Ontario pension protection calculation and general wind up process.

Ontario Protected pension.

In a previous post I mentioned that the calculation of Ontario protected pension was based on service in Ontario as a percentage of total service. There was a lingering question as to whether that means total service world wide or total service Canada.

I spoke to a representative from FSCO today. He was very helpful and explained the way they determine the pension. They don't try to calculate a percentage.

They take the final average earnings as used by Nortel in your pension calculation, and use the Nortel pension factors times the number of years of service in Ontario.

That way they don't have to determine service in all the other Provinces.

But the end result is basically equivalent to a percentage of service in Canada that is used.

This a a little bit of good news

General Wind Up Process.

I took the opportunity to ask the FSCO representative if I need to do anything to make sure that my pension is properly handled when Nortel ceases administering it September 30th 2010.

He was extremely helpful and explained a lot of the wind up process used in previous bankruptcies to me. This is a summary of my discussion with him.

On October 1st there will be another court session. At that session it will be determined if Nortel will have another stay or if it is going into full liquidation.

In either case the pension payment will continue as it is today for some time until all the necessary documents have been reviewed and verified by the trustees and by any administrator.

If Nortel is granted a further stay the pension will continue to be paid without reduction until the full pension wind up process is completed.

When the decision is made in the court that Nortel is being liquidated, the superintendent of Pensions in Ontario will appoint an experienced administrator to handle the pension wind up.

(I have to add at this point that if the NRPC is successful in negotiating some other form of pension administration this process may not apply and will probably be more beneficial for us.)

When an Ontario administrator is appointed there will be a period of time in which a full review of all the books and documents related to the pension will be examined carefully and verified. This process will be long and complicated since there are thousands of retirees being paid pensions, and thousands more who are eligible to apply for pensions some time in the future.

During this part of the process the retirees and future retirees will be contacted and asked to verify their records to ensure accuracy. It's important that everyone get prepared for that, and gather all your documents related to your Nortel pension so that you can provide evidence to support your service etc.

Once all the reviews have been completed and verified, the administrator
will be able to determine a true trust fund ratio that will be applied to all pensions. The administrators always err on the side of caution to ensure that they do not overstate that ratio. They do this to prevent the possibility of having to claw back any payments from retirees in the event that they discover the real ratio is less than they estimated.

This process will take quite a long time. It could be anywhere from 3 months to 9 months or maybe more if there are lots of discrepancies in the records and unforeseen issues.

Once all the due diligence has been performed and the administrator is satisfied that they truly know the ratio they will inform the retirees of the result and will give notice as to when the reduction will take place. This notice will most likely be a month or more in advance of the actual reduction.

So this is a bit clearer for me now. If this is the process used, it means we will probably continue to be paid the same amount for longer than we anticipated.

I don't know what the impact will be if the NRPC are able to obtain a change in the regulations and have some other administration process applied, so use the information I have provided here with caution.

I hope the NRPC provides an update on what to expect before September so that we know where we stand. I know they indicated that there will be some webinars in the near future after the NRPC General Meeting so keep checking for that information on the NRPC site, (see link in Right Hand Column), and I will post it here when I find out about it.