Thursday, September 30, 2010

Last day Nortel administers Canadian Pension

Today is the last day Nortel administers our Canadian Pension. As of midnight tonight Nortel ceases to administer the pension and washes its hands of retirees and future retirees.

The US retirees have already been transferred over to the federal pension insurance corporation, (the PBGC), and many Nortel US retirees have continued to receive their pensions without major interruption. Some US pensioners have seen a reduction due to the PBGC rules and some have suffered quite huge reductions due to the pension contracts they held with Nortel that were terminated when Nortel filed chapter 11 in January 2009. But in general Nortel retirees in the US are very happy that they had the PBGC to pick up when Nortel failed to deliver

Many US retirees also lost their non-qualified pension benefits and now sit waiting for their claims to be considered by the courts, a process that might take years and might only yield cents on the dollars owed to them.

In the UK most retirees were covered by the PFF, another National Insurance plan that provided some security to pensioners as they faced the bankruptcy of their former employer.

In Canada however, there is no national Canadian pension insurance scheme. Pensioners are left to fend for themselves.

Only in the Province of Ontario is there any form of protection, and that only works up to a maximum of $1000 per month. A total that is far below what many people will need to live dignified reasonable lives after retirement.

Tomorrow an appointed administration company, Morneau Sobeco, will take over administering the pension. For now the pension payments will probably continue as is for a while, (2 -3 months maybe). During that time M.S. will examine the assets and liabilities of the pension trust fund and determine the funded ratio. At that point pensions will be reduced. Currently the estimate, provided by Mercer on behalf of Nortel, is a reduction between 28% and 36% depending on the decision on whether to continue indexing or not.

Following that stage, if there is no change in the Federal and Provincial regulations, the pensions considered Ontario pensions will be converted to annuities for each individual. That conversion may result in further reduction and once in place will be locked in for the life of the pensioner and any survivors who are owed a pension.

The annuity rates are currently at an all time low, so the prognosis is grim.

In at least one other province, Quebec, action has been taken to offer alternatives to this dismal plan. As of yet Ontario has not yielded and continues to drive Nortel pensioners towards this future that offers little return for the years of devotion to their jobs at Nortel and basically guarantees that there will be massive reductions to the pensions they were promised.

Canada contrasts dismally to the US, the UK,and many other countries, in terms of pension protection, yet for some reason the Federal and Provincial governments and the general public at large have ignored this issue and turned their backs on seniors facing this big problem. Shame on them all.

Tuesday, September 28, 2010

John Tyson Letter re Nortel Canadian Pensioners' plight

John Tyson has written a number of letters regarding the shameful treatment of Nortel Canadian pensioners. This latest letter was published in the Ottawa Citizen on Monday Sept 27th.


Some cared, but not enough to help Nortel pensioners

The Ottawa Citizen September 27, 2010

John F. Tyson writes that it will take special intervention to help Nortel pensioners.

Nineteen months have passed since Nortel filed for bankruptcy protection, the largest in Canadian history. Without provincial and federal government intervention before Sept. 30, the 20,000 Nortel pensioners and long-term disabled will see their pension wound up and forced into annuities, cut by more than 36 per cent, and the end of all health and life insurance benefits by year end.

Without government intervention, they will be abandoned as human sacrifices to the unconscionable harm inflicted by current bankruptcy laws on private sector employees. I am one of them.

During that time, it seems as if I have been pushing-on-a-rope, and in spite of everything tried, I have been unable to find the spark that would ignite the fire within provincial and federal politicians.

The unanswered question is always the same -- why not? Perhaps it's because the intended audience cannot comprehend "justice-in-bankruptcy" when, as public sector employees, bankruptcy is unconceivable, and their pensions and benefits are securefor life. With no champion in sight, it is all to no avail.

The Nortel Retirees and former employees Protection Canada (NRPC) have held three rallies at Queen's Park and Parliament Hill; presented two petitions (18,000 signatures); written thousands of letters; produced full-page ads, and held extensive meetings with provincial and federal cabinet ministers and their bureaucrats. Again it was all to no avail.

Without political power or leverage, this private sector group exists on $20 member donations and all-volunteer commitment. What chance do they have when facing the power of corporate lobbyists, vulture foreign bondholders and the inertia of political hypocrisy?

With only faint hope, all they have left is the court of public opinion. All they have is a tired and desperate voice.

Aristotle described magnanimity as "the crowning virtue." I implore Premier Dalton McGuinty and Prime Minister Stephen Harper to lead elected members of the Ontario legislature and the Canadian Parliament in non-partisan magnanimous gestures of political will, compassion and justice.

Without intervention, the obituary is predetermined. No longer newsworthy, the epitaph will read: "Some cared, but not enough."


John F. Tyson, Ottawa

© Copyright (c) The Ottawa Citizen

Nortel US Non Qualified Pension letter to court

Docket 4020 on the Epiq Website contains a letter from Jackson Townsend, III Regarding Pension Benefits. As a retiree whose Non-Qualified pension was stopped when Nortel filed chapter 11, Jackson has expressed to the court a request for the court to regard pension benefit claims as priority or preferred so that they be considered before other creditor's claims.

I think that Jackson's letter was very courageous on his part speaking up for retirees and expressing the sentiments that we all feel. I plan to send a letter along the same lines to the court to express my desire to see pension claims treated as priority and given a higher payout percentage than other creditors who may be insured or who can certainly absorb the loss much easier than we can.

Pension claims, such as our non-qualified losses, should be considered in a different category than simply general unsecured claims. Pensions are deferred salary and are part of a contract between the company and the employee and they have a direct human impact on lives and living conditions. They should be treated with urgent immediate priority and paid out of the Nortel assets before other corporate and banking claims.

The PBGC claim is seen as a priority claim for qualified defined pension trust fund shortfalls. Our non-qualified pensions were part of a defined pension plan, registered with Erisa, but being paid out of company revenue instead of a PBGC insured trust fund. In my opinion the non-qualified pension claims should have the same priority as the PBGC claim, and treated as tax-deferred payouts in the same manner that the PBGC expects to receive their trust fund claim payment.

Monday, September 27, 2010

McGuinty agrees to another review of Nortel Canada pension plan

The following story appeared in The Canadian Press today:

McGuinty agrees to another review of Nortel pension plan, just days after saying no.
Mon Sep 27, 2:48 PM

Keith Leslie, The Canadian Press

TORONTO - A door slammed shut by the Ontario government on Nortel pensioners just last week was pushed back open Monday by Premier Dalton McGuinty, who said he would take a second look at the fate of their pension plan.

The former workers and retirees don't want their plan wound-up and the $2.5 billion in pension assets used to buy annuities that would provide them with a steady income, which is the normal practice when companies go bankrupt.

They say that would simply lock in the losses for the plan, currently estimated to be funded at only two-thirds of its liabilities.

They want to let a private financial services company manage the assets.

The government wrote the Nortel workers last week to formally reject their proposal, saying it would expose them to even greater risks because of a "high degree of exposure" to the equity markets.

"I am not willing, particularly after the financial events of 2008, to risk making an already difficult situation worse by subjecting $2.5 billion in retirement savings to an untested capital markets model,'' wrote Finance Minister Dwight Duncan.

McGuinty told the legislature Monday he had a change of heart after he and Duncan met with some Nortel workers late last week.

"They took the opportunity, as they should have, to rightly impress upon me just how important an issue this is to them," said McGuinty.

"They would like to exercise greater authority over the pension plan itself. I undertook to give this yet another review and to get back to them, and that’s where we are right now."

The Sept. 21 letter from Duncan to the Nortel retirees also pointed out that the Ontario government added $500 million to the province's Pension Benefits Guarantee Fund last year, knowing about half of it would be needed to help Nortel workers. The fund guarantees pensions of up to $1,000 a month when companies close.

Duncan added that the workers' plan would require changes to the Income Tax Act.

However, the province apparently did not even ask the federal government about such a change, so Ontario's Opposition asked Finance Minister Jim Flaherty and got a positive response, said Progressive Conservative critic Norm Sterling.

