Potential US settlement for Nortel Health Benefits

A number of my colleagues and I have just received a large package of documents from Epiq on a settlement proposal, regarding health and other benefits, between the Retiree Committee and Nortel US. I think all US retirees will receive it. It looks like it is still preliminary but on schedule for court approval in March. The agreement is for Nortel to pay close to $67M to an LLC that the retiree committee will establish, and then the money will be used either by a Voluntary Employee Benefits Association, VEBA, to provide partially subsidized health insurance, or it will be placed into individual Health Reimbursement Accounts, HRAs, to be used to offset medical costs. The two options will be voted on by all claimants before the decision is made. The individual claims for everyone will be sent out and will spell out the present value claim for health insurance, long term care, and life insurance based on actuarial data and each individuals service and age etc. It will then show the portion of the $67M that each individual is entitled to. There was no mention of percentages since everyone's claim is different. They did say that no insurance company was willing to provide long term care or life insurance so the value of those claims will be added to the health claim for health insurance either through the VEBA or HRAs. If the VEBA is voted in then everyone will have to use it or forfeit any claim. If the VEBA vote fails, then the claims will be placed into HRAs. The current benefit program will end May 31st no matter what is voted on. The document also indicated that the Committee of Retired Employees has a web site: http://www.kccllc.net/nortelretiree

Canadian OAS

As a Canadian living for many years in the USA I had not considered applying for a Canadian Old Age Security pension, thinking that the claw back clause would probably eliminate most of it. I also wondered if it would have an impact on my US Social Security. However when I called Service Canada last year they urged me to apply and said that I would receive the benefits I was entitled to without clawback or impact on Social Security. I did apply and it took about a year to finalize but I am happy to say that I am now receiving $245 per month that I wasnt before. Also, since it is a government pension which I didn't specifically contribute to, it is paid out of general taxes, it is not considered in terms of the USA Windfall Provision on Social Security. Much of this is because of the treaty between Canada and the USA on pensions. To be eligible for OAS one has to have resided in Canada and paid taxes for 10 years after the 18th birthday. If you live outside Canada you need to have 20 years to receive the pension. Since there is a treaty with the USA, Canada takes into account the time residing in the USA as well. For example I lived in Canada for nearly 19 years and then 27 years in the USA, so I was eligible to receive the OAS. To calculate it they take the ratio of the number of years you resided in Canada to 40 years, which is the maximum number, and multiply it times a dollar amount. In my case that worked out to $245 per month. Then they calculate any back payments to your 65th birthday and send you the money. It's worth looking into and applying for. Tom

Impact of WEP on Spousal benefits

Recently my wife applied for social security benefits. She applied under the provision that provides benefits to a spouse based on their partner's work experience. This is certainly a useful source of income and one that every married couple should take advantage of. I am not sure if it apples to common law partners but is worth checking. There are a few things that everyone should know. The spousal benefit is based on the workers full retirement age PIA (primary insurance amount). Some of the Social Security agents are not familiar with that and may try to argue that the spouse's benefits are based on the worker benefits which may have already been reduced if the worker has retired early. That is not the law. The law is clear that the spouse is entitled to half of the workers PIA amount if the pension is taken at the spouse's full retirement age. The spouse may also apply early from 62 years of age or later, but, in that situation,the spousal benefit is then reduced by the defined Social Security percentages based on the age the spouse is when she or he applies. A second impact is the Windfall Elimination Provision. If a worker has a second source of pension income from a government entity that did not contribute to Social Security then the worker's social security benefit is reduced up to a maximum amount. Check the social security website http://www.socialsecurity.gov/retire2/wep-chart.htm to find the impact based on your age. This situation applies for example if you are receiving a Canadian pension such as CPP as well as Social Security. However it does not apply to Canadian OAS since this old age pension falls into another category altogether. The US Social Security people are fully aware of Canadian CPP and QPP and will deduct overpayments from your social security pension if you do not make them aware of your other pension. I know it doesn't sound fair but that is the way the law works, and S.S. will find out eventually if you don't let them know and then you will owe a large amount back to them. The WEP also affects Spousal benefits from Social Security. When a worker has both pensions the worker's PIA is reduced by the Windfall Elimination Provision and that then has a direct effect on the spouse's pension. I dont understand the logic of that part of the WEP law if the spouse does not obtain extra income from the worker's other source of pension. It appears to be a double whammy to me and I plan to write to my congressman regarding this inequity. In the mean time the law applies and so I am posting this informaton so that others may know what to xpect if they encounter this situation.

US Retiree welfare plan termination

Docket 8066 is a motion by Nortel US to terminate the US retiree welfare benefits plan on Dec 31 2012. Nortel claims that they have followed all the legal requirements of section 1114 of thc code and that time has run out. The trial date is in early November and from what I have read of the various motions prior to this the court will probably grant approval. Healthcare benefits, long term care, life insurance benefits etc will cease on Dec 31 2012.

