Pressure rises to protect our pensions

Nortel workers could lose 90 per cent of their severance pay

Pressure rises to protect our pensionsAt long last, there is a ray of hope for workers whose employers have filed for bankruptcy. Currently pensioners, the disabled, and employees owed severance pay are treated the same way as banks and other sophisticated creditors: when a company goes under, they have to get in line to fight for a piece of what’s left with everyone else.

But a group of former Nortel employees is looking to change that. They have asked the federal government to make an emergency amendment to the Bankruptcy and Insolvency Act to give preferred status to the claims of pensioners, the disabled and severed employees—essentially putting workers at the front of the line.

In principle, there is already agreement to consider the amendment amongst all the federal political parties. Driven by concern that Nortel pensioners could lose 30 to 40 per cent of their pension income, on June 16 NDP MP Wayne Marston (Hamilton East- Stoney Creek) introduced a motion in the House of Commons to look into putting pension fund claimants ahead of other creditors in the event of bankruptcy proceedings. It was passed with unanimous support.

“I am optimistic that politicians could consider making the emergency change when they come back to the legislature in the fall,” says Diane Urquhart, a financial analyst and adviser to the Nortel Pensioners and Severed Employees. “Our bankruptcy law is way out of date with respect to new developments in the marketplace.”

Still, the amendment protecting pensioners is only the first step. According to lawyer Philip Slayton, disability plan members and severed employees need more protection too. The amount of money remaining for them is “grossly inadequate,” he says.

In fact, says Urquhart, if things don’t change, many disabled Nortel employees and employees owed severance pay will likely lose 90 per cent of the money they’re owed—income that is “otherwise obligatory under employment standards set by provincial laws and common law precedents.”




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Pressure rises to protect our pensions

  1. Such a plan leads to (un?)intended consequences. Any law that pushes current high-level creditors down a major notch (to let in the pensioners) will necessarily increase the burden of being such a creditor watching others butt in. As a sudden rule-change, it is unfair to current creditors (some of whom are no doubt bondholders like, oh, say, other pension funds!). As a "from this point forward" rule change, it will permit potential creditors to better evaluate their investments.

    • Just remember that we (disabled employee) are not butting in, we have been paying high premiums for benefit coverage that was suppose to guarantee our disability income, and therefore we rightrully should be at the top of the list of priority to be paid. You creditors (vultures) should only get what is left only after obligations are met, because you guys did not pay for it. You only invested hoping to pounce on these senarios, to make money off of hard working or unfortunate disabled employees that having been flung into these awful situations.

      • Wow. Try to control the venom.

        I am NOT a current Nortel creditor, to the best of my knowledge. Maybe the kids' RESP mutual fund has a bond or two, but I hope they had more sense than to lend a penny to this sick puppy. So you can cancel the "vulture" crap. BTW, it also doesn't apply to the real people and businesses who lent your sorry-ass company the money in the first place.

        You therefore "rightfully should be" wherever the laws of the country have placed you. Sniveling about vultures now is a convenient way to crap on the folks who gave your business a chance and are themselves now getting taken to the cleaners.

        Got any more whining in you? Maybe the taxpayers now owe you a living? Go on, give it a try.

        • a person who worked for years in company and gets injured on job and is fully
          disabled and has paid into disability plan should get lined up ( AFter all the lawyers and CEO bonus's are paid) to fight for his life for what ever is left over. . This person is fighting for his/her life not just extra income. Many are in critical condition . Some might even die waiting for treatments. We are talking about money but life or death for some. If their treatment is cut ( ie benefits) there is no other options.

    • Butting in is most acceptable as it is the butter inners that created the value for Nortel in the first place !

  2. There is no balance or fairness in Canada's Bankruptcy and Insolvency Act, which treats bond claims as equal to pension and LTD plan deficits and severance claims, given that bond owners had access to insurance for their losses in bankruptcy through the credit default swap market, while Canadian pensioners, LTDs and severed employees have no such access to insurance. In the Nortel case, the Nortel hedged bond owners are making an estimated 28% profit from the bankruptcy, while the pensioners are expected to lose 28% of their income. The impact of preferred status for employment related claims over the unsecured creditors will have only a very nominal impact on the cost and availability of debt for corporations, since only a small proportion of corporations enter bankrutpcy proceedings.

    The Canadian BIA should be amended to restore its original intention to provide fair treatment amongst creditor classes, with accessibility to insurance against loss being a paramount consideration in this decision.

    • If the rules need changing, that's fine. Get 'em changed. Just don't suddenly expropriate the position of current nervous creditors. I can think of no finer way to telegraph to the world that Canada ranks with nationalizing-mess Venezuela as a good place to do business. Good luck with the jobs thing when that happens.

  3. Nortel Ltders are set to soon lose their LTD payments, their Health Benefits plan, and their life "insurance" when the "Trust" that holds the funds for these benefits runs out of money. This is because this "Trust" is underfunded and uninsured, which is the crucial major downside to employees in ASO benefit plans. These plans have been around for the last thirty years, with the implicit backing of the federal and provincial governments, since they allow them to exist! They know the risk that these plans pose to employees, and yet they do nothing. The change to the BIA is an attempt to get the government to realize that these ASO benefit plans cause financial turmoil and even ruin for employees experiencing company bankruptcy. There needs to be insurance and proper funding regulation of private sector employee benefit plans, so this turmoil does not happen in the first place. Our government needs to step up and make these changes NOW. After all, the government's employees' benefit plans are properly insured and funded, and our taxes help fund them! Isn't the government supposed to look out for the welfare of all its citizens, not just the ones working for the government????

    • So what I'm saying is that the government needs to make changes to ensure the safety and endurance of private sector employee benefit plans, just as it has ensured the safety and endurance of government employee plans. This may mean businesses and their employees will have to pay more for insurance and plan funding up-front, but at least that means less chance of financial devastation if the company goes bankrupt.

  4. IT IS ALL WELL AND NICE TO PLEAD FOR THE CREDITORS THAT HAVE ALL LAWS ON THIER SIDE, BUT, I GAVE 37 YEARS OF MY LIFE WITH THE UNDERSTANDING THAT I HAD A PENTION , A HEALTH CARE PROGRAM, AN INSURANCE POLICY AND A SURVIVOR BENIFIT PLAN.NOW, SOME PEOPLE SAY THAT I, AND ALL OF US RETIRED EMPLOYES, DO NOT MATTER..
    IF IT WAS YOU, AT 63 YEARS OLD, WOULD YOU CALL IT " WINING" ?
    WAKE UP BUDDY.

    • Monsieur Tardif, after so many years at a technology company, you may have acquainted yourself with the "caps lock" feature of standard computer keyboards. What you may not have learned is that this is a "toggle" feature, and can be turned off. Try it, you might like it.

      I am not pleading for the creditors any more than I am pleading for you. I am pleading for the rule of law, so that everyone knows where they stand. A retroactive slap to creditors (themselves real people, too, I am sure) will do a lot of damage to the overall investment climate in this country, and should not be taken lightly.

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