Nortel Networks CCAA Restructuring
Important Notice Regarding Pensions
Nortel's Pension Plans and the PBGF
Information from the NRPC Regarding a Pension Alternative
Financial Support Programs
Trillium Drug Program
December 4, 2013
REPORT ON THE NORTEL INSOLVENCY PROCEEDING
THIS REPORT HAS BEEN LIBERALLY PLAGIARIZED FROM A REPORT THAT WAS PREPARED BY KOSKIE MINSKY LLP, REPRESENTATIVE COUNSEL
As you will be aware, the CAW-Canada has joined with the Chemical, Energy and Paper Workers Union to form - Unifor. As a successor union, Unifor has stepped into the shoes of the CAW-Canada as the representative for those former Nortel employees, including LTD recipients, who had been represented by the union at the time Nortel filed for protection under the Companies' Creditors Arrangement Act (CCAA). The Union also represents about 650 retirees and survivors who signed retainers with the Union in January to June 2009.
Upcoming Distribution from the Health and Welfare Trust (HWT)On November 19th, 2013, the Ontario Superior Court of Justice approved a final HWT distribution to Participating Beneficiaries, including LTD members.
The distribution for LTD members is expected to be sent in mid-December and will be for:
. 3% of your LTD Income Benefits;
. 3% of your LTD Life Benefits; and,
. 18% of your Pensioner Life, subject to individual adjustments for methodology and any data corrections.
The distribution will bring your total distribution to 38% of the LTD Income Benefits and LTD Life Benefits and 20% of the Pension Life that you are entitled to from the HWT, based on the actuarial calculations approved by the Court. You had previously received 35% of your LTD Income Benefits and LTD Life Benefits and 20% of your Pension Life.
The distribution will be made in mid-December. The balance of your actuarially determined claim for LTD Income Benefits, LTD Life Benefits and Pensioner Life will remain as a claim against the Nortel estate. The actual amount you will receive will be based on the share of Nortel's remaining world-wide assets that can be obtained by the Canadian Nortel entities in the multi-jurisdictional litigation that is now going on. An update on the litigation is set out below.
There will also be a distribution from the HWT to retirees in early 2014. This distribution to retirees will be approximately 11.2% of their Pensioner Life claim, bringing their total distribution from the HWT to approximately 31.2% of their total actuarially determined claim. The figure of 31.2% reflects a reduction for 2010 premiums paid to continue Pensioner Life coverage for retirees in 2010, and is subject to individual adjustments for methodology and any data corrections.
Any payment you have received from the Hardship Fund will not be deducted from your HWT distribution, but will be subtracted from your ultimate distribution from the Nortel estate.
As was the case in the past, the December distribution relating to LTD Income Benefits are not taxable. However, taxes will be deducted before any payment is made in relation to Survivor Income benefits, LTD Life Benefits and LTD Optional Life Benefits.
HWT Tax Appeal
Koskie Minsky, as Court appointed Representative Counsel, continues to work with the Department of Justice on the test case appeals about the correctness in law regarding whether the above noted LTD Basic Life and LTD Optional Life, in addition to some other benefits paid from the HWT, were taxable.
As previously reported, in an Advance Income Tax Ruling dated July 19, 2011, the Canada Revenue Agency held that these payments were taxable. At the instruction of the Court-appointed Representatives, Koskie Minsky is challenging the correctness in law of these Advance Tax Rulings through test-case appeals to be heard by the Tax Court of Canada.
Koskie Minsky sent out packages in October 2012 to all those individuals who received a payment from the HWT for LTD Basic Life and/or LTD Optional Life during 2011. Packages were also sent to individuals who were taxed for pensioner life insurance and the termination of survivor benefits.
As this matter has not yet been decided by the Court, and the deadline for 2012 objections is April 30, 2014, Koskie Minsky will be sending out packages to those who received a payment from the HWT for LTD Basic Life and/or LTD Optional Life in 2012 in the next few weeks. You must file a second objection for 2012 to benefit from a favorable ruling in the test case appeals for your 2012 tax year. Make sure that you file this objection with the Canada Revenue Agency in accordance with the instruction that you will be provided by Koskie Minsky, if you wish to be part of the appeal relating to the 2012 taxation year. You should also do this if you are the administrator of the estate of a deceased HWT beneficiary relating to the 2012 taxation year.
If you do not receive a tax objection package by January 15th, 2014 and a payment from the HWT was received in 2012, please call Koskie Minsky at 1-866-777-6344 or e-mail them at firstname.lastname@example.org.
On March 8, 2013 Justice Morawetz of the Ontario Court and Judge Gross of the Delaware Court approved an Allocation Protocol which provided that the U.S. and Canadian Courts would decide the outstanding claims and the allocation of the remaining Nortel assets between the various jurisdictions where Nortel operated around the world.
Since then, a litigation timetable has been established and the parties are currently exchanging documents and cross-examining witnesses in preparation for a trial that has been set to begin on May 12, 2014, for a period of twenty hearing dates. As you can imagine, there are millions of documents and witnesses from around the world who have information about Nortel that needs to be obtained. Just like any other trial, most of the work occurs before the trial begins and given the size of Nortel and the fact that it operated around the world, this means that there is a lot of preparation to be done. All of this takes an extraordinary amount of time and money. Although Unifor covers the legal costs for those it represents, there are numerous law firms representing workers and pension plans in each jurisdiction who would not be in a position to provide years of legal representation without the support provided by the Nortel estates.
There are, of course, corporate interests and vulture bond holders who are in this for profit and who are getting paid out of the remaining Nortel assets. All told, over a billion dollars has been paid out in professional fees since January 2009.
The Court Appointed Monitor in the CCAA proceeding continues to review the Personal Information Change Forms (Form B) and Proof of Claim Forms (Form C) that it has received from former Nortel employees, LTD recipients and retiree/survivors. If you have not received a decision with respect to the changes or additional claims you requested on the Form B or Form C that you submitted, please be patient. There is no significance to the order in which reviews are completed. The Monitor is sending decisions in relation to these changes and claims as soon as the claims are reviewed and will continue to do so over the coming months.
WHEN WILL YOU RECEIVE A CASH DISTRIBUTION FOR YOUR CLAIM!!!
The distribution on claims against the Nortel estate depends on the conclusion and outcome of the trial that is to begin in May, 2014. The amount of any cash distribution will depend on how much of the remaining assets is allocated to the Canadian estate and the total claims that are made against those assets. The total amount of the claims against the Canadian Estate has not been fully determined. There are claims that have been made by those outside of Canada against the Canadian estate; these include the UK Pension Plan, bond holders, other Nortel estates in other countries, etc. and the validity and extent of those claims has yet to be determined. Even in Canada, the deficit of the Nortel Canada pension plans has not yet been determined. All of these claims will affect, positively or negatively, on the amount that is available to distribute to Nortel's former employees, LTDs and retiree/survivors.
Even after the trial is over, there may be those who will appeal the decisions made by the Canadian and US courts and that may further delay any distribution. All of which means, it is unlikely that a cash distribution will happen within the next year.
On October 29, 2013, the court extended the next deadline for applications for the Hardship Fund to April 1, 2014. This deadline will continue to be extended by the court as needed. Please check our website for the latest version of the application with deadline information. On July 27, 2012 the Court approved expanding the scope of Nortel's Hardship Fund to include Nortel LTD Beneficiaries, including those who are receiving CPP-Disability or the Quebec Equivalent.
Payments from the Hardship Fund are treated as an advance on future distributions from the Nortel Estate, so any amount provided will simply be deducted from the recipient's recovery on their claim against the Nortel Estate.