Foreign income reporting on US Tax Return

A note on the NRPC site and also on the Yahoo Nortel pension group mentioned a new form 8938 which needs to be completed by US residents who have a financial interest in foreign banks or funds or trusts. The form is in addition to the Treasury form that needs to be completed and filed with the US treasury department. Turbotax supports this new form 8938.

You need to indicate on the software that you have foreign income or a foreign financial interest and then complete the form. You need to actually fill in the details on the form. Easystep will not take you through it.

I only found out about this new form yesterday which is unfortunately after the filing date of April 17th. If you are in the same boat you can file an amended return. Again Turbotax will guide you through that process.

If you have a bank account or RRSP or trust in Canada which is over $50,000 ($100,000for married filing jointly) you need to complete the form.
Also if you receive a pension from a Canadian company like Nortel, you need to complete the form.

You do not need to complete the form for CPP or OAP from Canada. Foreign Social Security payments like the CPP or QPP are exempt.

The form asks for a number representing the maximum value of the account during the year. For pensions, from what I can tell, you can use the total pension paid to you for the year, converted to US dollars. Check the instructions at www.irs.gov.

Tom

Nortel Mediation Process

The following web site has been created to cover the Nortel mediation process:

http://nortelmediation.com/

Here's the latest information from the web site:
Tom


The Nortel Mediation

In June 2011, Justice Geoffrey B. Morawetz of the Ontario Superior Court of Justice and Judge Kevin Gross of the U.S. Bankruptcy Court in Wilmington, Delaware, ordered all parties to the bankruptcy proceedings of Nortel Network Corporation to seek mediation while they prepare their decisions on motions seeking the allocation of Nortel's assets, heard earlier in the month.

The Honourable Warren K. Winkler, the Chief Justice of Ontario, was appointed mediator.

On March 26, 2012, Chief Justice Winkler announced in a letter to parties that an introductory mediation session will be held on April 24, 2012, at the Metropolitan Hotel, 108 Chestnut Street, Toronto, Ontario, commencing at 10 a.m. The mediation meeting will begin with a plenary session at which the mediation process will be outlined. Short private meetings with the parties, limited to 30 minutes, will follow. To arrange a private meeting, parties should contact Randy Bennett of Rueter, Scargall Bennett LLP randy.bennett@rslawyers.com.

This website has been created to provide information about the mediation being conducted by Chief Justice Winkler.

Keeping tabs on the legal costs

I looked at the Epic Systems record of US court proceeding to see if there is any progress whatsoever and as usual the majority of the docket record is the compensation to law firms and executives. Is anyone keeping tabs on that? Perhaps in Canada the Monitor should be able to tell us what the tab is so far for these legal beagles. I woner if anyone is looking at it and generating a report for the US and other countries. These people are eating into our assets and enjoying the free ride. Surely there should be public disclosure of the money being funneled to these firms? Also are there any results achieved by this amount of legal attention? I sure don't see any.

Tom

Time drags on

It seems like forever since Nortel declared bankruptcy. Since then thousands of us have felt the pain of lost pensions and benefits and yet the case drags on with only the lawyers benefiting.

What a miserable 3 years it has been.

Loss of non qualified pensions.
Loss of benefits.
Shameful rejection of the disabled employees.
Cuts in pensions.
Continuous anxiety and depression over the loss of income.

Why arent we getting some movement on the mediation and distribution of the assets?

We are all getting older and some have already lost the opportunity to enjoy any payout from this despicable situation.

Time for the judges and lawyers to get their act together and complete this so we can move on with our lives.

Tom

Morneau Shepell announces Canadian Pension Cuts

The administrator of the Nortel Canada Pension plan published their estimates for reduction of the plan payments on their web site yesterday. You can find the details by using the link in the right hand column to access their site.

Basically the reductions for the non-negotiated plan members will be 30% for those who have Ontario pensions and service and 41% for those who have pensions generated by service in other provinces. That means only up to 70% and 59% of the benefit will be paid on an interim basis. I say up to because there will be an addition reduction of up to 7% to account for the fact that pensions have been paid at 100% since October 2010 and they should have been paid at a lower amount. The reduction will be based on age and the amounts paid with a cap of 7%. So people with Ontario service may only get 63% and people with pensions based in other Provinces may get 52%.

The negotiated plan has slightly different figures. The corresponding reduced pension numbers are 75% and 57%.

In Ontario there is some pension protection and the PBGF will be making up the first $1000 per month of pension for people whose pension was from Ontario. This may help raise the percentage above the 70% quoted.

People with split service will see a reduction reflecting the proportion of their service from Ontario and well as other provinces.

The reductions will occur on the August 25th 2011 payment.

