. Further arrangements have not yet been worked out for the 4th quarter 2009 and periods beyond December 31 2009. Discussions are underway but no decisions have been made. This could have a serious impact on the ability of NNC to continue its operations, which in turn has ramifications on the pension payments. If no further funding is approved, NNC will not have money to continue operations and the Canadian pension fund would have to be wound up.

You can access the report on the Epiq web-site, see right hand column for web-site link, and then search under dockets for number 2088.

Monday, December 7, 2009

Canadian Nortel Employees on Long-Term Disability

Thursday, 03 December 2009
Media release: for immediate publication December 3, 2009

Long-Term Disabled Employees of Companies in Bankruptcy
Will have Higher Priority under NDP Bill
December 3, 2009

(Ottawa) Today in Parliament, NDP MP Wayne Marston tabled a Bill to amend the Bankruptcy and Insolvency Act (BIA), to ensure greater priority is given to employee disability and health-related benefit plans. This measure corrects the gross unfairness in our current bankruptcy laws, which push the legitimate claims of our most vulnerable citizens to the bottom of creditor ladder.

With almost 2,000 Canadian companies filing for bankruptcy protection in the first quarter of 2009 alone, this issue needs urgent national attention. Appropriately, the initiative was tabled on the UN's International Day of Persons with Disabilities.

"We are pleased to see that the proposed amendments not only address disabled employees' need for on-going wage replacement and health benefits, but also the health benefits of all retirees and their surviving spouses" said Sue Kennedy, the Court-appointed representative, for the Nortel Long-Term Disabled group.

This Bill will also help every Canadian taxpayer by preventing many of these distressed people, who are already living at the edge of poverty, from being thrown onto our overburdened social programs. "Canada's current bankruptcy laws download the cost of these programs onto the shoulders of the Canadian taxpayer, which we feel is unconscionable and avoidable,"says Ms.Kennedy."Companies cannot be allowed to shirk their moral, ethical and legal obligations to long-time employees by filing for bankruptcy protection".

Passage of this Bill is of the utmost urgency. Without these amendments, there is no other federal or provincial legislation to help cover the financial and health-care needs of thousands of long-term disabled employees across the country.

We encourage all parties to work together to expedite passage of these amendments as well as those contained in companion, Bill C-476, introduced earlier by Mr. Marston.

For further information, please contact:

Sue Kennedy, Court-appointed representative, CNELTD 613-620-1708
Lawrence Clooney, CNELTD,613-825-9969
Sylvain de Margerie,CNELTD, 613-277-6630
Last Updated ( Thursday, 03 December 2009 )

Friday, December 4, 2009

Nortel Bondholders and Trustees

The following lists the bondholders and trustees registered in the US Chapter 11 court in October 2009. Out of the 115 bondholders and trustees, most are US based, with only 10 Canadian. As a result the unsecured creditors committee in the Nortel bankruptcy process has been heavily influenced by the powerful U.S. junk bond owners. This could have far reaching impacts on the final decisions regarding allocation of remaining Nortel cash and proceeds from the sale of assets. If the Canadian government maintains its "hands off" attitude, there may be little left over to augment depleted Canadian pension trust funds. Without the benefit of National Insurance similar to that in the US and the UK, Canadian retirees are facing the bleak prospect of major impacts to their pensions.