If you are in a position of immediate financial hardship, you may request a payment from the Fund by completing a Hardship Payment Application. The Union can help you complete this form. This will be a private and confidential process, and you will not be required to share your personal information with anyone other than the Monitor, who is responsible for assessing your application, and with the Union's legal counsel.
Windup of Nortel's Registered Pension Plans and Member Information Profiles
Morneau Shepell, the administrator of Nortel's Registered Pension Plans, has been mailing out Member Information Profiles for the last several months in preparation for the windup of the Pension Plans.
Once the mailings by Morneau have been completed and Member Information Profiles have been returned, it will prepare the windup reports and then members will receive Option Forms. These forms will give you the opportunity to advise Morneau what you want done with your pension funds when the pension plan is finally wound-up. The options available will be only those that are legally available, the purchase of an annuity or the transfer to a locked-in RRSP, for instance. The options that are available will be determined by the laws of the province you were living in when your employment terminated.
If you have any questions about the Member Information Profile or Option Form, you may call Morneau Shepell at 1-877-392-2073, if you were in the Union pension plan.
Please ensure you keep your address updated with the Union and also please advise the Monitor, Ernst & Young. A Change of Address Form must be completed and supporting documentation of the new address must be provided. Documentation includes a driver's license or a recent utility bill showing the address. You can obtain a change of address form from the Union using the contact information below.
Please also ensure that you update the Pension Administrator, Morneau Shepell, with your address change even if you're not receiving your pension yet. Morneau Shepell can be reached at 1-877-392-2073, if you were in the Union pension plan.
If you have been represented by the CAW-Canada (now Unifor) during Nortel's CCAA proceeding and have any questions, please contact Barry Wadsworth at 1-800-268-5763, extension 3776 or e-mail email@example.com for any forms or information you need.
UPDATE - March 11, 2013
The Gazette (Montreal)
March 9, 2013
Nortel asset fight to be handled in joint trial; Dispute over residual $9 billion goes to court in Canada and U.S
LINDA NGUYEN, The Canadian Press
TORONTO - A long-standing dispute over how to divide $9 billion in residual assets from former technology giant Nortel Networks will decided by a joint, cross-border trial.
In a conference call Friday, Ontario Superior Court Justice Geoffrey Morawetz and U.S. Bankruptcy Court Judge Kevin Gross agreed that the mediation will proceed by litigation, rather than an arbitration panel.
A trial is expected to begin as early as this fall.
More than 100 parties including ex-workers, bondholders, trade creditors and governments worldwide are involved in the complex legal battle over how to divvy up the former equipment maker's residual assets.
In January, a mediation process held in Toronto abruptly ended after Ontario Chief Justice Warren Winkler, who was overseeing the two-week long proceeding, concluded there was no resolution in sight.
Three other attempts at mediation also had failed.
It's been reported that the proceedings have cost up to $755 million worldwide in lawyer fees since the negotiations begun. A group representing disabled ex-Nortel employees say that figure is closer to $861 million.
According to documents, U.S. law firm Cleary Gottlieb Steen & Hamilton LLP, which represented Nortel in mediation, filed $1.25 million in fees in November alone.
Barry Wadsworth, a lawyer for the Canadian Auto Workers, which represents about 850 former Nortel pensioners and former disability workers, says the group was in favour of the joint court process because it was a "more structured, efficient and expeditious process" than arbitration.
"It was our belief that the courts have the jurisdiction to hear and determine our argument that the worldwide assets of Nortel in all jurisdictions should be divided equally between all of the company's creditors," he wrote in an email.
"There really is no 'Nortel' anymore and this is really about a fair, reasonable and just division of the assets of this interwoven company that acted as one worldwide entity and should have its assets divided among all of its creditors on that basis."
Wadsworth said both judges stressed how important it is for these proceedings to go ahead in the most cost-effective and timely manner.
At its height in 1999 to 2000, Nortel was worth nearly $300 billion, employed more than 90,000 people globally and was regarded as one Canada's most valuable companies.
In 2009, the company filed for bankruptcy in North America and Europe, shedding thousands of jobs.
Earlier this year, the former top brass at the firm were acquitted of fraud charges nearly a decade after being accused of falsifying financial records. A judge found there wasn't enough evidence to convict ex-CEO Frank Dunn, ex-CFO Douglas Beatty and ex-controller Michael Gollogly of fraud.
The three were fired in 2004 and accused of involvement in a book-cooking scheme to trigger $12.8 million in bonuses and stock payments to themselves.
UPDATE - February 14, 2013
I have received a number of calls and e-mails regarding the recent failure of the mediation overseen by Chief Justice Winkler. Among other questions, there is a fear that the failure of the mediation might result in monies being lost from the pension fund itself, or that there might automatically be further cuts in pension payments to retirees.
THE FOLLOWING IS A VERY SIMPLE EXPLAINATION OF SOME VERY COMPLEX MATTERS - THE EXPLAINATION IS WRITTEN BY A LAWYER (ME), NOT A PENSION EXPERT OR FINANCIAL ADVISOR. So, if you happen to be a pension expert or financial advisor, please accept that this is provided to give some clarity to others who, like me, are not conversant with the terms, jargon and details, that would go into a legal opinion on the issues under discussion. NO ONE should use the information contained in this note to make decision on what to do with their pension or to make any other financial decision.
The first thing to understand is that the money that is currently in your pension plan is safe - no one can take anything out of that fund to pay off Nortel's debts.
Pension plans are usually valued based on the assets they have in the fund, the expectation that those assets will provide a certain rate of return over time, and the expectation that contributions from the Company will continue into the future. Of particular importance are those contributions that are expected to be made to address any deficiency between the value of the pension plan and the amount of the pension payments that are expected to be paid out. Once it is determined that the assets are not sufficient to pay out all of the current and future pensions, provincial legislation requires that the company make up the difference with additional contributions over a period of time.
Prior to January 2009, when Nortel went in to CCAA protection, the pension plan was underfunded and Nortel was making additional contributions to increase the value of the plan. In part the underfunding was because the plan had assets, i.e., shares in companies, which suffered as a result of the down-turn in the economy in 2008-2009. So while no monies were removed from the fund, the assets to pay out pensions were significantly reduced.
The other part is that, by law, the fund must contain bonds (both government and corporate). Interest rates charged by banks have an effect on bond interest rates. If bank interest rates on savings accounts are low, then bonds, which are a form of savings/investment, will also be low. Because interest rates are currently very low, and, as a result, bonds are not providing the rate of return that was previously forecast. There are other factors that will affect the final value of the pension plan, such as the price of purchasing annuities to replace the pension plan, the cost of this also goes up when interest rates are low.
In 2010, Morneau Sheppel was appointed by the provincial Superintendent of Pensions to administer the pension plan, replacing Nortel. In a very short period of time it became apparent to Morneau that certain individuals were taking the commuted value of their pensions at a rate that was higher than the actual funding level of the pension plan. It sought an order of the court which permitted it to reduce the commuted value payouts to more accurately reflect the funding status of the plan. By August 2011, Morneau had a better handle on the degree to which the pension plan was underfunded and found it necessary to actually reduce the pension payments being received by retirees. Different levels of reductions were made to different retirees depending on the pension legislation in effect in the province where they worked. That is where we are at the moment.