Each pensioner will receive an individual letter from Morneau Shepell and there will be a webinar on July 22nd 2011 from 1:00-3:00 PM to explain the reductions


You can register for that webinar on the administrator site. (See right hand column).

You can also call Morneau Shepell at 1-877-392-2073 for the negotiated plan details, and 1-877-392-2074 for the managerial and non-negotiated plan detail.

Us Trustee

The US Justice department has a group called the US Trustee. The people in that department have the mandate to oversee bankruptcy cases and make sure that the law is properly followed. The US Trustee intervened in the Nortel case when Nortel attempted to cut off retiree medical and other benefits in 2010. The Trustee was able to stop Nortel's petition and as a result Nortel had to withdraw their petition at that time. Nortel has reinitiated their plan to reduce or eliminate the medical and other benefits. However, this time they are going through the proper bankruptcy procedure by requesting that the court approve the formation of a 1114 committee. This process is currently underway and the US Trustee will be keeping a close eye on it to make sure it is per the bankruptcy codes.

It is good to know that some government agency has the retirees benefits in mind, even if it is only to ensure the courts follow the right process.

I am not sure if such an agency exists in Canada, but I would think that it would certainly be a good thing for Canadian retirees if a government agency was able to step in and have a say regarding the dispersion of the Nortel Canada Assets. Since the government there has practically thrown the retirees to the dogs by avoiding to provide pension insurance or protection, perhaps they could take some pro-Canadian steps to ensure that the Nortel Pension Fund receives payments from the assets, instead of handing large sums over to the UK and other European agencies who are trying to by-pass Canadian law to get their hands on a bigger share of the Nortel assets than they should be.

Since Nortel UK declared bankruptcy then the the UK claims should be placed against the Nortel UK assets, not the Candian assets, nor the US assets. If Canada and the US allow the UK claims and EMEA claims to be made against the Canadian and US estates it will circumvent the normal bankruptcy process in our countries and generate a precedent that will have worldwide implications. The US trustee, and if there is an equivalent in Canada, needs to get involved to make sure the proper process is followed regarding those foreign claims which have already been denied by both the US and Canadian courts. Otherwise all claims will become global and everyone will start claiming on company divisions in every countrynof operation resulting in total stalemate.

Along the same lines, both countries need to get involved in the asset allocation process. The UK and EMEA have been arguing forcefully that they should have more assets allocated to them since they have such large claims. This is simply another tactic to get their hands on a bigger piece of the pie. Their argument should be overruled. The dispersion of sold assets should not be based on claims but on other more relevant factors related to company presence, funding, sales, employees, ex employees, R&D etc.... Not claims.

Nortel patent sale posted on Nortel site

Following my previous post, I checked Nortel's web site and they have posted information of the sale of the patents for $4.5b.

See:

http://www2.nortel.com/go/news_detail.jsp?cat_id=-8055&oid=100272428&locale=en-US&lcid=-1


Tom

Nortel patents sale

According to Marketwatch Nortel has sold its patents for $4.5b to a consortium. See
http://www.marketwatch.com/story/nortel-announces-the-winning-bidder-of-its-patent-portfolio-for-a-purchase-price-of-us45-billion-2011-06-30?reflink=MW_news_stmp

If this is true it will be a very nice addition to the total estate that will be available for distribution.

Now they need to get the allocation process sorted out and also deal with the claims including the outrageous claims from Europe.

Then we may see some distribution against our outstanding claims.

Hopefully this will do something to help the deficit in the Canadian pension trust fund.

Asset allocation

The courts have agreed to further mediation talks and some of the parties involved have been pressing to have their very large claims considered as part of these talks. Frankly I think the size of claims should not have any impact whatsoever on the allocation of assets. It's unfortunate if in Europe the companies that Nortel took over were not keeping the pension funds at adequate levels especially considering the very lenient rules required to retire in some of the European countries. I think the governments of those countries affected should have had proper regulations in place to ensure pension funding. The same applies to Canada. The pension regulations there is antediluvian.

The asset allocation needs to be determined on other attributes like product development history, sales volume, manufacturing supply, number of employees, research funding. Bringing claim size into that picture distorts the formula, in my view, in favor of those who can talk loudest and dream up the best claim stories. How is it possible that EMEA can have claims bigger than the US and Canada combined? That doesn't make any sense. It's clear to me that these claims from EMEA are not Bona Fide.

Judge Gross orders formation of 1114 and 1102 committees

Docket number 5783 on the Epiq site contains the order by Judge Kevin Gross for the US trustee to form a 1114 committee of Nortel retirees who are receiving benefits such as medical and long term care to act on behalf of the retirees to negotiate with Nortel to change or terminate the medical and other retiree benefit plans.

Docket number 5790 contains a similar order for the US trustee to appoint a 1102 committee to represent the Nortel employees on long term disability to act on their behalf in similar negotiations with Nortel regarding the LTD benefits.