"If the Ontario government decided to pursue such an initiative and approached the federal government with a detailed proposal, which they have not yet done, the government of Canada would naturally be willing to support Nortel pensioners and the province of Ontario through expedient implementation of all reasonable proposed policy measures," Sterling quoted in a letter from Flaherty.

McGuinty said he didn't know if the province had made such a request of the federal government, but added his commitment to take a second look at the Nortel pension did not mean he agreed with the workers' proposal.

"There’s not a consensus among pensioners," he said.

"There are differing opinions as to what we need to do with respect to the future of their pension plan, and that’s something we feel we have a responsibility to take into account."

The New Democrats said whatever the reason for McGuinty's change of position, they welcomed it.

"These Nortel pensioners have gone through hell in a handbasket," said NDP Leader Andrea Horwath.

"They put together a well thought out plan that gets them to a place where their pension doesn’t have to be wound up, and I was horrified at the way the government dismissed that plan out of hand."

Nortel, Canada's former leading high-tech company and manufacturer of telephone and network equipment, had nearly US$29 billion in sales in 2000, before a decade of negative earnings forced the company to file for bankruptcy protection in January 2009.

Sunday, September 26, 2010

Final Nortel Canada Pension Cheque

I received my final Canadian pension pay stub from Nortel last week with a note basically saying " Adios Amigo". As of Sept 30th Nortel will wash it's hands, figuratively speaking, of our defined pension forever.

Something tells me that this was always their plan, from the start of the bankruptcy filing. The pensions in Canada, the USA, and the UK were draining huge amounts of money each month from their revenue, so they obviously were targets. Never mind about the people, nor the stress, that terminating the plans would bring. Nortel never had any intention of restructuring in any way that included continuing pension plans.

It just indicates to me that the people running the company in the last decade were not raised in the old Northern Electric mode, and had no concept of the core values that they espoused. Remember "People are our Strength"? Horses' patooties! The last cadre of management couldn't care a hoot for the people, they just wanted to take their golden parachutes and run all the way to the bank.

Well now we are set free, and haven't any real idea what it will mean to our pensions except that they will be reduced by at least 35% and maybe a lot more than we have been led to believe by the Mercer estimates. Adding insult to injury, we don't seem to be able to have any say in how our pension trust fund will be managed. The Ontario government apparently knows best and will make all the decisions for us, whether we want them to or not.

This new, emerging, view of Canada and Ontario is very unsettling. Where did the Canada I thought existed go to? It seems the new Canada just wants seniors to disappear, and not to bother them with their concerns, and "old" ideas. It's almost as if they are holding us hostage and exacting vengeance because of the poor management decisions by the unscrupulous executives who drove Nortel from the premier, world renowned company that it was, to the dirty cur hiding in the gutter that it has become.

Perhaps one day a history of the demise of Nortel will spell out the rotten, dishonourable treatment of it's retirees, and disabled employees, and heap shame on those in the government who turned their backs on citizens who once helped enhance Canada's status in the world.

Saturday, September 25, 2010

Koskie Minsky statement on Nortel Canadian pension plan administrator

The following statement regarding the new pension administrator was posted on the Koskie Minsky site. It also provides a link to the Financial Services of Ontario web site with some more details of the change in administration.

September 23, 2010
Version fran├žaise disponible plus bas (see K.M. site for French version)

The Superintendent of Financial Services announced today that it has appointed Morneau Sobeco Limited Partnership (Morneau Sobeco) as the new plan administrator, effective October 1, 2010, for Nortel's two defined benefit pension plans:
the Nortel Networks Negotiated Pension Plan (registration number 587766), and the Nortel Networks Limited Managerial and Non-Negotiated Pension Plan (registration\ number 342048) (the "Pension Plans").

In accordance with the March 31 Court-approved Settlement Agreement, Nortel will cease to make contributions to the Pension Plans and will no longer act as plan administrator effective September 30, 2010. Going forward, Morneau Sobeco will be the administrator of the Nortel pension plans and ultimately will be responsible for the wind-up of the Pension Plans. Morneau Sobeco was selected as the wind-up administrator through a tendering process. Given the firm's level of experience in pension plan wind-ups, we have confidence in their competence and in their ability to deal with large scale pension plan wind-ups such as Nortel's.

Effective October , 2010, questions should be directed to the new plan administrator, Morneau Sobeco Limited Partnership at www.morneausobeco.com. To review more information about the Superintendent's recent appointment, please visit the Financial Services Commission of Ontario website at http://www.fsco.gov.on.ca/english/pensions/nortel.asp.

While there will be changes to the administration of the Pension Plans effective October 1, 2010, there should be no immediate change to your pension. You should receive your normal pension cheque in October. Once Morneau Sobeco's appointment takes effect on October 1, a review of the Pension Plans will commence and a wind-up report will be prepared. You may experience a reduction to your pension in the future, likely after the wind-up report is completed and approved, as necessary. We will post more information on our website as it becomes available.

Friday, September 24, 2010

US Court hearing on VEBA rescheduled.

Docket 4005 posted yesterday on the Epiq web site stated that the court hearing for the VEBA proposal by the US NRPC had been rescheduled to October 14th 2010 at 10:00 AM. The bar date for objections has also been moved to 4:00PM on October 7th 2010.

To me, this reschedule looks like the court is giving Nortel's lawyers some time to get organized to object or declare otherwise. This is the second time the date has been rescheduled.

In the mean time there is no further motion yet by Nortel to terminate the health benefits but maybe that is what they are planning to do before the court hearing on October 14th.

But as I see it, no news is good news. Maybe we'll continue to have health benefits until the end of the year at least.

Thursday, September 23, 2010

Comments on Koskie Minsky Site

The following comments were posted on the K.M. site yesterday. Please read carefully.

On October 1, 2010, the NNL Non-Negotiated and Negotiated Pension Plans will transition to a new administrator appointed by the Superintendent of Financial Services for Ontario.

(Please see my previous post from earlier today. The new administrator has been appointed.)

As a result of the change in administration, all active employees who are members of the Pension Plans, including disabled employees who are on long-term disability, will experience changes that will take effect on October 1. Although you will cease to earn benefits under Nortel's existing Defined Benefit and Defined Contribution plans on October 1, Nortel has established a mechanism to make payment of DC contributions and to provide a "top-up" deposit for grandfathered members of the Defined Benefit plan for the period between October 1 through December 31, 2010 while you remain an active employee of Nortel in compensation for the value of the defined benefit that you would have earned.

Canadian LTD participants in the Defined Contribution and the Defined Benefit pension plans recently received correspondence outlining these changes and providing information about how future payments and investments will be made. Please read the information in this correspondence carefully and note that you are required to take positive action only if you do not already have an existing Employee Investment/Savings Plan account with Sun Life. Many disabled employees will already have an existing account with Sun Life however if you do not, please create one by completing the form you have been provided and returning it to Sun Life by 4:00pm on September 27.

The correspondence you received provides you with several investment options, and which option you choose, if any, is a personal decision. If you have any questions about which investment option you should choose, please speak to your personal investment or financial advisor. If you do not choose any option, you will be placed into the default option (as outlined on the form).

If you have questions about whether you already have an existing account with Sun Life, please contact Sun Life at 1.866.733.8612. You may contact KM at 1.866.777.634 , or if you are a member of the CAW, your counsel at 1.800.268.5763 with other questions.

If you believe that you should have received this correspondence but have not, please contact us immediately.

Morneau Sobeco Appointed Administrator of Canadian Pension Plans

The following was posted on the NRPC web site today.


Thursday, 23 September 2010

We have just received news that the Financial Services Commission of Ontario has appointed Morneau Sobeco as the Administrator for the Nortel Pension Plans to be effective October 1, 2010. Full details of the media release are below for your information. For further information on Morneau Sobeco, you may go to their website at: www.morneausobeco.com. We expect to be meeting with representatives shortly.

The following contact information is provided as to who to contact if you have questions regarding your pension:

More information will be available on October 1st.