We had hoped the mediation would provide a forum to resolve the question of how to distribute the $9 billion in assets that belong to Nortel world-wide. However, as you will know, Chief Justice Winkler declared that further efforts at mediation were no longer useful. What is happening now is that we will be trying to obtain as much money out of the Nortel insolvency to ensure that, at the very least, there will not be any further cuts to pensions. Hopefully, we will get enough so that some of the cuts can be reversed, but this is by no means assured. In any event, the more money we can get into Canada the less likely it is that any further cuts to pensions will occur.
To understand part of the problem we are facing, there are over $7 billion in "trust funds" arising out of the sale of Nortel's assets. This amount is being fought over by each of the Canadian, US and European jurisdictions claiming that it should be given to them to pay their creditors. But there are amounts in each of these jurisdictions that, for the most part, can't be accessed by the other jurisdiction's creditors. When Nortel went into bankruptcy protection the Canadian estate had very little cash. The US and Europe still had lots of cash on hand. On the CAW Website you can see the financial statements showing how much each estate has left in cash reserves. The US has almost a billion dollars in cash, Europe has 780 million and Canada has 244 million.
So when we look at the claims of creditor's around the world, we also have to look at how much each jurisdiction already has to pay its creditors. In order for there to a fair payment to all creditors, it has been our position that Canada should get more out of the Trust Fund because there is less money in Canada to start with. Unfortunately, again, there is not agreement on this so we have to fight to get our fair share of the proceeds from the sale of Nortel's assets. On the other side of the coin, Canada was the headquarters for Nortel and so everyone around the world is making claims against Canada and trying not only to take the few dollars we have left, but any money that comes to us out of the Trust Fund. But that is a matter for the courts to decide and we will fight to keep anyone from taking what we are entitled to.
No distribution of Nortel's assets to its creditors can take place until it is determined how to distribute them to the various jurisdictions around the world, primarily being Canada, the US and Europe. As noted, there are approximately $9 billion in assets, but 30 billion dollars in claims against those assets. Until it is determined how to distribute the assets, there can't be a payment to the creditors.
For several years now we have done everything possible to try and find an agreement with other creditors, including the bond-holders, which would see everyone get a fair and reasonable settlement. It is now clear that litigation will commence to resolve how the remaining Nortel assets should be distributed. Both the Canadian and US courts have asked for and received a list of what each party believes are the outstanding issues. Twenty or more parties have provided lists and the courts have set March 7 as a date for the parties to attend and tell the court how they think the litigation should proceed. There are various positions on how and in what order to litigate the various issues that need to be resolved in order to distribute the Nortel assets.
If the creditors around the world decide to fight tooth and nail over all of the issues, it will take a long time to get anything for the creditors in Canada (including the pension plan). But, if the other parties are not willing to be reasonable, then we have no choice but to fight to get a fair settlement for our members, those who have lost pensions and LTD incomes, and everyone who has had their health benefits cut off.
AN ADDITIONAL NOTE RELATING TO PENSIONS
In February 2012, Morneau Shepell switched from Northern Trust to CIBC Mellon as the "custodian" of the pension plan. Because of this, anyone who was being paid a pension before March 1, 2012, will receive two T4s to file their 2012 income tax returns, i.e., one for January - February from Northern Trust, and one for March - December from CIBC.
In addition, starting in late February 2013, retirees and those former employees of Nortel who have not yet commenced taking their pensions, will be receiving documents identified as "Member Information Profiles". Essentially, like with the Compensation Claims process, the information provided by Nortel to Morneau is incomplete and it needs to do its own investigation to ensure that it has all the information it needs to wind-up the pension plan and purchase annuities for the plan members.
IT IS VERY IMPORTANT that you complete and return the Member Information Profile forms. If you have any questions please contact Morneau at 1-877-392-2073 or contact me at firstname.lastname@example.org or 416-495-3776.
You can also obtain information on various issues on the Koskie Minsky web-site. Specifically, there is some recent information arising out of Koskie Minsky's webinar on February 14. Slides for that webinar can be found at:
Associate Counsel, CAW-Canada
MEDIA ADVISORY JANUARY 25, 2013
Nortel Mediation Ends in Failure, Pensioners Pay the Price of Bondholder Greed, says CAW
The CAW is expressing outrage at the collapse of mediation efforts over the distribution of Nortel's remaining assets. CAW National President Ken Lewenza said that the needs of former Nortel workers, pensioners and the long term disabled have been disregarded on account of bondholder greed - yet again.
"Despite the efforts of The Honourable Warren K. Winkler, Chief Justice of Ontario, and his team of expert advisors, the mediation that should have determined the distribution of over $9 billion in Nortel's remaining assets ended in failure to the detriment of all those who were hoping this four year case would finally be settled," said Lewenza.
Justice Winkler called an end to the mediation after more than a week of intensive negotiations when he concluded that "further efforts at mediation are no longer worthwhile."
"As with two previous mediations, failure resulted because Nortel bondholders who bought their bonds for 20 cents on the dollar wanted not only the full value of the bonds, amounting to some $4.5 billion, but years of interest on top of that," Lewenza said. "I struggle to imagine a more unjust situation in the case of a bankruptcy, where bondholders expect more than full payment. Canadian pensioners, thousands of whom were CAW members, have suffered over 50 per cent cuts in their pensions, while former employees have lost jobs, health benefits, and disability incomes, since Nortel entered creditor protection in 2009."
"It is inconceivable that Canadian pensioners and disabled employees have to suffer personal hardship so that junk-bond speculators can reap unconscionable profits from utter misery," said Jerry Dias, Assistant to the CAW President. "Sadly, our federal government, who could reform the existing laws and regulations, is allowing this to happen because it's more interested in protecting financial opportunists than the Canadian workers who built Nortel, then watched it fall apart through financial mismanagement."
The CAW now sees the potential for extended litigation before bondholders agree to a fair settlement or Canadian courts take jurisdiction over the entire Nortel case and force a resolution.
"Canadian pensioners and former employees will continue to fight for the economic justice they deserve," said Lewenza.
In the company's heyday in the mid-1980s, the CAW represented approximately 5,000 Nortel workers in five locations.
UPDATED DECEMBER 6, 2012
As previously reported, in June 2011, the Canadian and U.S. Courts ordered that all parties were to engage in a further round of mediation. There were two previously unsuccessful attempts that occurred before the sale of Nortel Intellectual Properties for $4 Billion. The courts then appointed The Honourable Warren K. Winkler, Chief Justice of Ontario, to serve as mediator. In April 2012, briefs were filed by each group having an interest in the mediation, including the Canadian Creditors Committee. This group includes those represented by the CAW-Canada, in addition to the court appointed representatives for retirees, LTD recipients, continuing and transferred employees, as well as representatives from Morneau Shepell, the pension administrator, and the Superintendent of Pensions, who approved the Pension Benefit Guarantee funding for the pension plans.
An initial meeting of the parties to the mediation was held with The Chief Justice on April 24, 2012 in Toronto, Canada. The Chief Justice then engaged in discussions with each of the parties between August and October of 2012. During those meetings the Chief Justice asked each group to submit a proposal on how the remaining assets of Nortel should be distributed. Those proposals have all been submitted by the various world-wide creditors.
Based on what he has read, the Chief Justice determined that he will convene a week of intensive mediation from January 13 to 18th, 2013, in an attempt to find a resolve to the impasse that has held up the distribution of $9 Billion to Nortel's creditors. We are hopeful that each of the other parties; being bond holders, UK and US pension plans, retirees and disabled former employees around the world, as well as other commercial and individual creditors, will all see this as the last real chance to find a resolve before someone or everyone tries to litigate in one court or another in Canada, the US or Europe.