Debtors’ Bondholders and Trustees

Bank of New York
Ameriprise Financial Services, Inc.
Amalgated Bank
Banc of America Securities, LLC; NationsBank of Texas, NA; Banc of America
The Bank of New York Mellon
Barclay's Capital, Inc./Fixed Income Bond-C
Barclay's Capital, Inc., LE
BMO Nesbitt Burns, Inc/CDS
BNP of Paribas Prime Brokerage, Inc
BNP Paribas Securities Corp/Fixed Income
Bank of New York/LDSEG
Bank of New York/London
Bank of New York/Prudential
Bank of New York/TD BK
Mellon Trust of New England, NA
Bank of America/La Salle
Bank of New York/Barclays
Sanford C. Bernstein & Co., LLC
Brown Brothers Harriman & Co.
Carolina Capital Markets, Inc; Clearview Correspondent Services, LLC; H.G. Wellington & Co,
Inc; Scott & Stringfellow, Inc; Hawthorne Securities, Corp; McMillion Securities, Inc
Cede & Co.1
Citigroup Global Markets, Inc./Salomon Brothers
Charles Schwab & Co., Inc.
CIBC World Markets, Inc
Citadel Derivatives Group, LLC or Citidel Trading Group, LLC
Citibank, NA
Citigroup Private Bank & Trust
Citigroup Global Markets, Inc. or Citigroup Financial Services Corp.
Comerica Bank
Credit Suisse Securities (USA)
Davidson (D.A.) & Co., Inc.
Deutsche Bank Securities, Inc.
Dresdner Kleinwort Securities LLC
E*Trade Capital Markets, LLC; E*Trade Cleary, LLC
Emmett Larkin Co., Inc.
Fiducie Desjardins, Inc.
First Clearing, LLC
First Southwest Company
Goldman Sachs & Co.
Goldman Sachs Execution & Clearing, LP
Goldman Sachs International Ltd.
Haywood Securities, Inc.
H&R Block
Huntington National Bank
Ingalls & Snyder, LLC
Interactive Brokers, LLC/Retail Clearance
Jefferies & Co., Inc.
Janney Montgomery Scott, LLC
Jones (Edward D.) & Co.
JP Morgan Securities, Inc.
JP Morgan Clearing Corp.
JP Morgan International
JP Morgan Chase Bank, National Association
JP Morgan Securities Inc./Fixed Income
Keybank National Association
Laurential Bank of Canada
Lehman Brothers, Inc.
LPL Financial Corporation
Marshall & Illsey Bank
Merrill Lynch Pierce Fenner & Smith Inc.
Manufacturers & Trust Company
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Morgan, Keegan & Company, Inc.
Morgan Stanley & Co. Inc.
Morgan Stanley & Co Inc./Retail
National City Bank
National Financial Services Corp.
The Northern Trust Company
Oppenheimer & Co., Inc.
Pershing, LLC
PNC Bank, NA
Raymond James & Associates, Inc
Raymond James Ltd
RBC Dominion Securities Inc
RBC Capital Markets Corporation
Ridge Clearing & Outsourcing Solutions, Inc
Scotia Capital Inc
Scottrade, Inc
Southwest Securities Inc
SSB-Trust Custody
Sterne, Agee & Leach, Inc.
Stifel Nicholaus & Company
Suntrust Bank
TD Ameritrade Inc.
Sumi Trust
Suntrust Bank
TD Waterhouse Canada, Inc.
UBS Financial Services, Inc.
UBS Securities, LLC
Union Bank of California
US Bank NA
Wachovia Bank, NA
Wachovia Securities, LLC
Wachovia Capital Markets, LLC
Wells Fargo Bank, National Association
Wilmington Trust Company
The Fifth Third Bank

Ad Hoc Bondholder Group

Mackay Sheilds LLC
Loomis Sayles & Company, L.P.
Fidelity Management & Research Co.
Pacific Investment Management Company LLC
Sankaty Advisors LLC
Milbank Tweed LLP (advisors)

Wednesday, December 2, 2009

National Pensioners Federation letter to Canadian Government

Jean-François Pagé
Clerk of the Committee
House of Commons
Ottawa ON K1A 0A6

The National Pensioners and Senior Citizens Federation, with over a million members, is extremely concerned about the down loading of social costs onto the tax payer during strategic bankruptcies We were always aware of this, but were never able to get specific numbers such as Diane Urquhart provided in her report," Induced Bankruptcies Cost Canadian Taxpayers Billions of Dollars: Federal Government Not Stopping the Abuse."

Diane's report on bankruptcies says:

"I estimate that the Nortel liquidation will cost Federal and Provincial Governments at least $355 million in additional social security program expenditures and reduced income tax revenues, even though Nortel will have an estimated $6 billion plus of cash in its global bankruptcy estate"

Understand this is just one company down loading onto the taxpayers. The total cost with other companies downloading onto Canada's social security programs and the tax base is in the billions. Parliamentarians do not seem to understand the ramifications to Canadian society of permitting corporations to file for bankruptcy protection for the purpose of avoiding their employment obligations that are otherwise payable under Provincial laws. Our Federation is calling for emergency Finance Committee hearings to give our input for changes to Canada's bankruptcy laws. Bring out all the studies on cost and availability of credit that seem to be the basis for not amending the BIA law to put the Disabled, Severed and Pensioners ahead of the Junk Bond Holders. Diane's study on this shows the cost of credit for investment grade companies is minuscule. Only bankrupt companies are affected by the requested change and these companies are not seeking financing. The bond holders at this late stage are almost always junk bond owners, all of which had access to credit default insurance, many were insured and most bought at a deep discount to the bond's face amount once the corporation was known to be financial distress.

Where is the opposition to changing the BIA ? Are they only visible in the back rooms of power yet able to inflict so much cost to our Canadian social security programs. Let them show their faces in Ottawa via hearings in front of the Finance Committee. The National Pensioners and Senior Citizens Federation supports the retirees and former employees of Nortel , Abitibi Bowater, Fraser Papers, Canwest and many other companies already in bankruptcy proceedings. We wish to appear at the Finance Committee hearings to demonstrate the down loading onto our social security and tax base that is happening now with Nortel.

President - Art Kube