Effective October 1, 2010, Morneau Sobeco is the New Plan Administrator for Nortel Pension Plans. On September 30, 2010, pursuant to a court-approved Settlement Agreement reached on March 31, 2010, Nortel Networks Limited (Nortel) will cease to make contributions to its two defined benefit pension plans: the Nortel Networks Negotiated Pension Plan (registration number 587766), and the Nortel Networks Limited Managerial and Non-Negotiated Pension Plan (registration number 342048) (Nortel pension plans). In addition, the agreement recognizes that effective September 30, 2010, Nortel will cease to act as the plan administrator of these plans. Court appointed representatives and counsel to the former Nortel employees and pensioners were parties to the Settlement Agreement.

Effective October 1, 2010, the Superintendent of Financial Services (the Superintendent) appointed Morneau Sobeco Limited Partnership (Morneau Sobeco) as the new plan administrator for the purpose of winding up the Nortel pension plans. The Superintendent made this appointment under the authority of section 71 of the Pension Benefits Act (PBA).

Morneau Sobeco was selected for this appointment through a competitive tendering process.

Why a New Plan Administrator Needs to be Appointed.

Pension plans that are registered in Ontario must be administered in compliance with the PBA, which sets out requirements that must be followed for the operation, funding and termination of pension plans in Ontario.

Effective October 1, 2010, the newly appointed plan administrator is needed to ensure continuity in the administration of the Nortel pension plans (including payment of pension benefits), to commence the wind up of the Nortel pension plans, and to represent the pension plans as decisions are made regarding allocation of the proceeds from the sale of Nortel’s assets.

In carrying out the wind up of the Nortel pension plans, the administrator will be responsible for determining adjusted entitlements, including the “top up” provided through the Pension Benefits Guarantee Fund (PBGF) to entitlements earned in Ontario. A retiree’s entitlement with the PBGF “top up” is determined as of the date the plan winds up. The fact that it may take years to annuitize the Nortel pension plans has no impact on the pensions of Ontario retirees, as the Ontario government through the PBGF assumes the risk for any changes in the annuity markets.

Who to Contact for Pension Inquiries

Pension plan members and pensioners with questions about their entitlements and benefits should contact the plan administrator, as the Financial Services Commission of Ontario (FSCO) does not keep personal data and is not able to respond to such questions.

Effective October 1, 2010, questions should be directed to the new plan administrator, Morneau Sobeco Limited Partnership at www.morneausobeco.com. (More information will be available on October 1st.)

Prior to October 1, 2010, questions concerning the Nortel pension plans should be directed to the current Nortel pension plan administrator at:

Nortel Networks Limited
5945 Airport Road, Suite 360
Mississauga ON L4V 1R9
Tel: (905) 863-7462

Wednesday, September 22, 2010

Response from Tony Clement Canadian Minister of Industry

Earlier this year I wrote to Tony Clement urging him to support Bill C-501 and help protect pensions, in particular the pensions of Nortel retirees who face a huge cut in income.

Here is his reply:

Thank you for your correspondence regarding pension protection.

The Government of Canada is committed to exploring ways to better protect
workers when their employers go bankrupt. To date, the government has
taken several steps to accomplish this goal. For example, in July 2008,
the Wage Earner Protection Program was implemented to guarantee the timely
payment of unpaid wages, including severance and termination pay, of up to
approximately $3,330, in a receivership or a bankruptcy.

In October 2009, the federal government announced an important pension
reform plan which includes measures that will benefit pension plan
sponsors, plan members and retirees. These measures are intended to:
enhance protections for plan members; reduce funding volatility for
defined benefit plans; make it easier for participants to negotiate
changes to their pension arrangements; improve the framework for defined
contribution plans and for negotiated contribution plans; and modernize
the rules for investments made by pension funds. Chapter 12 of the
Statutes of Canada 2010, which received Royal Assent on July 12, 2010,
incorporates a number of the announced pension proposals. Additional
legislative and regulatory changes will also be required in order to
implement all of the announced proposals.

Furthermore, the government has undertaken a very serious and public
discussion with Canadians on retirement income adequacy and security.
Recognizing that retirement income issues have federal, provincial and
territorial (FPT) dimensions, finance ministers set up a joint FPT
research working group to conduct an in-depth examination of retirement
income adequacy. The findings of this group were presented at the Finance
Ministers Meeting in December 2009.

Based on the working group’s findings, the finance ministers agreed to
proceed with the analysis of options to improve Canada’s retirement income
system. To support this work, federal consultations, which included
online consultations and a series of cross-country round table
discussions, speaking engagements and town hall meetings, were launched on
March 24, 2010, to gather input from Canadians on how to further build on
the strength of Canada’s retirement income system.

These efforts, as well as consultations undertaken by provincial and
territorial governments, informed discussions at the June 14, 2010 meeting
of FPT finance ministers. During this meeting, ministers agreed to
explore specific system improvements, such as pension regulation and tax
changes to encourage more retirement savings by allowing broad-based,
defined contribution pension arrangements for multiple employers,
employees and the self-employed; promote financial literacy to empower
individuals to make the best decisions and take more responsibility for
their own retirement; and consider a modest phased-in and fully funded
enhancement to the Canada Pension Plan.

Ministers are seeking to create a strong private and public balance,
acknowledging the importance of both effective government support and
personal responsibility. Currently, no final decisions have been made.
Detailed options for each of these proposals are under study and
development for further review by FPT finance ministers at the end of
2010.

Thank you for bringing your concerns to the government of Canada’s
attention. Please accept my best wishes.

Yours sincerely,



Tony Clement

Tuesday, September 21, 2010

Canadian Pension Check after Sept 30th 2010

In response to a question as to whether there will be a gap in pension payments when Nortel hands over the Canadian pension to the Ontario administrator on Oct 1st 2010, Anne Clark-Stewart of the NRPC wrote the following helpful response in Yahoo groups.

You will continue to receive your current monthly pension as you have from Northern Trust until the newly appointed Administrator for the Financial Services Commission of Ontario is ready to reduce the pensions and buy the annuities. They have promised a seamless operation.

This process will start once the Administrator is appointed on Oct. 1st and will probably take 3 to 4 months to evaluate the plan and ensure that all of the information is accurate to purchase annuities for each of us. You will only receive one cheque, as you do now, with the PBGF top-up, where pensioners are eligible, included in the pension cheque.

As soon as we have more information on the wind-up process and what involvement we may have, we will communicate to all NRPC members. In any event, we have been told that everyone will receive at least one month's notice before there are any cuts to the pension cheques.

Be aware however, that we still feel that there should be an alternative to buying annuities in such a poor annuity market. We will continue to put our proposals in front of the Government for consideration.

We will also continue to refute any erroneous information that they present and will have that information on the NRPC web site.
Anne Clark-Stewart
NRPC Communications

Monday, September 20, 2010

Canadian pension annuity or FSM

With only 10 days before Nortel hands over the administration of the Nortel Canada pension plan to Ontario administrators, it is still unclear if there is any other option than to accept annuities at this the worst possible time in 25 years for buying an annuity.

There are still large questions to be asked about the entire process and whether it is advantageous to many pensioners to avoid the standard wind up process by opting for a new idea called the Financial Sponsorship Model.

The Canadian NRPC are urging Ontario legislators to allow a change in the regulations which would take control of the Nortel Canada pension away from the government administrators and turn the fund over to private investment companies who would administer and invest the funds, instead of purchasing annuities as is called for in the current process.

The basic premise of the NRPC is that gains could be made through investment to replenish some of the losses in the fund caused by economic impacts, and poor regulations that allowed Nortel to let the fund value drop below 100%. Of course investment means increased risk, which could dilute the funds over time and many people are concerned that this approach may place their pensions even further into jeopardy at some future time.

An independent financial analyst has raised concerns about moving away from the annuity process which could make things worse for many Ontario pensioners whose pensions are $1000 or less per month. The standard wind up would continue to provide their pensions at 100% based on the Ontario Pension Benefit Fund top up, which would offset any drop due to Nortel pension underfunding.

It is argued that almost half of Nortel pensioners fall into this situation, and to divert the wind up process into an FSM could mean that those pensioners would then be at risk of having their pensions reduced below $1000 per month. Part of this argument is due to the agreement made earlier this year which provided additional funds into the OPGF by the Federal Government in order to ensure that the Nortel Ontario Pensioners would receive the top up. This was part of the deal between the NRPC and Nortel, and if the process if diverted from the standard wind up to an FSM then the OPGF top up may not be a certainty.

