Nortel Explains Pension Decision

By Mark Evans | Published: July 18, 2009

On Friday, the Pension Benefit Guaranty Corp. said it was taking responsibility for Nortel’s underfunded pension plan covering about 23,000 employees and retirees in the U.S. The PBGC said it made the decision before Nortel’s sells the rest of its assets given none of the deals would include the pension plan.

Here’s a letter to Nortel employees from Elena King, Nortel’s senior vice-president of Human Resources:

Dear colleagues,

Earlier today, the Pension Benefit Guaranty Corporation (PBGC) made an announcement with respect to Nortel’s U.S. Retirement Income Plan — also known as the U.S. Defined Benefit Pension Plan. The PBCG will be assuming responsibility to administer and pay benefits under the plan in accordance with the plan documents and applicable law.

The PBGC, a federal agency, was created to protect the benefits of private sector employees participating in defined benefit pension plans. It’s not uncommon for the organization to assume responsibility for plans when companies are in Chapter 11 proceedings.

Although the action announced by the PBGC is technically referred to as a “termination,” it is important to note that when the PBGC terminates a pension plan and becomes its trustee, the PBGC takes over administration of the plan. As a result, Nortel will no longer be the administrator of the plan, and the plan will be considered “terminated,” although your benefits will not cease.

No action is required on the part of plan members. Your records will be transferred to the PBGC and the agency will take over administration of the plan, and the PBGC will communicate directly with plan members on how to get more information.

This announcement does not affect the Defined Contribution Plan (i.e. 401(k) plan), Retirement Income Plan Restoration Plan, Long-Term Investment Plan Restoration Plan and Supplementary Executive Retirement Plan. The pension plans for other countries including Canada are also not affected by this announcement.

I encourage you to listen to last week’s pension GIS for more information on Nortel’s US pension funds and the role of the PBGC. You can also click here for a Frequently Asked Questions document that provides more details on this matter, or you can visit the PBGC website for more information and their full contact details. They’re ready to take your calls and questions.

Update: The Ottawa Citizen reports that the move by the PBGC has Canadian pensioners worried that the PBGC will go after Canadian assets to deal with the U.S. pension fund’s $514-million deficit.


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  • Milan_Bekich

    “The pension plans for other countries including Canada are also not affected by this announcement.”

    Hmm … this does not bode well, for as was stated: “The PBGC said it made the decision before Nortel’s sells the rest of its assets given none of the deals would include the pension plan.”

    Glad that I took a lump sum when I exited. Gladder still that my 401k was not in NT stock and that I rolled it over into a self-directed retirement scheme.

    Milan

  • bunkster

    Yea, you're a frickin' genius – you self serving goof. At least I read this blog due to on-going interest/involvement rather than to gloat about how smart I was. Haven't you got something better to do? Like post old employment contracts somewhere on the web or something?

  • scalppeeler

    Again Uncle Sam to The Rescue.
    Americans take care of their own.
    Much like The Chinese and Quebecers.
    Canadians?
    Nope.
    Dunn, Clement, Mcguinea, harper, manley, mike and board are all
    together at one of their cottages this weekend thumbing their
    noses at the nortel employees, soon to be ex employees, ex employers
    and pensioners.
    Oh Canadud.

  • Milan_Bekich

    I'm not one to brag but if you insist:

    http://contracts.onecle.com/entrust/bekich.emp….

    BTW: I too have an on-going interest/involvement … Schadenfreude.

    Milan

  • protosphere

    A far cry from the $400 Billion they soaked from investors with same old hype.

    Fraud, bankruptcy, forced government inquiry, etc… bad news, bad… bad

    There were more investor losses than employees. They already lost 60K of the 90K from their peak not all that long ago… and such a fuss over the remaining 30K… if this is really what all the fuss is about than… money with the well having run dry.

  • Milan_Bekich

    Keep posting protosphere. You'll be number one soon. Until then, less is more … ;-)

    Milan

  • nortelex

    Help!

    1) I used to be able to see both my Canadian and US pensions on the Mercer website. Now I can only see the US pension

    Does anybody know why?

