Tuesday, August 24, 2010

NRPC Newsletter 8-24-2010 (1)

The NRPC has issued a newsletter on August 24th 2010 which may be read on their website. I have provided a summary of the points on the pension trust fund and the wind-up and will provide a summary tomorrow on other entries in the Newsletter:

Pension Plan Trust Fund
Nortel's June 2010 estimate is that the company's two defined benefit pension plans (managerial and negotiated) are funded to 64% if they were to be wound up today and indexing is included. This is down from 69% as last publicly reported in May 2009. The decrease is not due to the quality of the actual investments but mainly to changes in key assumptions on future market returns, the purchase of annuities and future inflation rates. When the wind-up occurs, the actual ratio used may be different. Without indexing, the non-negotiated solvency ratio is 72%, the negotiated is 74%.

Ontario Government Update:
The Ontario Government bureaucracy has been extremely reluctant to engage the NRPC in dialogue on the orphanage plan (now called the Financial Sponsorship Model).

Conventional Pension Wind-Up
FSCO is charged with carrying out the Wind-up process. Due to the complexity and size of the Nortel wind-up FSCO still cannot tell us exactly what we can expect under conventional wind-up (CWU).

Our current pension plan is indexed for Cost of living increases. The aspect of indexation is complicated and when an administrator is appointed in September, indexation provisions might be maintained or it might not.
The following scenarios are attempts to clarify the impact of the reduced ratio and indexing.

Ontario pensions (non-negotiated): Scenario (a) -Not IndexedFirst $1000 - 72% of pension plus a PBGF top-up of 28% = $1000 - not indexed in future years
Portion above $1000 - 72% of pension - no longer indexed in future years

Ontario Pensions (non-negotiated): Scenario(b)- IndexedFirst $1000 - 72% of pension plus a PBGF top-up of 28% = $1000 - not indexed in future years
Portion above $1000 - 64% of pension - indexed in future years in line with provisions of our pension plans.

These examples from the NRPC are only to give you an indication of orders of magnitude. As mentioned above, it is not clear how CWU will be implemented.

For pensions outside Ontario:

Under wind-up regulations funds could be transferred to each province for administration of pensions in that province. The transfer of pension funds to other provinces is also unclear at this time.

Service earned outside of Ontario is not eligible for the top-up provided for service earned in Ontario. At this time, indications are that funds from the pension plans would be transferred to each province, at the solvency ratio currently estimated to be 72%,for administration according to their rules.

Currently the NRPC has no information about how the pensions for people living outside the country will be handled.

Financial Sponsorship Model
There are many variables leading to a very complex set of possibilities. That is why the NRPC has been pursuing the concept of FSM. Under FSM a large financial institution would take over management of the pension fund. Under FSM, the large costs to purchase annuities would be avoided. It is anticipated that payouts larger than CWU by 8-10% or more are likely.

However, the Ministry of Finance (MoF) has been reluctant to support FSM. We need them to pay attention to FSM and to modify the regulations accordingly. Without a change to provincial regulations, FSM cannot be implemented in Ontario.

To make this change we need to intensify pressure on the Ontario government, and the MoF in particular. A rally at Queen's Park on September 15 is organized for that purpose

All Canadian Nortel retirees and their families should support FSM and lobby their MPS to make it happen.

Petition to the Ontario Legislature re Don't Wind up the Plan
The NRPC has initiated a petition which is:
- Available online on the NRPC website.
- To be printed and signed by as many individuals as possible.
- Not to be changed in any manner.
- Not to have any comments on it or the sheet will have to be discarded.
Some key points to remember:
- Petitioners must be residents of the Province of Ontario.
- It is acceptable for petitioners to be under the age of majority.
- A petition must contain original signatures only, written directly on the face of the petition.
Please return completed signed page(s) to the NRPC no later than Sept. 5, 2010 at:
NRPC - Petitions, PO Box 21, Dorchester, ON, N0L 1G0

Queens Park Rally
To reinforce the request to not wind up our pension plans, The NRPC is organizing a rally with the support of the CAW at Queen's Park on Wednesday, Sept. 15, 2010 at noon. If you are within travelling distance of Queens Park, please attend and bring your friends. We need a strong show of support. More information will be on the NRPC web site as the agenda, speakers and logistics are finalized.

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