As a result there are many Nortel pensioners who are fearful of their pension being reduced by such a change when the current process guarantees they will continue to receive what they have been receiving, albeit without any cost of living indexing. I imagine that most of us, if we were in that situation, would feel the same.

The other half of the Nortel Canada pensioners however don't have the luxury of the OPBGF. That in itself is a shameful indictment of the Canadian Federal Government and their apparent disdain for seniors in this situation. Many pensioners live in other Provinces and out of the country and therefore won't be eligible for the OPGF if their service was outside Ontario. Also many Ontario residents have pensions which are more than $1000 per month. So they will suffer regardless. The pensions will be cut to at least the 64% funding ratio and then possibly further when the costs of purchasing annuities are factored in. Also the percentage funded number is still an unknown since a proper actuarial calculation and asset assessment has not been carried out.

The move to an FSM for those people may be more attractive since it could mean a larger pension if the investments provide positive returns. However the risks are high and there is no Canadian precedent.

However, I think that we will have no choice. The Ontario government has said that they will not consider the FSM and frankly based on the lacklustre approach of the Canadian and Ontario governments to all the efforts we have made so far, it looks like they will dig their heels in.

If they do, then I think we need to be looking at the ways in which they administer the money through annuities. Surely a $2.5B fund can command a better return rate than individual annuity purchases and with government support there has to be some creative idea that would maximize the rates of return on this enormous amount of money.

Sunday, September 19, 2010

Canadian retiree petitions to Ontario legislature

Petitions presented to the Ontario Legislature Sept.15, 2010

Saturday, 18 September 2010
After the Rally at Queen's Park on Wednesday, several members of the NRPC Board and one of our actuaries were acknowledged in the Legislature. by Charles Sousa, MPP for Mississauga South and Yasir Naqvi, MPP for Ottawa Centre. A bit later in the official proceedings, the MPPs each presented 4000 signatures on our petition to have an alternative to wind-up-by-annuity of our pension funds. What is significant here is that both these members belong to the Liberal caucus and were presenting the petitions even after Minister Duncan had said he would not support our alternative proposal of the Financial Sponsorship Model (FSM). They deserve our heartfelt thanks and support.

There are several thousand more petitions to be presented by other MPPs from the opposition parties. We are very pleased that we are getting support from all parties in the Legislature. This just indicates that we need to keep up the pressure as there is still time to move Minister Duncan into action on our behalf.

The following is the text from Hansard for the introductions and the presentation of the petitions:

Introduction of Visitors:

Mr. Charles Sousa: I rise today to recognize some executive directors of Nortel Retirees and former employees Protection Canada who are here on the front lawns today. Please welcome Mr. Ron Olsen, an actuary; Mike Moorcroft, who's the chair of GTA membership; and Ray Hounsell, who's the Quebec chair.

Mr. Yasir Naqvi: I also want to introduce the national chair of the Nortel Retirees and former employees Protection Canada, Don Sproule, who lives in the great riding of Ottawa Centre-welcome, Don-and also Frank Mills, who is a director of NRPC Canada.

PENSION PLANS

Mr. Yasir Naqvi: I'm tabling about 8,000 signatures on a petition, along with my colleague MPP Charles Sousa, on behalf of Nortel pensioners. The petition reads as follows:

"To the Legislative Assembly of Ontario:

"Whereas the Pension Benefits Act (PBA) regulations for ‘loss of sponsor' of defined benefit pension plans only permit windup and annuity purchase; and

"Whereas in the present economic climate the cost of annuities is at a 25-year high with no relief in sight;

"Therefore the purchase of annuities exacerbates the punitive impact of windup on Nortel pension plan members and others in similar situations, and increases the costs passed on to the taxpayers of Ontario;

"We, the undersigned, petition the Legislative Assembly of Ontario as follows:

"To amend the PBA regulations to permit the Administrator and the Financial Services Commission of Ontario (FSCO) to apply other options in the ‘loss of sponsor' scenario which will provide more benefits to Nortel pension plan members and others in similar situations, such as the continuation of the pension plan under responsible financial management by a non-government institution."

I affix my signature and send it to the table via page Shanthos.

Mr. Charles Sousa: I have with me a petition that was presented to myself and MPP Yasir Naqvi from Ottawa Centre. It's part of 8,000 signatures provided by Nortel Retirees and former employees Protection Canada. It reads as follows:

"To the Legislative Assembly of Ontario:

"Whereas the Pension Benefits Act (PBA) regulations for ‘loss of sponsor' of defined benefit pension plans only permit windup and annuity purchase; and

"Whereas in the present economic climate the cost of annuities is at a 25-year high with no relief in sight;

"Therefore the purchase of annuities exacerbates the punitive impact of windup on Nortel pension plan members and others in similar situations, and increases the costs passed on to the taxpayers of Ontario;

"We, the undersigned, petition the Legislative Assembly of Ontario as follows:

"To amend the PBA regulations to permit the Administrator and the Financial Services Commission of Ontario (FSCO) to apply other options in the ‘loss of sponsor' scenario which will provide more benefits to Nortel pension plan members and others in similar situations, such as the continuation of the pension plan under responsible financial management by a non-government institution."

I affix my signature and provide it to Caelan, the page, to deliver it to the table.

Last Updated ( Saturday, 18 September 2010 )

Thursday, September 16, 2010

Ontario Finance Minister rejects FSM. Pension will wind up in annuities

The following story was published in the Ottawa Citizen today.
Looks like we have no choice according to this story.


Finance minister Dwight Duncan ended months of uncertainty over the future of Nortel's $2.5-billion pension plan on Wednesday, when he rejected a request by the roughly 18,000 pensioners to place the funds with private investors.

Instead, the heavily underfunded plan will be wound up and turned into annuities.

A government-appointed supervisor begins the process Oct. 1.

The decision angered a leader of the company's main pension group, who had come to Queen's Park with about 1,200 former employees to lobby the government.

"I am dismayed," said Don Sproule, chairman of Nortel Retirees and Former Employees Protection Canada.

"Quite frankly, the 2011 election begins now.

"We have 18,000 Nortel pensioners (10,260 based in Ontario) who are going to come forward and not let them forget. Minister Duncan has been ... running out the clock, and, if this is his position, they will bear the consequences."

Pensioners had hoped to try to recover some of the roughly $1 billion missing in their plan through investments. They believe the cost of purchasing annuities, contracts with financial institutions that provide fixed payments, will amount to 10-12 per cent.

The annuity market is at historic lows and the pressure of the Nortel funds coming onstream will reduce returns further.

"We are not going to get a fair deal when annuities are purchased," Sproule said.

Duncan decided the risk of private placement was too great. He emerged from the legislature just moments before the rally began and officially declined the request.

"We are not proceeding," he told reporters. "This is the policy of the government."

A number of factors were considered, he said, including the fact the group had failed to submit a formal plan. Federal laws would also need to be changed for the proposal to be accepted.

Duncan said similar efforts in Britain had ended badly.

"This is a shining example of how supposedly bullet-proof pensions can be mismanaged, and what they're essentially proposing is permission to invest in riskier assets," he said. "So we've decided that it's best not to take a riskier road on a pension that's already obviously been horribly mismanaged."

Sproule said Duncan had discouraged a "creative" solution from the former telecom employees from the beginning.

"They've got their heads stuck in the sand," he said. "They just weren't listening."

Roughly 25 buses transported ex-Nortel workers from London, Belleville, Brampton and the Toronto area. One bus came from Ottawa.

The aging workers carried a variety of signs, including "Annuities Suck" and "Your Pension Could Be Next."

Conservative MPP Norm Sterling attacked Duncan for his decision.

"This is their money," the MPP for Carleton-Mississippi Mills said. "The $2.5 billion is their money, not the government's money. We believe that the government owes an obligation to justify their rejection of this plan."

Sterling also accused Duncan of exaggerating division among the group. Finance officials claimed 400 disabled former Nortel workers opposed the move to private investment. That group actually totaled 37 dissenters.

"Let's not misrepresent the support that they have for your plan," he said.

A government-appointed supervisor will take control Oct. 1. It's estimated the supervisor will take up to six months to calculate the final value of the fund.