    2) Does this PBGC take over mean, we can now take a lump sum if we leave/laid off from nortel?

  • Nortel watcher

    Bunkster, now what?

  • freqmgr

    As I understand the PBGC rules lump sum payments are not allowed.

  • bunkster

    What do you mean now what? I guess I just keep reading posts from a**holes.

  • Nortel watcher

    : ^ ))))))))))))))))) LOL

  • yes4aapl

    You sound exactly like the kind of f***ing a**hole that I will be so glad to be rid of when this whole thing is over. Go buy a life, goof.
    bunkster
    ===
    re
    How will you do that? Are you Mike Z?

  • vvvv

    A few points:

    1. PBGC does not offer lump-sums, except for persons who have a trivially small benefit.

    2. PBGC does not make the U.S. retiree 100% whole, relative to the benefit that would have been available under the NNI plan. It's better than nothing, and for some people it will be a life-saver, but it's not perfect. There are caps… penalities for early retirement are stiffer… many retirement benefits aren't covered… alternatives for annuities are fewer… and most importantly, PBGC hasn't yet said how it will handle the hypothetical 6% annual increase in the Cash Balance Plan.

    3. The underfunding of the U.S. plan has a lot to do with the drop in stock and CMO markets over the last 12 months… not something Nortel had control over. Fact is, many U.S. corporate pensions are severely underfunded at present. Nortel just happened to file bankruptcy while the financial markets were near their bottom. The timing couldn't have been worse.

  • scalppeeler

    Make no Mistake it is much better than what Canada has failed to offer.
    Harper, Clement, McGuinea, Baird, Jim Watson, John Manley, Ottawa City Council.
    All Talk and No Action, or just no Action.
    All after the fact.
    Say nothing, Say No Soup (clement and mcguinea) or say something just for posturing.
    Canada sure is a sham.

  • yes4aapl

    3. The underfunding of the U.S. plan has a lot to do with the drop in stock and CMO markets over the last 12 months… not something Nortel had control over.
    ====
    re
    For Nortel U.S. employees and pensioners, the takeover is good news because it guarantees that pensions of as much as $54,000 US annually will be paid from the Pension Benefit Guaranty Corp. fund.
    vs
    Only Ontario guarantees pensions of up to $12,000 annually and only for work that was performed in the province.

    The estimated 40 per cent of Nortel employees who worked in Montreal, Calgary and other provinces have no guarantees.
    O! Canada!
    http://www.canada.com/Nortel+Canadian+pensioner…

    total deficit as the creditors claim will be more than $4 bill
    UK only, it's been £2.0B
    translate £2.0B into USD please

  • scalppeeler

    To make matters worse and correct me if I am wrong but did McGuinea not come out and say that 12k is not covered now? Didn't he say the word guarantee is actually not a guarantee?
    Whether he did or not look at the number. 12k vs 54K.
    Disgusting and Disgraceful.
    This re–inforces my view that Canada will not take care ot its own.
    Canada will not look after its established people and traditions that have been here, thrived, worked and contributed for Generations. If Nortel was based in Quebec I guarantee the Quebec Premier would be involved in a positive way. Not like McGuinea. I also guarantee if Nortel were American, Somalian or Arab owned it would have been bailed out gleefully by harper and clementine.
    Get the word out people. I know the Canadian pensioners are sptting mad right now.

  • Milan_Bekich

    “If Nortel was based in Quebec I guarantee the Quebec Premier would be involved in a positive way.”

    If NT were based in Quebec there would never had been a problem. The employees would have been so busy learning to conjugate irregular French verbs that they would have had no time to create and implement a business plan.

    Milan

    Milan

  • Milan_Bekich

    Ah … Sweet, Sweet Schadenfreude. !

    Milan

  • protosphere

    haha. If they aren't too long, they are too frequent, can please some of the people some of the time but never everyone at once as the saying goes =)

    So far too little is done to alleviate the bellyaching by defrauded investors, gagged and severed employees, pensioners, growing creditors, etc… Even this late in the game, it is still worth the compulsive protest to perhaps assist alleviating something like this happening again. Hence, my passion. Besides, it has been fascinating, beyond belief, to be seen with so much more to come.