The details of the committees are to be presented to the court for approval. There is no statement in terms of timing or the method of selection of the committee representatives. Legal fees for the 1114 committee will be borne by Nortel. A cap of $200,000 has been set in terms of the legal representation for the 1102 committee and will be borne by Nortel also.

This is the first step towards major change to these programs. It will probably take a few months but probably before of by year end.

Nortel US files for formation of 1114 committee

Nortel has filed in the US court for the appointment of a 1114 committee to be established. This is the first step towards eliminating retiree medical and other non pension benefits as well as long term disability benefits. The committee will be staffed with retirees who will represent the interests of those of us who are receiving retiree medical and other benefits. I don't know who will be on that committee yet . I imagine the US NRPC will be involved since they originally were able to stop Nortel from eliminating the benefits unilaterally. Nortel claims it is costing them $12 million per year to keep supporting the medical and LTD programs for retirees and LTD employees. Considering the costs of all the lawyers now involved this seems to me to be a much better use of the estate funds than handing them over to a bunch of legal vultures who have no vested interest in the welfare of retirees or of Nortel for that matter.

Monitor's 65th report re UK and EMEA claims

The Canadian monitor, Ernst and Young submitted the 65th report to the Canadian court and also copied the US court as defined in docket # 5351 on the Epiq website.

The report requests the Canadian court to address the UK and EMEA claims which have been submitted in order to expedite the process for allocation of the Nortel estate between the various countries involved. The UK and EMEA have submitted enormous claims valued at $13.5 billion Canadian and have also requested priority which would mean that their claims would be given preferential treatment and if allowed would basically wipe out any funds for Canadian unsecured creditors. This could also impact the US claimants if the US court recognized the claims.

The claims submitted by the UK and EMEA include elements that are non specific and include accusations of mis management by NNL. These appear frivolous to me and considering the fact that Canada does not insure or protect their pensioners in the event of bankruptcy ( unlike the US, the UK, and other countries in the EMEA group) I hope that the courts dismiss these claims outright and send them back to claim against their own country subsidiaries rather than taking funds away from the unsecured creditors in Canada and the USA. If the courts allow these claims then the pensioners and LTDers in Canada will get nothing to make up for the missing funds in their trusts.

Nortel files for allocation of sales assets

Docket 5307 on the epic web site contains a request by Nortel to have the US and Canadian courts define a deadline and a method for determining the allocation of the funds received from asset sales. The mediation talks which involved 125 individuals broke down after months of debate and thousands of pages of information.

Nortel claims that they cannot move ahead with distribution of funds to legitimate claimants until they are able to determine the amounts of assets that are assigned to each country. Nortel also pointed out that there is a $2billion claim by Nortel US against the Canadian assets. The US group cannot determine what the US assigned assets will be until they know what the assets are assigned to both the US and Canada and also the claims percentage in Canada so that they can factor in the cash received from the Canadian estate into the US estate.

Docket 5266 on epic web site

An ex Nortel employee (Robert Horne) has filed a request to the US court asking for permission to sit on the unsecured creditor's committee and speak for ex employees to obtain better support for our claims and also the access to information from Nortel which was cut off when Nortel cancelled the HR services group. You can check the details at the Epic website (see the right hand column) and look at docket 5266.

We have been cast off by Nortel and left to founder as they continue to pay the lawyers and the remaining team and no one in the court system seems to be worrying about what we are owed and the blatant disregard for any rights we may have had as ex employees or retirees. Hats off to Robert Horne for taking the initiative and trying to get some representation for us in the courts.

Tom

Canadian federal election

With the Canadian federal election coming up there is a big opportunity for Nortel retirees and ex employees to show their displeasure with the current government and work to vote out the conservatives and others who refused to help secure pension funds against unscrupulous companies that let the trusts decline and then went into bankruptcy to avoid having to make up the shortfall.

Nortel also pronounced a death sentence on some of their disabled employees by raiding their fund and cutting off their source of income and yet the government stood by and watched. These people need to go and be replaced with human beings instead of the robotic, pro business, anti senior, greedy charlatans who sit in Ottawa and spew hot air.

Get organized to vote them out. Don't let them get away with what they have done. They are not representing you, they only care for themselves and their rich cronies.

Tom

Nortel mediation talks fail

The Globe and Mail has reported that the mediation talks being held with all the representatives of the Nortel Creditors has failed to reach an agreement. That means this will drag out for a long time. The lawyers will make hay and spend a big share of the Nortel estate as all the parties argue over the disposition of the funds. I'm not sure what this means in terms of the courts. Check the following link and also look at the dockets on the Epiq website to see if the judge makes any new rulings. if I find anything out I will post it.
Tom


http://www.theglobeandmail.com/globe-investor/nortel-sale-mediation-process-fails/article1984248/