It is estimated to currently be funded at roughly 70 per cent.

Finance officials believe with the help of a government backstop, known as the Pension Benefits Guarantee Fund, pensions will eventually be funded at close to 90 per cent.

© Copyright (c) The Ottawa Citizen


Read more: http://www.ottawacitizen.com/life/Province+wind+Nortel+pension/3532036/story.html#ixzz0zjHmklfA

Canadian Rally in Toronto supporting the FSM

The Canadian Press - ONLINE EDITION

Hundreds of Nortel pensioners rally outside Ontario legislature
By: Ciara Byrne, The Canadian Press

15/09/2010 8:12 PM |

TORONTO - Hundreds of Nortel pensioners fearing drastically reduced retirement benefits rallied outside the Ontario legislature Wednesday, calling on the government to rethink the pension plan's fate.

Their $2.5-billion underfunded plan will be wound up, under government supervision, at the end of the month.

The fund is to be converted into individual annuities with various financial institutions, but Nortel retirees are calling on Premier Dalton McGuinty for a different plan.

A so-called financial sponsorship model, they argue, would allow financial institutions to compete to offer something like a pension to Nortel retirees.

"We are not asking something that is unreasonable," Peter Kennedy, secretary-treasurer of Canadian Auto Workers, told the crowd.

"The government does not have to act in haste, there is time here and there are options."

Ontario's finance minister has called the financial sponsorship model a "riskier road" for a pension that has already been "horribly mismanaged."

Outside the legislature on Wednesday, people chanted and yelled "shame" as they blamed McGuinty for not accepting the alternative plan.

Many held signs that read, "MPPs, what if it was your pension?"

Don Sproule, president of the Nortel retirees, said the standard practice of buying annuities would not protect pensioners.

"What we're finding out is that there's not a competitive market for annuities in Canada," said Sproule.

The $2.5 billion in assets would have to be sold into an annuities market that can only handle between $200 and $500 million a year, he added.

"So, what we know is that when it comes to purchasing annuities, we're not going to be getting a fair shake," said Sproule, adding the alternative would open up the plan to the private sector and let large, Canadian financial corporations run the plan for pensioners.

"In the end, the pensioners will do better in terms of the pay out (under the alternative plan)," said Sproule.

Eleanor Wilson, 70, said she fears her benefits will be cut in half if the government sticks with the annuities plan.

"My pension is about $1,200, so it will go down to about $600," she said.

Organizers of Wednesday's rally argued in a release that Nortel pensioners could forfeit at least 35 per cent of their monthly cheques, which would be made worse if the government winds up the plan.

Ontario's pension benefits guarantee fund, the only one of its kind among the provinces, provides pensioners with up to $1,000 a month if their company plan fails to provide its full benefit or any at all.

The fund got a $500-million boost in this year's provincial budget to address claims stemming from Nortel's demise.

Diane Urquhart, an independent financial analyst who supports the annuity plan, said the fund would cushion the blow.

"Nortel Ontario pensioners who have pension income of $1,000 or less per month will not be facing any pension income cut at all, due to the top up payment from the Ontario pension benefits guarantee fund," Urquhart said.

Finance Minister Dwight Duncan said the sponsorship model is too risky and there are too many hurdles. The government is opposed to any plan that increases the risk associated with the pension fund, he said.

"There are a range of issues that just make this a very, challenging, risky," said Duncan, who added the pensioners want to invest in riskier assets to receive a higher return in order to make up for any losses.

"Further risk to a pension that has obviously not performed well, and the pension situation itself should remind all Ontarians about proper pension management."

Ottawa would have to amend the Income Tax Act if the financial sponsorship model was adopted, he added.

Nortel's pension issues came to a head after Nortel became insolvent in 2009, leaving the workers with an under-funded plan.

At its peak during the 1999-2000 technology boom, Nortel was Canada's most valuable company after the telecom equipment maker went through several years of rapid expansion and diversification funded by debt and stock sales.

But starting in 2001 Nortel suffered a decline in sales due to a combination of factors including the merger or demise of many of its customers, an economic slowdown and an accounting scandal that led to the dismissal of former CEO Frank Dunn and other executives.

Wednesday, September 15, 2010

Claims process

The Canadian Monitor Ernst and Young has filed the 53rd monitor's report on the status of the Nortel situation. The report may be seen at the E&Y website under public documents, Monitor Reports.

It is also listed on the Epiq Website dockets.

The reports deals with the claims resolution process including the cross border protocol. If agreed and approved this will take us a little closer to the weeding out of duplicate claims and disallowed claims and eventually to the final settlement. At this point in time the number and amount of claims is so large that it will require a lot of analysis and decision making by the people leading the resolution process and the courts. This will not happen quickly

Here is an excerpt from the report dealing with the cross border protocol:

Agreement now having been reached on key terms of both the Claims Resolution Order and the Cross-Border Claims Protocol, the Applicants are seeking approval of the Claims Resolution Order at a hearing before this Honourable Court and the Applicants and the U.S. Debtors will be seeking the approval of the Cross-Border Claims Protocol at a joint hearing of this Honourable Court and the U.S. Court, both of which are scheduled to be heard on September 16, 2010.

The form of the Claims Resolution Order and Cross-Border Claims Order being sought are complementary to each other as they provide a mechanism to efficiently govern the coordination and resolution of claims filed in both these CCAA proceedings and the Chapter 11 Proceedings.

Proposed Cross-Border Claims Protocol

The provisions of the Cross-Border Claims Protocol relate primarily to the cooperation and consultation between the Applicants, Monitor and U.S. Debtors with respect to information relating to Overlapping Claims and Same-Creditor Claims (each as defined herein and collectively referred to as the “Protocol Claims”) and procedures for the resolution of such claims.

To facilitate the sharing of information, there will be a monthly meeting between the Applicants, Monitor and U.S. Debtors to review the Protocol Claims.

For purposes of the Cross-Border Claims Protocol, the following definitions apply:

a) Overlapping Claims – a claim or portion thereof that (i) has been filed in both the Canadian Proceedings and the Chapter 11 Cases; (ii) by the same party or by the same affiliated parties; and (iii) arises from the same underlying claim, action, liability, property, agreement, lease, debt or transaction. For the avoidance of doubt, the definition of Overlapping Claims shall include, but not be limited to: (i) any guarantee and indemnity claims where the direct claim is filed against a debtor in one jurisdiction and the guarantee or indemnity claim is filed against a debtor in the other jurisdiction; and (ii) duplicate claims filed in both jurisdictions (claims filed in both jurisdictions by the same of affiliated party asserting the same amount and underlying liability); and

b) Same-Creditor Claims – a claim or portion thereof that: (i) has been filed in both the Canadian Proceedings and the Chapter 11 Cases; (ii) by the same party or by the same affiliated parties; and (iii) is not an Overlapping Claim.

For purposes of the Cross-Border Claims Protocol, there are claims that specifically do not constitute Overlapping Claims or Same-Creditor Claims, including certain claims related to the U.K. pension plan, Canadian pension liabilities and employee related matters.

With respect to Protocol Claims, the Applicants, Monitor, and U.S. Debtors will comply with the consultation procedures set forth in the Cross-Border Claims Protocol and attempt to cooperatively resolve such claims. Failing a cooperative resolution, the Applicants and the Monitor, on one hand, and U.S. Debtors, on the other, may seek resolution of such claims in compliance with their respective claims resolution orders and procedures with the exception of Overlapping Claims in excess of $1 million (“Material Overlapping Claims”). With respect to Material Overlapping Claims (except bond claims), where the U.S. Debtors, Monitor and the Applicants cannot agree on an appropriate resolution, they shall seek direction from both this Honourable Court and the U.S. Court regarding the resolution of such claims.

With respect to the bond claims, if the Monitor and the Applicants, on the one hand, or the U.S. Debtors, on the other, proposes to allow, stipulate or settle the bond claims (the “Settlement”) and after consulting with the other party with respect to such Settlement as provided for in the Cross-Border Claims Protocol, the party not proposing such Settlement does not agree with such Settlement, such party may request that the hearing to allow the Bond Claims in the Settlement be a joint hearing.