  • protosphere

    Slander McGuinty is not just. He publicly stated on television that he was appalled at how Nortel hid behind federal bankruptcy laws to circumvent paying severances (bypassing provincial laws in this province).

    Would you prefer a mean spirited Harris or a Social government that legalizes gambling under the guise of padding healthcare.

    McGuinty is for the Nortel employees.

    The guys you reiterate don't even hang with each other which make it sound so challenging. I also think Harper is doing a stellar job distancing his party from tyranny to make the trailer house politics attacking any party in power sound all that much more challenged.

    As for Manley, we have stated a few reservations with his law firm defending Dunn, 1 out of 6 for you… =)

  • protosphere

    “This re–inforces my view that Canada will not take care ot its own.”

    Instead, consider they would be “very reluctant to throw money into the pension plan to fund non-Ontario pensioners”.
    http://www.ottawacitizen.com/Life/Analysis+Nort…

  • scalppeeler

    Disagree totally with your view on your pal McGuinea.
    You like him for some reason.
    What it is you obviously won't admit.
    The ontario premier bailed out the bolt turners at the car plants.Talk is cheap.
    His lamentations about Nortel are just that.
    Cheap talk that isn't going any further.
    Like ottawa city council, john manley and jim watson.
    The ontario premier even renegged on the ontario guaranteed pension for Nortel pensioners.
    He's done nothing and will continue to do Nothing.
    To make all this worse it should be noted that there will be no additional funding after september from the U.S arm of Nortel to keep Canadian operations afloat.
    My obvious question here is why don't Canadian operations withthe backing of the Canadian gov't just take it. Nortel is a Canadian company founded by British radar specialists in telecomm and RF after World War 2. Canadians fought and died for Britain. This is how the Canadian pensioners are repaid.

  • less

    lol – I was thinking similarly. What if the PBGC were run by Nortel guys?

    Dear soon-to-be-ex colleagues,

    Upon it return from vacation earlier today, the PBGC made an announcement with respect to Nortel’s U.S. RIP (no pun).

    The PBCG will be assuming responsibility to no longer administer and pay benefits in accordance with the plan documents by skirting applicable law after its $11 million initiation fee is paid in full.

    Forthwith,the PBGC will be referred to as the Recognized Leader (RLE, or “really”).

    it is important to note that when the Recognzed Leader terminates, it RLE terminates. As a result, the plan will be considered “terminated,” your job and benefits will cease.

    No action is required on the part of administrators. Your records will be transferred to the RLE trash bin.
    They’re ready to terminate your calls and questions.

    We're simply are on your side,

    RLE

  • protosphere

    http://www2.canada.com/topics/news/story.html?i…

    They can not pay, not that they wouldn't.
    Also, “The Ontario government has no obligation to save the pension insurance program.”

    McGuinty replied: “I can't.” “I'd love to be able to say that I could,”

    this was a corporate paid yet grossly underfunded fun with no premium increases since the early 80's
    the Ontario Pension Benefits Guarantee Fund, which pays pensioners up to $1,000 per month, is on the brink of collapse.

    bankruptcy at one sufficiently large company, or several large companies “would cause the plan to go broke.”

    yes, Nortel employees are disappointed, victims of the perfect storm when so much of Nortel's already underfunded pension plan was vested in the recent equities downturn effecting Nortel's assets as well

    Nortel filed for bankruptcy protection in January after losing almost $7 billion in the U.S. and Canada since 2005.

    The Toronto-based telephone equipment maker employed 5,600 people in Canada as of early March. More than two-thirds of them are in Ottawa.There are about 12,000 Nortel Canadian pensioners, including about 6,300 who worked in Ontario.If Nortel fails to restructure, the pension plan will be wound up and will be funded to an unknown level.

    If, for example, the plan were only 75 per cent funded at wind up, a pensioner who was receiving $2,000 per month would receive $1,500. The provincial fund would then kick in $250 per month (because the retiree only received $740 of their first $1000).

    All employees are guaranteed $1,000 per month.

    http://www.globaltv.com/globaltv/bc/Nortel+pens…

    The fund, built through corporate payments, is worth about $100 million, McGuinty said.