The problem, of course, is that no court has absolute jurisdiction over the international Nortel insolvency matters and there are laws, some of them conflicting, in each jurisdiction, which would result in very long and disastrous litigation, taking years and years, as well as hundreds of millions of dollars. That course of action is to no one's benefit. But this is about money, and Chief Justice Winkler will have his work cut out for him.
Mediation discussions and information exchanged with the Mediator or among the parties to the mediation is confidential. As such, there is to be no discussions as to the content of the mediation but meetings are being held with the mediator and discussions between the parties have been occurring.
For more information regarding the mediation please visit Chief Justice Winkler's website at: http://www.nortelmediation.com/index.htmlUPDATED SEPTEMBER 20, 2012
THE FOLLOWING IS A BRIEF SUMMARY - DETAILED INFORMATION CAN BE FOUND BELOW
Stay of Proceedings & Expected Distributions
Nortel recently received an extension of its CCAA stay of proceedings until October 31, 2012. The company continues to work through the many issues that must be resolved prior to the completion of the Nortel wind-down. It is uncertain how long this will take. We have started to receive questions about when to expect the next cash distribution from Nortel. Unfortunately there is no scheduled distribution and we do not expect one in the near future. There will not be a final distribution from Nortel's Health and Welfare Trust (HWT) or from the Nortel estate in respect of your Compensation Claim at least for the rest of this calendar year and quite likely longer.
It is particularly difficult to estimate when there will be a distribution from the Nortel estate, because the ultimate wind-up of the Canadian estate is dependent on complex estate allocation issues which are the subject of an international mediation that started in April of 2012. It could be a significant period of time before these complicated issues are resolved through the mediation process that is currently proceeding with the assistance of Mr. Justice Warren Winkler.
Changes to the Hardship Fund criteria
On July 27, 2012 the Court approved the expansion of the scope of the Hardship Fund to include Nortel pensioners and survivors, allowing them to apply for a payment from the Fund for circumstances which satisfy the requirements. Payments from the Hardship Fund are treated as an advance on future distributions, so any amount awarded will be deducted from the recipient's ultimate Compensation Claims recovery from the Nortel estate.
Previously Nortel pensioners and survivors were ineligible under the original version of the Hardship Fund Eligibility Criteria. Since the pension cutbacks last summer, however, the Court-appointed Representatives became aware of situations of serious financial hardship among pensioners and sought the expansion that was approved by the Court on July 27.
If you are a Nortel pensioner or survivor and you are in a position of immediate financial hardship, you may request a payment from the Fund by completing a Hardship Payment Application. Koskie Minsky can help you complete this form. This will be a private and confidential process, and you will not be required to share your personal information with anyone other than the Monitor, who is responsible for assessing your application, and your Representative Counsel.
Note: The maximum amount that will be payable to you under the expanded criteria is $5,000. It is not guaranteed that you will be approved for a payment, and if you receive a payment it may not be for the maximum $5,000 amount. Any amount that you do receive will be subject to applicable taxes, and the payment will be a lump sum advance on your distribution from the Nortel estate. To be clear, your ultimate distribution from the Nortel estate will be reduced by any amount that you are awarded from the Hardship Fund.
The updated Eligibility Requirements and the Hardship Payment Application Form will be available through the Monitor's website at www.ey.com/ca/nortel.
Update on Compensation Claims Process
The Monitor has been reviewing the Requests for Correction and Proofs of Claim received. There were a total of approximately 2000 Requests for Correction and Proofs of Claim received. The process of review consists of identifying the requested corrections or claim, reviewing supporting documentation and communicating with the claimants for additional clarification or documentation where necessary. This detailed process is necessary to ensure the Requests for Correction and Proofs of Claim are accurately and fully understood before any determinations are made regarding the claims.
In order to expedite matters, the Monitor is not waiting until responses to all 2000 of the Requests for Correction and Proofs of Claim have been prepared to begin responding. The Monitor will be responding to the balance in similarly sized batches over the next number of months.
PLEASE NOTE: YOU DO NOT HAVE TO DO ANYTHING IF YOU FILED A REQUEST FOR CORRECTION OR A PROOF OF CLAIM. THE MONITOR WILL RESPOND IN DUE COURSE. THE FACT THAT SOME PEOPLE WILL RECEIVE A RESPONSE BEFORE OTHERS HAS NO SIGNIFICANCE.
CONSOLIDATED CASH POSITION AND LIQUIDITY AS AT JUNE 30, 2012
As at June 30, 2012 the consolidated cash balance for all Nortel entities was approximately $10.2 billion, including $2.8 billion of total treasury cash. Nortel's consolidated cash balance in held globally in various Nortel entities and joint ventures. The following is an overview of Nortel's consolidated cash position as at June 30, 2012.
As at June 30, 2012, Nortel Canada had cash available for operations and post-filing intercompany settlements of approximately $256 million.
The U.S. entities had cash available for operations and post-filing intercompany settlements of approximately $984 million. NNI's Restricted Cash relates to $1 million held in escrow for the benefit of utility providers in accordance with the First Day Order.
The Joint Administrators on behalf of NNUK and the other Europe/Middle East Debtors had available cash for operations and post-filing intercompany settlements of approximately $746 million. The EMEA non-filed entities had available cash of approximately $15 million which is expected to be used primarily to fund their in-country operations and intercompany settlements.
Nortel entities in the Asia/Pacific region had approximately $257 million of available cash for operations and intercompany settlements. As a result of the regulatory regime in the People's Republic of China, the funds in Greater China of approximately $81 million are generally only available to fund operations within Greater China and intercompany settlements.
Caribbean and Latin America entities had available cash of $86 million and $43 million, respectively. This cash is expected to be used to fund their domestic operations and intercompany settlements.
Proceeds from the sale of Nortel's assets of approximately $7.3 billion are being held in escrow by various escrow agents. As at June 30, 2012, the funds held in escrow included:
a. Approximately $7.3 billion held in escrow by JPMorgan Chase Bank, N.A. ("JP Morgan") until an agreement is reached or determination made regarding allocation of these proceeds among the various Nortel legal entities, including Nortel Canada. The current divestiture proceeds held in escrow include: (i) $4.454 billion from the sale of Nortel's patent portfolio and related assets (the " Residual IP"); (ii) $1,053 billion from the sale of CDMA/LTE Access assets: (iii) $18 million from the sale of the Layer 4-7 business: (iv) $10 million from the sale of the Next Generation Packet Core business: (v) $857 million from the sale of Enterprise assets; (vi) $625 million from the sale of the MEN assets; (vii) $113 million from the sale of GSM/GSM-R assets; (viii) $145 million from the sale of DVAS assets; and (ix) $46 million from the sale of MSS assets;
b. $22 million held by CitiBank relating to the sale of MEN assets. These divestiture proceeds include $8 million being held in support of the related TSA and $14 million being held subject to certain succession tax and other adjustments;
c. $1 million held by Wells Fargo relating to the sale of DVAS assets. These divestiture proceeds are being held subject to resolution of certain tax liabilities in EMEA; and
d. $1 million held by JP Morgan relating to the sale of MSS assets. These divestiture proceeds are being held in support of the related TSA.
Other unavailable funds include $35 million transferred from the CDMA/LTE Access asset divestiture proceeds escrow to a separate trust account.
STATUS OF THE APPLICANTS' CLAIMS PROCESS AND CROSS-BORDER CLAIMS MATTERS
To date, 1,065 claims with a cumulative value of approximately CAD 36 billion have been filed against the Nortel Canada pursuant to the Claims Procedure Order and the EMEA Claims Procedure Order. This includes potential duplicative claims filed against multiple Nortel companies and claims filed subsequent to the Claims Bar Date.
