Monday, February 22, 2010

Canadian Settlement Agreement

Tomorrow there will be a web seminar from 3pm to 5pm organized by the NRPC and Koskie Minsky to discuss the 2010 settlement agreement between the NRPC the CAW and Nortel. Details of the agreement can by found in the 39th report by the monitor Ernst& Young, and may be viewed on their web site. See link in right hand column.

You can find out the details for the seminar on the NRPC web site at:

By the posts that I have seen on the Yahoo Groups site, there is a lot of controversy about this settlement. The group of Canadian disabled workers (400 people plus survivors) are very unhappy because this settlement basically cuts them loose as of the end of 2010, and the trust fund for the disabled people is maybe only 20% funded, so they face a major impact.

The settlement provides for the pension payments from the Nortel trust fund to continue until Sept 30 2010 at which time Nortel will cease to administer it and will hand if off to an Ontario government appointed administrator. Nortel will continue paying into the trust fund approximately $2.6M per month until March 31st 2010 and then it will reduce the payment to $380K per month. These amounts are far short of what is needed to make up for the deficit in the trust fund.

In paragraph 82 of the monitor's report they state that the administrators of the pension trust fund filed claims against Nortel in respect of the defined pension plan and the defined contribution plan of $1.1B. I presume that amount includes the Unionized and Salary plan deficits, so I am not sure if it indicates a change to the funding ratio of the plans from the 69% quoted in mid 2009. I have asked for clarification of that from the NRPC and from Koskie Minksy. We'll see if I get a response.

In all the agreement will mean that Nortel has to pay $57M during 2010 to fund the Health and Welfare, the pension plans, and the advance on the severance payments. The breakdown of those payments is:

Pensioner Medical and Dental (M&D): $24.4M
Long term disabled M&D & Life ins.: $3.0M
Survivor Transition benefits : $2.8M
LTD Income : $12.2M
Survivor Income Benefits : $1.4M
Pension Payments to the Trust Fund: $8.9M
Termination Fund : $4.3M
Total : $57.0M

Regular Pension Payments come out of the Trust Fund and are completely separate from this agreement.

In the end this is Nortel's last payment to us and as of October 1st 2010 we are parting ways for ever. Nortel wanted to get rid of the pension and welfare burden on it's back, and this is what they are doing. They are making a token offer to appease the masses, however it is going to hurt badly come October for the pensioners, and very very badly for the disabled employees in January 2011. In the meantime, Nortel is setting aside millions in bonuses and perks for it's current employees and it is planning to exit the CCAA in a smaller, leaner,profitable state with the pensioners and creditors off it's back.

At least in the US and UK there is some semblance of concern as the PBGC and the PPF step in to provide payments to the US and UK retirees. Canada on the other hand has thumbed it's nose at pensioners and disabled people, and is leaving them out in the cold to wither away. As Canada puts on a great show to the world with the Olympics,and Canadians swell with pride, I wonder how many of them really know what their country is doing to their older generation?

For shame!!

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