The Cross-Border Claims Protocol also contains certain general provisions, including provisions dealing with rights of parties to appear and be heard by this Honourable Court and the U.S. Court and the preservation of parties’ rights.

Tuesday, September 14, 2010

Canadian HWT information on Koskie Minsky

For everyone impacted by the termination of HWT benefits in Canada, Koskie Minsky has placed some information on their site which you can look at by clicking on the link on the right hand column for Koskie Minsky, then go to the documents section.

The following is what they posted todaY;

September 14, 2010 Please visit the HWT Document Package tab to the right of this page for new information that has been posted concerning recipients of LTD, SIB and STB income

Monday, September 13, 2010

US Non Qualified Pension Claim- Tax Impact

I received this important information from a colleague. If we do get paid anything on our claims, even if it is titled on a 1099-R form to the IRS, the cheque must be made out to the tax deferred trust fund that we plan to use, such as an IRA. So there is more that would need to be done to convince the court to pay out any claims according to this categorization.

Here's the information I received:

Typically if one plans on rolling over a "-R" type distribution tax free (e.g., 509, 403, 401K) then the distribution MUST NOT pass thru the employee's hands unencumbered. The distribution must be:

Sent directly to the fund, wire transfer

If its a paper transaction, must be made out to the fund or to the fund jointly with the employee, with a fixed time period for deposit into the destination fund.

The IRS and our tax courts have historically interpreted "sole possession", i.e., check in the employees name only, as the employee has had "use" of the proceeds and therefore it isn't a true rollover.

The tax laws may have been modified over the last several years, so if we manage to get something out of this deal, U.S. citizens best check with an accountant or tax lawyer before the distribution occurs. Remember, any advice, interpretations, suggestion, or answers obtained verbally - and in some cases in writing - from the IRS do not necessarily hold up in a tax court.

Sunday, September 12, 2010

FSM section in NRPC Canada web site

The NRPC Canada has created a separate section devoted specifically to explanation of the Financial Sponsorship Model and the difficulty of wind up by annuity.

Members of the NRPC can log into their site (see link in right hand column), click on the News item on the menu, and then on FSM on the sub menu.

There are 4 articles inside the section. They are:

Canadian Institute of Actuaries on difficulty of wind-up annuities.

Ontario Expert Commission On pensions on difficulty of wind-up by annuity.

An academic paper by professor Norma Nielson ( University of Calgary Haskayne business school) highlighting the absence of an efficient Canadian Annuity Market.

House of Commons testimony on the absence of an efficient Canadian Annuity Market.

Friday, September 10, 2010

US Non-Qualified Pension Claim and IRS

Earlier this year I wrote about my attempt to get a ruling from the IRS regarding the possibility of rolling over into an IRA, any payout I might receive as a creditor of NNI for my non-qualified pension. I also asked about the possibility of claiming a loss for the portion of the non-qualified claim that I didn't receive.

The tax advocate called me a few times to discuss this but was never able to provide a clear or definitive answer. She was limited in her ability to get assistance from the experts in the IRS who deal with pensions.

I decided to go see the IRS at the local federal building. The people there tried to help but I think they also do not have the knowledge to deal with such a complex issue. In fact I think they are only equipped to deal with simple tax filing questions.

However the clerk did mention something that may be important. She said that the questions could only really be answered when it was clear how the court would title the payments. If the payments are made on a 1099-misc then they are subject to tax like ordinary income. I explained that these claims are for tax deferred pensions that disappeared and she said that if the court titled the payments as 1099-R then we may be able work out a way to roll them over. Not sure yet.

Hence my next step is to try to find out how the court defines the payments and if it is possible to distinguish the payouts as pension related by issuing us a 1099-R. It seems to me that we could perhaps have a lawyer put a motion before the court to treat the claims for non-qualified pension as 1099-R eligible. After all it wouldn't make any difference to the other creditors but it would allow us to place the money into an IRA and withdraw it on an annual basis so that we were not hit with a large tax fee for the entire amount all at once.

I realize that the NQ portion of the pension was over the IRS limit at the time the pension started, however in the last 10 years the limit has increased a lot so that it is possible the claim payout would be under the new IRS limits. In addition we were receiving the payments from Nortel over a period of years so it was being treated as if it was a tax deferred fund with annual payments, like an IRA.

I still don't have a feel for the second question about claiming the loss. I'll keep trying the IRS to see if I can get some guidance.

Thursday, September 9, 2010

Canadian Webinar Sept 1 2010 Summary Part 5

Part 5 of the summary of the webinar held by Koskie Minsky / NRPC on Sept 1st 2010.

(8) Questions and Answers

There were a few Questions and answers provided on the webinar held Sept 1st. I am only listing the ones that I think added some extra information that people would be interested in.

Q. Pension reduction timing.
A. Things may go on unchanged for several months after Sept 30 2010. The reduction will be later at the same time as the PBGF is applied.

Q. Ontario top up and Quebec law1.
A. The key is the province in which service occurs. Service in Ontario will mean eligibility for the PBGF top up prorated specifically for the service in Ontario. Only those who retired from Quebec (about 25%) will be eligible for Law 1.

Q. Purchase of annuities.
A. The administrator will look to purchase group annuity contracts. It will be huge. At close to $2.5B. The timeline is very difficult to predict due to the size and complexity.

Q. Funded status.
A. The number given 64% is an estimate only. The real number will be determined for the final wind-up.

Q. Annuity market and FSM.
A. The Ontario market is not very competitive. The rates probably won’t be competitive since we are at a 20 year low in rates. The estimate of 64% assumed competitive rates so that number could be lower.

Q. Distribution of claims.
A. Some pressure to have an interim distribution in 2011. This will be discussed further in the next NRPC newsletter which will be published on the NRPC web site- maybe October.

Q. Pension Claim.
A. Whatever is recovered as a part of the claim process for pensions will be put back into the pension plan. People in Ontario may have to pay back the amount topped up by Ontario PBGF, from any claim payment into the pension fund. People outside Ontario may not have to pay that back. Not sure.

Q Record review.
A. The analysis of employee records is well underway but not yet in the control of the wind-up administrator. Each person will receive a statement and have a chance to correct it.

Q. Do annuities run out of money?
A. Obligations of the insurance company should continue for life. Federal government has back up insurance.

Q. PBGF Calculation.
A. the administrator will be responsible for determining eligibility and amount.

Q. Commuted pension.
A. Cannot cash out commuted pension if you are already receiving a pension, except for people in Quebec under law 1. have an option to do that.

Q. Cost of PBGF top up.
A. the federal government has set aside $500M to help make sure the fund is covered.

Q Fund assets and allocations.
A. The Monitor is keeping NRPC informed of discussions on the assets and their investment allocations.

Q. Severance $3000.
A. Have to meet certain eligibility requirements. See Webinar slides.

Q. Transfer pension to another company.
A. Only in Quebec under law 1.

Q. Health plan
A. If one is set up separate from Nortel it will be possible to buy into it. No details yet.

Q. Transfer pension into RRSP or RRIF.
A. No if already retired.

Q. Retiree Survivor pension.
A. Will continue at the ratio after wind up at the new level. (64% or less of what was being received.)

Q. PBGF $1000
A. Service in Ontario any time during your career counts.

Q. Court injunction on wind up.
A. The court does not regulate pension benefits etc. The only way to make a change is through the legislature.

Q. Value of Intellectual property and $1.4B tax credits.
A. I.P. portfolio value is not yet known. The tax credits are part of the I.P. realization process and could enhance the value.

Q. Who will inform retirees about wind up?
A. The administrator will communicate to retirees.

Q. When can we expect Nortel to announce restructuring plan.
A. Nortel is on a path to liquidation.

Q. What happens to the difference between 86% commuted value and total value?
A. The 14% is a claim.

Wednesday, September 8, 2010

Letter to Ontario Premier and MPs re the FSM alternative to pension wind-up

The following is the text of a letter from Don Sproule, chair of the NRPC, to Premier McGuinty and the Ontario legislators urging their action to put in place the FSM as an alternative to the current wind up by annuity approach that will reduce our pensions even further than the 35% shortfall in the pension trust fund. Please check the NRPC web site for more details on how you can help to get this message across.