STATUS OF THE EMPLOYMENT RELATED CLAIMS PROCESS
To date, the Monitor has issued Information Statement Packages to over 14,000 individuals representing a claim value of approximately $1 billion. The Claims Procedure Order established a bar date of January 6, 2012 for Identified Claimants and a Rolling Bar Date for those who cease employment after December 31, 2010 and who received an Information Statement Package to:
a. Return any Requests for Corrections; and/or
b. File a Form C Proof of Claim in respect of any other compensation related claims.
The Monitor has received approximately 1,500 Request for Corrections forms and approximately 780 Poofs of Claim forms from approximately 2,200 claimants. The Monitor continues to provide copies of these requests and claims to Representative Counsel and counsel to the CAW, as appropriate.
Since the January 6, 2012 bar date, the Monitor has been reviewing the Requests for Corrections and Proofs of Claims received. The process consists of reviewing supporting documentation, identifying the requested corrections or claim and communicating with the claimants for additional clarification or documentation. This detailed process is necessary to ensure the Requests for Corrections and the Proofs of Claims are accurately and fully understood before any determinations are made regarding the claims. Once the review has been finalized, Mercer, the actuary, will be requested to revalue the claim based on the accepted changes.
The Monitor has concluded its review of Requests for Corrections for approximately 850 individuals. These individuals have received one of the following notices:
a. Notice of Acceptance - if all requested changes to personal date points were accepted but did not have any effect on the dollar value of the Compensation Claim;
b. Revised Information Statement - if the Monitor has accepted all the requested changes to personal data points and a change in the dollar value of the original Compensation Claim results. These Revised Information Statements set out the final dollar value of the Compensation Claim in accordance with the Methodology based upon the corrected changes to the personal data;
c. Notice of Disallowance - if all requested changes to personal data points were disallowed;
d. Notice of Partial Disallowance - if some requested changes to personal date points were accepted and others were disallowed. These individuals will have 28 days from the date of the notice to file a Notice of Dispute. If the Monitor does not receive a Dispute Notice within the 28 day period, the Monitor will provide these individuals with a Revised Information Statement as discussed above or, if applicable, will notify the individual that the changes to personal data points did not have any effect on the dollar value of the Compensation Claim; or
e. Monitor Corrected Personal Information - if as a result of the acceptance of one or more of the requested changes to a personal data point provided by the individual claimant, the Monitor made additional/related changes to other data points. These individuals will have 28 days from the data of the Monitor Corrected Personal Information to make changes to the corrections made by the Monitor. If the Monitor does not receive any further changes from the individual within the 28 days period, the Monitor will provide these individuals with Revised Information Statements as discussed above or, if applicable, will notify the individual that the changes to personal date points did not have any effect on the dollar value of the Compensation Claim.
The Monitor also has been reviewing Form C Proofs of Claim. The Monitor has concluded its review of 63 Form Cs and has issued Notices of Disallowance. These individuals have 28 days from the date of the notice to file a Notice of Dispute.
The Monitor has received over 70 Notices of Dispute.
Updating Your Address with CAW, the Monitor and Morneau Shepell
It is very important that Koskie Minsky, CAW, Ernst & Young and Morneau Shepell have your most current address on file. If you have recently moved, you will need to change your address with either, Koskie Minsky, CAW, or Ernst & Young, and with Morneau Shepell. If you change your address with either, Koskie Minsky, CAW, or Ernst & Young, then whichever organization you file your address change with will inform the other one of the change. Morneau Shepell, which administers pension benefits from Nortel's registered pension plans, must be contacted separately.
To change your address with CAW and the Monitor, you need to fill out a Compensation Claims Process Proof of Address Form, click here for the form.
If you do not have access to the internet, contact us and we will send a change of address form to you by mail.
If you need to change your address with Morneau Shepell, you should contact them directly. Their contact information can be found at the end of this Report. Even though many LTD Beneficiaries are not yet in receipt of their Nortel pension, it is still important that Morneau Shepell have your most recent address on file. Since the registered pension plans are being wound-up, there may be option statements or other important correspondence sent to you by Morneau Shepell in the coming months.
STATUS OF THE HEALTH AND WELFARE TRUST
By a series of Court Orders dated December 15, 2010, May 2, 1011, June 21, 2011 and March 2, 2012, the Court approved interim distributions from the HWT to Income Beneficiaries. Cumulative interim distributions in the amount of approximately $34.4 million were made to 761 Income Beneficiaries (including 344 LTD Beneficiaries, 80 SIB Beneficiaries and 337 STB Beneficiaries) during the period from January 2011 to June 2012.
The Court approved a fourth interim distribution from the HWT to LTD Beneficiaries on account of their LTD Life and LTD Optional Life Benefit. The Fourth Interim Distribution, in the amount of approximately $1.9 million, was made to 351 beneficiaries on or about September 30. 2011.
By Court Order dated November 8, 2011, the Court approved a fifth interim distribution from the HWT to individuals on account of Pensioner Life. The Fifth Interim Distribution, in the amount of approximately $21.2 million, was made to 8,783 individuals (including 330 LTD Beneficiaries 8,154 Pensioners and others) during the period from November 2011 to June 2012. There remains a degree of uncertainty regarding the final amount that will be available to distribute from the HWT.
A number of matters impact on the final amount available for distribution from the HWT including the treatment of stale-dated cheques. Sun Life had advised that as of May 31, 2012 there are 5,146 stale-dated cheques outstanding dating from January 1997 onward, with a total value of $1,037,495. Sun Life has advised the Monitor it has a process in place for replacing stale-dated cheques in the normal course when payees come forward and make such a request.
In order to provide greater certainty as to the ultimate cash available for distribution from the HWT, to reduce administration efforts and costs dealing with potential claims of a large number of holders of small value Stale-Dated cheques and given the low level of activity related to clearing of Stale-Dated cheques, the Court has approved the following process for dealing with the remaining Stale-Dated cheques:
a. All Stale-Dated cheques issued prior to September 1, 2003 will be included in the HWT as trust property to be administered by the Monitor and available for distribution to the Participating Beneficiaries.
b. All Stale-Dated cheques issued on or subsequent to September 1, 2003 for an amount less than $100 or payable to a third party medical practitioner will be included in the HWT as trust property to be administered by the Monitor and available for distribution to the Participating Beneficiaries.
c. A reserve will be established for all Stale-Dated Cheques issued on or subsequent to September 1, 2003 in an amount of $100 or more to be administered by the Monitor or the trustee upon direction of the Monitor.
OTHER FACTORS RELATING TO THE HWT DISTRIBUTION
In determining the amount actually remaining in the HWT, the following are some of the other unresolved issues which must be clarified:
a) Investment returns;
b) Treatment of stale-dated cheques;
c) The actual amount of Pensioner Life premiums paid during 2010;
d) The treatment of costs related to expenses incurred prior to the termination of the HWT but not submitted by February 28, 2010;
e) Taxes and administrative costs; and
f) Any fees paid from HWT assets pursuant to the Settlement Agreement with respect to any dispute or litigation regarding the HWT.
There are also uncertainties with respect to the liabilities of the HWT, as previously reported, which include:
a) Changes to the estimated actuarial value of benefits as a result of status changes occurring with respect to the individual, such as recovery or death;
b) The resolution of contingencies: and
c) Updating of data to December 31, 2010.
