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.

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