    While it is unknown is how much it would cost to underwrite Nortel's pension plan, McGuinty said a bankruptcy at auto giant General Motors would require “several billion” dollars.

    ___________________________________________

    Provincial Ontario government paid 3.5 of the 10B to bail GM who employ 45,000 in Ontario (federal gov't paid balance of around 7B), and GM is already positioned to repay so shortly thereafter. Canadian Auto Workers union president Ken Lewenza said he is optimistic that taxpayers will see their money come back.

    I do not believe Nortel would have turned around losing after losing $7B since 2005, while employing a fraction of the GM workers and even more in extended services and industries in Ontario. Nortel is federally protected under bankruptcy to not pay severances, not provincially, with no straight plan for years losing money and they wanted over a billion for a job creation plan to get an idea of the obscurity in cash burn that was understandably denied and told to go Federal where they folded.

    There, is no restructuring today but selling off their depreciating assets while still paying bonuses, they rode the the UIC system cutting severances wanting their cake and eat it too with all sins forgiven to burn more recklessly. How could they possibly fund this even if they would love to is my take on it? Although I can see pensioners frustration that is ill directed towards government than Nortel itself.

  • scalppeeler

    Protosphere.
    Please be current with the News and be a realist.
    Let the facts speak themsevles. Same with rhetoric and false promises from the fed and prov gov't.
    McGuinty has come and out said there is no 1,000 guarantee anymore.
    And saying Ontario has “no obligation” is part and parcel of the problem. Why don't they have an obligation? They should have an obligation. They had an obligation to bail out the bolt turners at GM etc. Funny that the autoworkers have had no trouble securing their future and pension plan thanks to McGuinty. They are set for life.

  • Blogger4life

    Elena, we see you as the antichrist. May God have mercy on your soul.

  • NT_DFW

    I guess you can brag about being one of those let go earlier this decade with a full ELT silver parachute (more than 1 year pay at full TTC for someone with less than 10 years of service) and the priveledge of following Mr. Ethics himself (F. William) over to Entrust. For all the complaining you do about the lifers and their senses of entitlement, you seemed to demand more than your fair share of perks while at Nortel.

  • NT_DFW

    Avaya just announced as Enterprise stalking horse:

    http://finance.yahoo.com/news/Nortel-To-Sell-En…

  • JlouisMeneghetti

    lol

    And you really think that English is easier? Just ask French speaking people…

  • ExNortelian2

    For all of you people that didn't really follow the Ont version of the pension gauranteed fund was basically broke when Stelco went under. Twice in the past there have been private members bills put forth in the Ontario parliament in an attempt to have the maximum pension payment gaurantee increased from $1K/month to $2.5K/month. Both bills died on the order paper so it was obvious at the time the Ont. gov't didn't give a s**t about maintaining the fund. I believe the latest attempt to have the increase legislated was 2007 but all searches of bills seemed to come up blank on it now, I wonder why??

  • yuavia

    I think that you can to buy or to get an annuity contracts thinking in your retirement plans, because, your family will be very benefit with this, you’ll receive an amount monthly for meet the expenses.

  • rwayneking

    Hi-there, I worked at Northern Electric , at 8200 Dixie Dr. from SEPT 1963 to SEPT1974, my employment no. was 68236, is there a snow balls chance in hell of getting a pension cheque out of Nortel, Just a Yes or No will do. I will not be 65 until 2012.

  • rwayneking

    Hi-there, I worked at Northern Electric , at 8200 Dixie Dr. from SEPT 1963 to SEPT1974, my employment no. was 68236, is there a snow balls chance in hell of getting a pension cheque out of Nortel, Just a Yes or No will do. I will not be 65 until 2012.

  • Anonymous

    Hello, I worked for Northern Electric as an installer of Bell telephone equipment from 1969 to 1973 ( had to quit for family reasons, traveled too much ) and last year I contacted Norelco about getting a pension and they informed me that I needed to be an employee for at least 10 years to get a pension.
    In that case would they be willing to return all my pension contributions ( my employee number started with 85… ( I forgot it but they must still have me in their record books.)

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