STATUS OF ALLOCATION MATTERS AND MEDIATION
Orders were issued by this Court and the U.S. Court dated June 17, 2011 pursuant to which various parties interested in the allocation of the Nortel global asset sale proceeds were ordered to mediation in an attempt to find a resolution.
The Honourable Warren K. Winkler, Chief Justice of Ontario, is to serve as mediator.
On August 3, 2011, the U.S. Court entered an order requesting the appointed mediator to consider the postponement of the mediation until after the U.S. Court's decision on motions to dismiss the claims of the EMEA Debtors against the U.S. Nortel entities.
The U.S. Court hearing with respect to the EMEA Debtors' claims took place October 14, 2011. It was not until March 20, 2012, that the U.S. Court entered an order granting some but not all of the U.S.'s motions.
On March 26, 2012 all parties to the mediation, received a letter from the Mediator indicating that they were to file new or revised mediation briefs by April 16, 2012. The Canadian Creditor groups representing employees and pensions filed a confidential brief with the mediator.
A meeting of the parties to the mediation was held on April 24, 2012 in Toronto, Canada. Mediation discussions and information exchanged with the Mediator or among the parties to the mediation is confidential. As such, there is to be no discussions as to the content of the mediation but meetings are being held with the mediator and discussions between the parties have been occurring.
GLOBAL MEDIATION INFORMATION
The Canadian Press
Date: Tuesday Apr. 24, 2012 12:04 PM ET
TORONTO - Mediation over the distribution of almost $9 billion in assets belonging to bankrupt Nortel Networks began Tuesday in one of the most complicated proceedings of its kind.
The effort at settling the myriad creditor claims from Canada, the U.S. and around the world kicked off with Ontario's top judge warning of the pitfalls of failure.
If the parties resort to litigation, Chief Justice Warren Winkler told a room full of high-priced bankruptcy lawyers, it would deplete much of the money now available to creditors, who include pensioners of the one high-flying high-tech company.
"The alternative to a mediated outcome is a lengthy litigation process," Winkler said.
"This would be a catastrophic outcome for some, and unsatisfactory for most of those affected by this case."
The bankruptcy proceedings over Nortel's business lines and intellectual property involve companies in 20 countries on every continent except Antarctica.
Besides Nortel pensioners, others looking for a share of the assets include disabled former employees, bond holders, trade creditors and governments. Legal proceedings are underway in the U.S., U.K., and Canada.
"The Nortel insolvency is one of the most complex trans-national legal proceedings in history," said Winkler, who was appointed mediator by courts in Ontario and Delaware.
"The complexity of this case would make even a conflict-of-laws- professor cringe."
Winkler acknowledged the hurdles he faces; especially since the value of the claims far exceed the residual assets. In addition, two previous efforts at mediating a settlement failed.
Originally founded in Canada in 1895 as an equipment provider for Canada's telephone system, Nortel expanded into a global digital and network powerhouse starting in the mid-1980s.
By 2000, Nortel had $30 billion in annual revenues and employed nearly 93,000 people. The empire began crumbling with the burst of the "dot-com bubble" in early 2001.
In 2004, it was forced to restate its financial results due to accounting irregularities and became the target of shareholder lawsuits. Creditors finally pushed the company into bankruptcy in 2009.
Hard-hit Nortel pensioners, whose pensions have been slashed by 30 per cent in some cases, have resorted to demonstrations, legal action and pressing for tougher legislative protections.
Because no single court has the ultimate authority over the issue, Winkler warned that litigation could lead to conflicting results and endless appeals.
As a result, he said, mediation is essential to a resolution.
He promised a fresh approach - something different from gathering all the parties together to try to hammer out a deal. Instead, he pledged to meet with the various parties individually in an effort to find common ground on which to build a settlement.
STATUS OF FOREIGN PROCEEDINGS
The following is a summary of the court orders that have recently been issued in the U.S. Chapter 11 Proceedings:
a. On April 18, 2012, the U.S. Court entered an order appointing Richard Levin as a neutral mediator concerning the modification or termination of the Nortel Retiree Welfare Plans and the Nortel LTD Plans;
b. On May 24, 2012, the U.S. Debtors obtained an order authorizing and approving procedures to resolve or otherwise settle claims of employees terminated by the U.S. Debtors after the Petition Date;
c. On July 11, 2012, the U.S. Debtors obtained an order authorizing and approving the Fourth Estate Settlement Agreement;
d. On July 11, 2012, the U.S. Court entered an order requiring the Nortel Networks U.K. Pension Trust Limited (as Trustee of the Nortel Networks U.K. Pension Plan) and the Board of the Pension Protection Fund to file amended claims against the Debtors on or before September 5, 2012 and to attach supporting documentation for such claims.
IMPORTANT NOTICE REGARDING PENSIONS
The Following announcement was issued by Morneau Shepell, the pension administrator, regarding reductions to the current payments being made to retirees under the Nortel Negotiated pension plan. The notice advises of the reductions in pension payments that have been expected for a long time. The Pension administrator has been very conservative in its projections regarding the funded status of the plan and therefore has likely reduced pension payment more that will eventually be required, however, it has the right and the obligation to make the decisions it has made.
It is our hope that the current negotiations seeking to obtain more funding for the pension plan will mean that the funded ratio will increase and with it an eventual increase to the now reduced pension benefits retirees are receiving.
IT IS VERY IMPORTANT THAT YOU READ THIS AND CONTACT MORNEAU WITH ANY QUESTIONS YOU MAY HAVE - 1.877.392.2073
Important Announcement Regarding Pension Reductions
This announcement is to advise you of an important issue regarding your pension from the Nortel Networks Negotiated Pension Plan (the "Plan") Registration No. 0587766.
Based on the most recent actuarial valuation as at December 31, 2009, prepared by the prior actuary for the Plan, there were insufficient assets to fully satisfy the benefit entitlements of all members and pensioners.
We have reviewed the current funded status of the Plan and have determined, on a preliminary basis, that there are only sufficient assets to support approximately 75% of the benefit entitlements, excluding indexation, for Ontario service and 57% of the benefit entitlements for non-Ontario service.
These preliminary estimated funded levels are based on conservative assumptions and may be changed later in the wind up process. For example, a claim has been filed against the estate of Nortel for the estimated funding deficiency in the Plan, and we expect that we will receive some recovery on this claim (although the timing and amount payable under this claim are still uncertain). Any recovery on this claim will increase the funded status of the Plan.
The funded level is currently higher for Ontario service than for non-Ontario service because Ontario members do not have the entitlement to future pension indexation (i.e., their benefit value is lower).
We have filed an application with the Superintendent of Financial Services (the "Superintendent") requesting a declaration pursuant to subsection 83(1) of the Ontario Pension Benefits Act, (the "Act") that the Pension Benefits Guarantee Fund (the "PBGF") applies to the Plan.
The PBGF is an insurance-type compensation fund that provides limited protection for pension benefits for members and pensioners who had pensionable service in Ontario in under-funded pension plans in circumstances set out in the Act.
Ontario is the only province with such a fund.
Therefore, rather than reduce all of your monthly benefits for Ontario service to the 75% estimated funded level for the duration of the wind up process, as an interim measure, we will make monthly pension payments up to the amounts guaranteed by the PBGF for Ontario employment. Please note that if a portion of your benefit was earned in a province other than Ontario, this portion of your benefit is payable at the 57% funded level and is not eligible for coverage under the PBGF.
In addition, Ontario legislation provides that when a pension plan is wound up with insufficient assets, indexation after the wind up date is not to be paid unless all other plan benefits have been fully paid. As a result, any indexing applied after September 30, 2010 for pensionable service in Ontario is not eligible for coverage and has been deducted from the monthly payments.