To all Members of Provincial Parliament in the Legislative Assembly of Ontario
September 8, 2010

Please don’t wind up our pension plans!

I am writing to every Ontario MPP on behalf of the members of Nortel Retirees and former employees Protection Canada (NRPC) because of the financial disaster that is facing us after September 30. That is the day when Nortel’s pension plans will be placed in the hands of the Ontario government. Twenty thousand former employees across Canada will be permanently affected by the government's decisions, including a large number who are elderly and in poor health. Our pension plans represent our retirement savings and we should have a say in how they are managed. The time for some fresh thinking and action by the government on protection of pensions and pensioners is long overdue.

We discovered in 2009 that our pension plan is seriously under-funded. The latest information from Nortel indicates that we will lose at least 35% of our pensions. This estimate may prove highly optimistic for reasons described below. Given a choice in the matter, we would prefer that the assets of Nortel's estate were the means to reduce our losses, not the public purse. But the actions of the Federal government in favouring foreign claimants over Canadian workers in bankruptcy court make this unlikely. And now the Ontario government, having already allowed Nortel the opportunity to neglect its funding responsibilities, seems intent on making matters much worse for its retirees.

Over the past year we have purposefully and consistently asked the government NOT to wind up our $2.5 Billion Pension Fund and NOT to attempt to buy us annuities with the proceeds. The negative impact of Wind-up-by-Annuity is recognized in the 2008 report of the Ontario Expert Commission on Pensions* when it recommended that the government “investigate strategies for reducing the cost of annuities and the influence of the annuities market”. It is clear that Wind-up by- Annuity will erode even more of our pension incomes. Experienced actuaries and academics tell us that liquidating a very large fund like ours could cause a systemic failure of the Canadian annuity market, which typically can only supply between $200 Million and $500 Million worth of contracts per year. At best winding up our plan will cause a steep rise in annuity prices, which might lead to the purchase of lower quality products. Furthermore, outrageous as it may seem, we will be forced to pay the costs of this destructive process from our pension fund!

Wind-up-by-Annuity is not only punitive to retirees, but it also wastes public funds. In February 2010 many retirees were pleased to hear at last from Finance Minister Dwight Duncan that the government would honour the commitment of the Pension Benefit Guarantee Fund (PBGF). But since the PBGF’s obligation is based on the final size of each Nortel worker’s pension, Wind-up by- Annuity will also cost the Ontario taxpayer more money. The impact is not only in Ontario. Thousands of Nortel workers across Canada who did not have Ontario service are ineligible for the PBGF. They face the full pension cutback. So as a result of Wind-up-by-Annuity the Ontario taxpayer will fund higher PBGF contributions and in every other province, Canadian taxpayers will pay the burden of increased social security costs.

Fortunately there are more attractive alternatives to Wind-up-by-Annuity. The Ontario Expert Commission on Pensions recommended that the government create an Ontario Pension Agency (OPA) to keep stranded plans out of wind-up, thereby avoiding costly annuity purchase while also allowing them to benefit from improving economic conditions.

So in the spirit of Nortel’s era of innovation, we have a better idea for you: The Financial Sponsorship Model (FSM). The NPRC and its advisors took the premise of the Ontario Pension Agency to the financial markets and added some improvements. FSM also avoids buying costly annuities but unlike the OPA, FSM would guarantee a minimum income level that is no worse than Wind-up-by-Annuity while at the same time allowing pensioners to share in long term investment gains. FSM would ensure that PBGF guarantees for Ontario service are met, but at lower cost to the province. The NRPC and its advisers have canvassed strong Canadian financial institutions with the FSM concept and they believe it is a viable alternative. These institutions are currently dedicating major resources in preparation for a formal response. We now need the government to show the same level of innovation and creativity to help us get FSM over the goal line.

For Nortel pensioners across Canada, FSM provides for the continuation of more of their pensions without the unnecessary hardships caused by Wind-up-by-Annuity. For the Ontario government it offers savings on the PBGF and on social programs, without increased risk. But FSM has other benefits that could prove very significant in the longer term. For Ontario's financial institutions, it provides new opportunities to attract and manage capital. FSM will also be attractive to corporations that offer defined benefit pension plans because it removes unpredictable impacts on their cash flow caused by the need to fund Wind-up-by-Annuity obligations. In no small way FSM could help preserve the existence of defined benefit pensions in Canada. And Ontario would lead the way!

After September 30th, our pension plans will be on a course towards Wind-up-by Annuity. But if we start quickly we can chart a different and better course. Please give us your support in preventing further mistreatment of Nortel's pensioners. We have time for FSM to be put in place simply by amending the regulations associated with the Pension Benefits Act. We need action NOW!

Yours truly,

Don Sproule
NRPC, National Chair

*Recommendation 5-2, Arthurs Report on the Ontario Expert Commission on Pensions, 2008./attch. “An Alternative to Wind-up-by-Annuity for Nortel Pension Plans” NRPC, Sept. 7 2010

Monday, September 6, 2010

Canadian Webinar 9-1-10 Summary Part 4

Part 4 of the summary of the webinar held by Koskie Minsky / NRPC on Sept 1st 2010.

(6) Political Activity

Numerous meetings have been held between the NRPC and elected officials as well as various Ministry of Finance officials.

Rallies have been held and more are planned. The current focus in Ontario is on changing the Ontario regulations to allow a Financial Sponsorship Model approach to maintaining the pension fund and avoid winding it up.

If the regulations are changed and a FSM is approved it will apply Canada wide.

At the same time the Federal government has been pressured and will continue to be pressured to change the Canadian bankruptcy laws to provide preferred status for pension plans suffering through the bankruptcy claim process.

Demands have been put on the table to the Ontario Government to:
• Honour the PBGF top up for Ontario Service
• Not wind up the pension plan
• Establishing a FSM for all Nortel pensioners

In Quebec the NRPC have defined requirements to be met
• Change Bill 1 to accommodate the CCAA
• Change Bill 1 to accommodate the FSM

There are currently 2 bills before parliament to change the bankruptcy law to benefit pensioners. One will be reviewed in the Industry Committee and the other in the Senate Finance Committee this fall


(7) Compensation Claims Procedure

The process is being worked on by Koskie Minsky, the NRPC, the Monitor, and various advisors.

The process will include all claims of pensioners, former employees, and survivors.

Individuals do not need to file their own claims. It will be done by our legal representatives.

The process will be posted on the Monitor’s web site once approved and there will be notices and postings on other sites to ensure everyone knows and understands how this will work.

The actuarial firm Segal will be involved in the claim verification process.

Everyone will have the opportunity to review the data and correct any errors. You will be contacted directly with this information and should review it carefully and respond as quickly as possible with any discrepancies.

Once the claims have been verified the Monitor will confirm the claims

Because of the complexity of the claim process the final distribution of the estate may take years to complete. However there may be an interim distribution, but that is an unknown at this time.

Sunday, September 5, 2010

Canadian Webinar 9-1-10 Summary Part 3

Part 3 of the summary of the webinar held by Koskie Minsky / NRPC on Sept 1st 2010.

(4) Defined pension Plan Update and Financial Sponsorship Model

Nortel will transfer administration of its pension plans to FSCO midnight Sept 30th 2010. FSCO will name an administrator as part of the standard wind up process per Ontario regulations.

The pension will continue to be paid as is for a few months until the administrator has officially determined the final wind up percentage ratio. The most current estimate (June 30th 2010) of the wind-up ratio was 64% for both managerial and negotiated pension plans and the estimate assumed indexed and non-indexed pensions. It is possible that the ratio will be lower that that when all the facts are fully known and calculated in a detailed manner.

When the final wind up ratio is known by the administrator, the pension will be reduced to that percentage, until the administrator completes the purchase of annuities to provide the pensions. This reduction in pension is often linked to the start of PBGF top ups in Ontario. The final wind up ratio can only be determined once assets and liabilities of the fund are completely known.

Each individual’s pension will be examined and worked by actuaries and advisors to ensure that everyone is fairly treated. The province (s) in which service was accrued or from which you retired will be important in the determination. In this standard wind up process, Quebec liabilities will be transferred to the Quebec Government for application of Law 1. This law will only apply to individuals who retired from Quebec. Ontario’s PBGF will apply only to the service accrued in Ontario.

