If you like soap operas, communications, technology, bankruptcies and pension liability discussions, this well-researched and well-written article by TMC’s Brendan Read makes for interesting reading.
Here is an excerpt:
Tony Marsh, for the Nortel Retirees Protection Committee, told TMCnet that Nortel’s Canadian pension liability is over $2 billion but is only 69 percent funded. There are no national pension guarantee funds in Canada unlike in the United States and the United Kingdom. There is only the Ontario program, the Ontario Pension Benefit Guarantee Fund.
“The agreements with Ericsson, Avaya (News – Alert), and probably the buyers of Nortel’s remaining assets will absolve them of the pension liabilities, while the proceeds from the sales will be held in escrow until the sales are finalized,” Marsh told TMCnet. “The question then becomes who gets what. The American and British governments staked their claims over the proceeds, but we have heard nothing from ours, which causes us to worry.”
Unfortunately for the 17,500 Canadian Nortel retirees, provincial government decisions to give the ailing auto sector funding ‘holidays’ had led to the PBGF being depleted.
Even when fully funded it only guarantees up to the first $12,000 per pensioner per year.
In contrast for example the PBGC will pay a maximum guaranteed amount of $54,000 for a 65-year-old American Nortel retiree. There are some 23,000 U.S. Nortel employees and retirees. The fund says the Nortel Networks Retirement Income Plan is 58 percent funded, with assets of $716 million to cover benefit liabilities of $1.23 billion, according to PBGC estimates. The agency says it expects to cover the entire $514 million shortfall.