Pensioners have been paid 100% or their benefits subsequent to the wind up date of October 1, 2010, whereas they are only entitled to payments at the funded ratio after that date.
Pursuant to wind up rules, they have been overpaid for the period October 2010 to July 2011 and we have an obligation to recover these overpayments.
Overpayments are being recovered over the estimated lifetimes of the individual pensioners (determined on an actuarial basis).
The reductions necessary to recover these overpayments will vary depending upon the amount of the overpayments and the age of the member. They have been capped at a maximum of 7% of full entitlements, and most reductions are well below this threshold.
Current gross monthly pension payments will be revised effective with the August 25, 2011 payment (tax deductions will be adjusted accordingly):
We regret that such action is necessary in light of the Plan's underfunding, but the Administrator is responsible for ensuring that all members and pensioners of the Plan are dealt with in a fair and equitable manner and in accordance with pension legislation.
Letters have been sent to all pensioners who were in receipt of pension benefits as of October 1, 2010, indicating the amount by which their pensions have been reduced. When you receive your letter, please review it carefully, particularly with regard to the information on your province of employment. If the information is incorrect please refer to the instructions outlined in the letter under "Verification of Province of Employment".
A webinar will be hosted by Koskie Minsky on July 22, 2011, from 1:00 pm to 3:00 pm. We will be participating in this webinar to give you an opportunity to ask questions about this required step in the wind up process.
If you do not have access to the internet, contact Koskie Minsky by July 20, 2011 at 1.866.777.6344 to register for listen-only access.
How will the PBGF benefit me?
Nortel's Defined Benefit plans are underfunded, and there will not be sufficient assets to pay the promised benefits in full. If you worked in Ontario, PBGF will top up the first $1,000 of monthly pension for service that accrued while employed in Ontario.
For example, assume you are entitled to a monthly pension of $2,000 but that at the date of wind-up, the pension plan is funded at 70%. The first $1,000 of your pension will be topped up by the PBGF such that it will paid in full ($700 through the funds in the pension fund and $300 by the PBGF). The remaining $1,000 of your pension will be paid at the 70% value. Therefore, your total pension payment would be $1,700 as opposed to the $1,400 level you would receive if there were no PBGF, or the $2,000 level you would receive if there were no funding deficiency on plan wind-up. If you did not work in Ontario for your entire career, only the portion of your pension which was accrued in Ontario will be subject to the PBGF. This portion will be determined according to the contributions made while working in Ontario, which is based on the age and service requirements in the Plan.
How long will a pension plan wind-up take?
Pension plan wind-ups can take years, even when they are straightforward. Nortel's pension plan wind-up will be lengthy and complicated. Please note that the wind-up administrator (Morneau Sobeco) will permit eligible plan members to commence their pension during the course of the wind-up, subject to receiving the approval of the Superintendent to do so. Morneau Sobeco has already applied for approval under section 70(3) of the Ontario Pension Benefits Act. Note that pensions started during the wind-up will be paid at a reduced rate to approximate the deficient funded ratio of the Plans; similarly, pensions currently in pay will soon be reduced to the same rate. We will continue to provide progress reports with updated information and estimated timelines as the wind-up progresses.
What if I am a member of the defined contribution pension plan?
In the defined contribution pension plan, contributions are fixed, and the amount of eventual retirement income is not guaranteed, like it is in a defined benefit pension plan. Members of the defined contribution plan will not be subject to the same reduction of anticipated benefits.
In order to determine when you are eligible to retire from the defined contribution pension plan, you will need to contact Morneau Sobeco.
A Special Note For Those Who Received LTD
Ontario's Superintendent of Financial Services has made a special provision relating to those who had been receiving LTD benefits and who were employed in Ontario, Alberta and Nova Scotia. FSCO has also approved the transfer of certain sums from the pension plan to the LTD recipients. This approval includes the interim transfer of up to 50% of their commuted value entitlement to a locked-in retirement account, even if the individual is not pension eligible to receive their pension.
The above noted update from Morneau will provide additional information on this option, however, if you have any questions please contact the Plan Administrator at 1-877-392-2073.
Disabled employees have been notified that their employment will be terminated by Nortel as at December 31, 2010. Termination normally triggers a range of options for a terminated employee, including the right to elect an immediate transfer of his or her pension entitlement into a locked-in retirement vehicle. However, the Nortel pension plans are in the midst of being wound up so the normal timing and process will not be applicable.
Pursuant to section 73(2) of the Ontario Pension Benefits Act, in a plan wind-up, all persons entitled to a pension benefit, except pensioners who are already receiving a pension, have a right to transfer their commuted value out of the plan. That is, anyone who is not a pensioner will be offered the portability option. Option statements will be provided to everyone with a plan benefit after Morneau Sobeco has prepared and filed a "wind-up report" for each of the Plans, and the Superintendent has approved them.
All disabled employees will be provided with the option to transfer the entire commuted value of their pension into an authorized locked-in retirement vehicle, or to receive an immediate annuity (if they are retirement eligible) or to retain the right to a deferred annuity, for monthly pension payments in the future. Typically in a pension plan wind-up, this process of providing option statements and allowing lump sum transfers from the plan would not occur until a wind-up report has been prepared and approved. However, we have raised with Morneau Sobeco the serious concern that delays in processing commuted value transfers for disabled employees will cause significant financial hardship. We are discussing with Morneau Sobeco a protocol to permit the calculation and transfer of partial commuted values into an authorized locked-in retirement vehicle for disabled employees who want them. You may not, however, receive the commuted value of your pension in cash.
Those who elect to take their commuted value will only receive the approved reduced transfer ratio of their pensions. To inquire about when you are eligible for retirement, please contact Morneau Sobeco directly.
Lump sum transfers from the Plans are required to be "locked in". The reason why your pension may be transferred to a locked-in vehicle, but not given to you in cash is because, as a general rule, vested pension benefits are not intended to be accessed until you reach retirement age or a qualifying early retirement age under the pension plan. Typically, the assets supporting an employee's "deferred" pension entitlement either remain in the pension plan until retirement age or are transferred out, on a locked-in basis, to another pension plan or retirement vehicle, or used to purchase a deferred life annuity from an insurance company. The public policy behind locking-in is to ensure that pension plan assets are available exclusively to benefit the employee during his or her retirement years. Accordingly, the Ontario Pension Benefits Act prohibits the cash value of a pension benefit from being (1) commuted or surrendered, (2) subject to execution, seizure or attachment, or (3) assigned, charged or given as security.
Exceptions to Locking-In
There are some disabled employees who have expressed concern about their pensions and the locking-in requirement in the legislation. In exceptional circumstances of "financial hardship", members may be able to access "locked-in funds". Financial hardship is a defined term under provincial pension legislation or regulations, and in most provinces there is a special procedure to follow in order to apply for access to the locked-in funds. If you choose to transfer the commuted value of your pension into a locked-in vehicle, the provincial laws of the province where you live will apply in order to unlock those funds. Any members wishing to access pension funds are only permitted to do so according to the applicable pension legislation.
For example, section 67 of the Ontario Pension Benefits Act permits a member with financial hardship to apply to unlock the funds. The applicant can apply based on six qualifying circumstances, which include low income, risk of eviction from home or rented home, money for rental deposit, medical treatment or residential renovations related to a disability or illness. For free assistance filling out the required forms in Ontario, contact the Financial Services Commission of Ontario at 416-250-7250 or toll free at 1-800-668-0128.