People who are not entitled to an immediate pension will receive an option statement. They will be able to elect to receive a lump sum commuted value, or an annuitized pension. The commuted value amount can be transferred into a “locked-in” retirement account. Amounts in excess of the CRA limits must be taken in cash, and are subject to income tax. People who don’t receive an option statement will receive an annuity. People who are pension eligible on wind up can start the pension process with approval from the administrator and regulator.

The administrator will request proposals to secure group annuity contracts.

The full wind up of the pension can take a long time, possibly many years. Nortel’s pension situation is extremely complicated with individuals working in multiple provinces and transferred between jobs in various provinces and countries. Various provincial laws apply.

Financial Sponsorship Model

The NRPC are pursuing an alternative to the standard or current wind up process. The NRPC are referring to this approach as the Financial Sponsorship Model.

The Canadian Pension Benefit Act does not call for purchase of annuities on wind up. However, the current Ontario regulations do call for purchase of annuities, and in the FSCO FAQ’s on their web site it is clearly stated that annuities must be purchased on full wind up.

Because we are in very turbulent economic times purchasing annuities is not a good option since we will be subject to a number of very negative factors.

In Canada there are only about 6 companies that could take on the issuance of annuities for our pensions. The market is therefore constrained and is not very competitive. In addition the value of the pension fund at $2.5B will swamp the market which at present is closer to $500M annually. This will result in bids which we would not consider competitive. The interest rates for annuities are at a 20 year low so purchasing annuities at this time is a poor investment. Also the 64% funded ratio has built in annuity interest rates that are considered competitive so it is probable that that ratio will be negatively impacted. Finally, by buying annuities at this time, we will lock in the losses in the fund and never have an opportunity to recoup those losses that have occurred due to the market slump and the regulations that allowed Nortel to let the fund sink below a fully funded ratio.

It is important for us all to realize that pensions are really deferred compensation. If Nortel had not offered these pension benefits to us, we all would have sought out higher salaries and wages to build our own retirement fund. In addition because we were offered a defined pension benefit, the Canadian government limited our ability to place money into RRSPs. This inequity is being further applied by insisting that we lock in the losses and buy annuities. It is clearly a failing on the part of the government and should be addressed properly by our elected representatives rather than brushing us off as they seem to be doing.

Ontario had already convened a group to examine pension Reform, and in the recommendations section 5-2 of the Ontario Expert Commission on Pensions they said:
• Do not wind up the Plan.
• Establish an Ontario Pension Agency
• Avoid wind up by annuity.

Hence the NRPC are calling on the Ontario government to follow the recommendations of their own expert group and allow Nortel Pensioners to find an alternative to the annuity market. Since, in spite of the OECP recommendation, Ontario has not shown interest in forming a Pension Agency, the NRPC are asking that regulations be changed to allow a private company to take over and run the pension fund for us. This has been termed the Financial Sponsorship Model.

At this point the specifics o the FSM are not clear but the goals are to ensure that everyone continues with a pension that is better than what the standard wind up process would provide. It would be applied Canada wide and if properly managed it could result in improvement in the fund ratio.

The downside is that there is always some risk associated with investment, but on the other hand there is also some small risk of further pension reduction in the standard wind up process if the insurance company providing the annuity runs into trouble.

Before it is possible to define the elements and methodology of the FSM there is the question of having the Ontario regulations changed to permit such an approach. The NRPC are working towards that, with political engagement to convince Ontario to make the change.

As more details arise on this topic I will post the information.

Saturday, September 4, 2010

Nortel US Chapter 11 plan on Epiq Site

I just saw on the Epiq web site that Nortel has proposed a plan for consideration by the court and to be voted on by the creditors.
Docket 3874 contains the plan which is 126 pages long and addresses the proposed method for distribution of assets to creditors.
I think we as creditors will receive a copy in the mail and have a chance to vote on it.
From what I can see we don't have much choice.

Friday, September 3, 2010

Canadian Webinar 9-1-10 Summary Part 2

Part 2 of the summary of the webinar held by Koskie Minsky / NRPC.

(3) Update on Benefits

Just to remind everyone, Nortel will cease all benefits in Canada on December 31st 2010. That includes health, dental and life insurance benefits.

Nortel will also stop income benefits for survivors of an employee who died while on active Nortel service. (this does not refer to a survivor of a pensioner).

Claims for costs incurred after December 31 will not be covered.

Make sure all claims are submitted before February 28,2011.

The NRPC is working to find an alternative option for retiree medical after Dec 31st, but there is no news on this front as of yet.

Pensioners are urged by the NRPC to explore other options on an individual basis.

Individuals will have a claim against Nortel for the value of lost life insurance and may receive a pro rata distribution through the Compensation Claims Procedure, but this may take years to complete.

(4) Terminated Employees Group

Individuals who are eligible will receive a lump sum payment up to a maximum of $3000.

There are various requirements that you must meet to be eligible.
(a) Employment terminated on or before June 30,2010.
(b) Owed severance or employment termination pay.
(c) Not have been offered employment by one of the purchasers of Nortel’s assets.
(d) Have not received money from a Nortel Bonus, Retention, or Incentive plan or from any court approved equivalent. (Certain limits apply check with K.M.)

Reductions will be made if you already received money from the Termination fund

The payments may be able to be rolled-over as a retirement allowance. K.M. will advise later.

Letters will be sent out in September and payments made in November.

The severance claim process is being worked by K.M.
Individual severance agreements will be confirmed in the first step of the Compensation Claims Procedure. Severance for people without individual agreements will be calculated based on methodology being discussed by K.M. and the other parties.

The Compensation Claims Procedure is expected to take a long time to complete. Most likely it will be years before all the elements are finalized and payment made.

Thursday, September 2, 2010

Canadian Webinar 9-1-10 Part 1 summary.

The Koskie Minksy/ NRPC webinar on Sept 1st covered a number of items including: (1) The status of Nortel assets; (2) The Health and Welfare Trust Allocation process; (3) Health and Life Insurance Benefits; (4) Terminated Group update; (5) Defined Benefit Pension Plan; (6) Political activity; (7) Compensation Claims Process; and (8) Q&A.

Over the next few days I will try to summarize what I thought were the main points in these areas.

(1) Nortel Assets:

A total of $3.03B US held in a lock box with another $223M in various escrow accounts. Also a sum of $214M held in a single purpose NNL bank account exclusively belonging to the Canadian estate.

There are still unsold assets including; intellectual property; real estate; tier 2 sales; minority interests; and venture capital investments.

Most of the assets have to be allocated among a number of jurisdictions including Canada, US, EMEA, and CALA. No allocation method has as yet been determined. Discussions have been held but so far have been unsuccessful. A major issue is the ownership of intellectual property. Also the UK pension regulator is pressing for a very large claim against the Canadian estate.

Until the asset allocation is fully worked out, the full distribution of assets against claims cannot be completed. There is however the possibility of an interim distribution but there is no clear information on that.

(2) Health and Welfare Trust

The monitor has prepared a proposal for the allocation of the HWT assets and submitted it to the court to be reviewed on Sept 29 2010. The parties are working to achieve a distribution by Dec 31 2010. The Canadian Revenue Agency has been requested to make an advance tax ruling seeking tax relief on the HWT distributions. Individuals receiving monthly income benefits (SIB and STB) will receive a value of their entitlement sometime this month.

The HWT has liabilities estimated to be $532M and there is only $80M in assets. The monitor has recommended that the benefits are shared pro rata by those with: Pensioner Life ; LTD Income; LTD Life; LTD Optional Benefit; and SIB and STB income. Koskie Minsky stated that this would result in approximately 34% recovery on the liabilities of the beneficiaries. I am not sure how they arrived at that percentage.

I will follow up tomorrow with a summary of the update on benefits and the terminated group.

Wednesday, September 1, 2010

Canadian Webinar at 3PM eastern time

The Koskie Minsky/NRPC webinar is today at 3PM. Check the K.M. site (see link in RH column ) to obtain info on joining the webinar. The webinar number for audio only is intended for people without internet access. Please call and register with KM on their hotline at 1.866.777.6344.