You should be aware before applying to unlock funds due to financial hardship that this money is no longer protected from creditors, and may be seized and/or affect your eligibility for certain government benefits. Please contact your provincial pension regulator for questions and assistance with unlocking funds in a locked-in retirement vehicle.
Commencement of Your Pension
If you are eligible for a pension - that is, you have reached your "normal retirement date" or a qualifying age for an early pension under the Plan - and wish to commence your pension during the wind-up, you must contact Morneau Sobeco. You will be provided with a series of forms to be completed. Normally, pension plan administrators request 90 days' notice in order to properly process the paperwork.
What happens if I am not yet pension eligible?
If you have not elected to commence your pension, or you are not entitled to, you will choose between:
- Lump sum commuted value transfer (to be transferred into a locked-in retirement vehicle with amounts in excess of Income Tax Act (Canada) limits taken in cash and subject to income tax); or
- Annuitized deferred pension (based on your age and eligibility for retirement).
You will be provided with an option statement setting out these choices, with the amounts specified, following your termination from Nortel. This process cannot take place until the wind-up report has been completed and approved by the Superintendent.
Will I receive my pension option form right after I am terminated?
Disabled employees have been notified that they will be terminated on December 31, 2010. Under normal circumstances, an option form would be sent to you setting out what you may do with your pension benefit following the termination of your employment. However, because the Pension Plans are being wound up, the process will be different. Typically in a wind-up, option statements are not distributed until a wind-up report has been prepared and approved. This can take 1 to 2 years. We have asked Morneau Sobeco to consider putting into place a special process for disabled employees who are losing their LTD income and are unable to withstand the normal delays.
In meetings on December 17th with the Ontario Ministry of Finance and FSCO, the National Chair of the NRPC, Don Sproule, was provided with a long sought after letter from Minister Duncan concerning the request by the NRPC to proceed with the Financial Sponsorship Model (FSM) as an alternative to conventional wind-up of the Nortel pension plans. The letter is a conclusion to the second review of FSM ordered by the Liberal Government at the end of September 2010.
Key points covered in the letter:
- Acknowledges the arguments made by the NPRC for greater pensioner choice during pension wind-up; i.e., choice beyond the current conventional wind-up-by-annuity.
- Provides a clear statement of government intention that will allow the FSM RFP respondents to proceed to submitting binding proposals. Although we are still many months away from binding FSM proposals, when they are ready, pensioners will have an opportunity to choose between conventional wind-up and the FSM. Full communication of the FSM will be provided when the selection process has been completed to enable pensioners to make an informed decision.
- By mutual agreement between the MoF and the NRPC, the default pensioner option will be conventional wind-up-by-annuity. Pensioners must make a clear choice if they wish to opt out of conventional wind-up and pursue the FSM concept.
It has always been advocated by the NPRC that for eligible Ontario service, the benefits of the PBGF (Pension Benefit Guarantee Fund) must apply to either option; of conventional wind-up or the FSM. We received corroboration of this today. This is extremely good news for those with Ontario service and we further thank the Minister for this confirmation.
The actions of the NPRC Québec executive have been instrumental in advancing options for Nortel Québec pensioners, most recently with the Nortel specific provisions in Québec Bill 129 put forward by Minister Julie Boulet. At the same time, Ray Hounsell, Québec chair, has been at the table during all the Ontario Government discussions over FSM. With this announcement by the Ontario Government, the Québec executive will be moving forward to see how the elements of the FSM can further improve the lot of Québec pensioners.
In the case of most of the remaining provinces, the NRPC has had early indications that provincial administrations would be willing to consider other wind-up options if Ontario takes the lead. This is now clearly the case and as the details of FSM are fleshed out, we will be taking the proposal to those provincial jurisdictions so that pensioners with service in those jurisdictions will also be given a choice.
We have much work to do, but it's time to pause here and without going into names thank the many people that got us to this stage: our advisory team from Koskie Minsky, The Segal Co and RSM Richter, the NRPC national executive, the NRPC Québec executive, and all members who attended the rallies at Queen's Park, signed petitions and wrote to or visited their MPPs and Government Ministers. Special mention goes to the "NRPC 16" who got us a second review of the FSM concept with Premier McGuinty.
Finally, the political process worked and we expressly thank four Ontario MPPs: Charles Sousa, Yasir Naqvi, Bob Chiarelli and Norm Stirling who have worked in support of finding better options for Nortel pensioners.
Ontario Disability Support Program (ODSP) provides eligible disabled individuals and their families with income support and disability support including prescriptions, dental, extended health coverage, and medical supplies. People receiving CPP Disability and their dependants automatically qualify. The family can have a house, and a car, but there are maximum limits for the family's income and assets.
Ministry of Community and Social Services ODSP
351 Preston Street, 2nd Floor, Ottawa, ON K1S 3H8
General Inquiry: (613) 234-1188 / Toll Free: 1-800-267-5111 / TTY: (613) 787-3959
Fax: (613) 783-5958
Click here to visit the website.
Ontario Trillium Drug Program is intended for Ontario residents under age 65 who have a valid Ontario Health Card and who have high prescription drug costs in relation to their household income. The program runs from August 1 of one year to July 31 of the next and you have to pay a deductible, which is based on your past income. You must indicate that your healthcare coverage and LTD income stopped as of Dec. 31, 2010. Details and application forms can be found at your pharmacy or online. Phone 1-800-575-5386 or refer to the website.
In Nova Scotia, there is the Income Assistance program, which provides people in financial need with assistance for basic needs such as food, rent, utilities like heat and electricity, and clothing. In some cases emergency dental care, vision care and prescription medications can also be covered.
Disability Links for Income Support: http://www.gov.ns.ca/disa/income.htm
Nova Scotia - Pharmacare: http://www.healthquotes.ca/MSI-Nova-Scotia.aspx
General Inquiries: 1-902-429-6565 (local) or 1-800-544-6191 (toll free)
We were in contact with the Director of the CPP Disability program regarding the program and how the termination of the LTD plan might impact our members. In our discussions, it was suggested that those who are not in receipt of CPP disability benefits should reapply as there might have been a change in circumstances which would result in a granting of benefits. It was also suggested that those who have not done so call CPP to ensure that they are receiving the maximum CPP disability benefit available.
Call: 1-800-277-9914 and is accessible from anywhere in Canada - TTY: 1-800-255-4786
Or cick here to visit the website.
In addition, the Government of Ontario established the Trillium Drug Program (TDP), which is intended for those who have high prescription drug costs in relation to their net household income. The TDP contact information is:
P.O. Box 337, Station D
Tel : 416-642-3038
Fax : 416-642-3034
Toll-Free : 1-800-575-5386
E-mail : email@example.com
Other provinces may have similar programs, which will likely be administered through their respective Health Ministries.
If you are a CAW-Canada member who is currently at work or on LTD, or if you are currently retired and were formerly represented by the CAW-Canada AND YOU SIGNED A RETAINER AGREEMENT WITH THE CAW - you can provide us your e-mail address and receive future correspondence by e-mail - firstname.lastname@example.org
The Nortel Retirees and Former Employees Protection Committee - http://www.nortelpensioners.ca/
Barry E. Wadsworth
CAW-Canada Legal Department
An initial meeting of the parties to the mediation was held with The Chief Justice on April 24, 2012 in Toronto, Canada. The Chief Justice then engaged in discussions with each of the parties between August and October of 2012. During those meetings the Chief Justice asked each group to submit a proposal on how the remaining assets of Nortel should be distributed. Those proposals have all been submitted by the various world-wide creditors.