CTV reports that Nortel pensioners protest bankruptcy laws in Ottawa:
Former Nortel employees gathered on Parliament Hill to ask for government help to ensure they continue receiving pension and disability payments - regardless of what happens to the beleaguered telecommunications firm.
Organizers said ex-Nortel employees were bussed in from Montreal and Belleville to attend the demonstration, which took place at noon on Wednesday. They were accompanied by Canadian Auto Workers union members and leaders from several federal opposition parties.
The protesters are seeking amendments to national bankruptcy laws. Their goal is "to give pensioners and people affected by the Nortel insolvency a higher priority ranking in the bankruptcy courts," Don Sproule, chairman of the national committee for Nortel pension plan members, told CTV News Channel on Wednesday.
Nortel filed for bankruptcy protection in January. Since then it's been selling off assets. And in June, the company's shares were delisted from the Toronto Stock Exchange.
Former employees say their pensions are less than 70 per cent covered because the company is in bankruptcy proceedings.
Pensions are a provincial responsibility in Canada. But bankruptcy laws are federal, and the protesters say their pension and disability payments are not protected under the current legislation.
"Right now, unsecured bond holders are treated the same as Canadian seniors who have pensions from their employers," said Diane Urquhart, a financial adviser who has been working with ex-Nortel workers.
Bloc Quebecois leader Gilles Duceppe, NDP leader Jack Layton and Liberal leader Michael Ignatieff were expected to join the protest.
Speaking earlier on Wednesday, Ignatieff said he wanted to thank the Nortel pensioners "for stepping up and making the question of pension security, particularly the question of pension security in the case of bankruptcy, the national issue that it's become."
Ignatieff pledged to work with the group to change federal bankruptcy laws to "make sure this kind of thing never happens again to another Canadian."
Sproule said Nortel is paying out around an average of $12,000 per year for unionized former employees. Former white-collar employees receive approximately $22,000 a year.
"So you take a 30 per cent haircut off that, and it's going to leave people in real hardship, in possible poverty and having to sell their house," he said.
Nearly 20,000 workers have been affected by Nortel's financial troubles, according to Sproule. About 17,500 are pensioners. Another 2,000 were let go without severance, and 450 remain on long-term disability from the company.
"The feds like to talk about how sound our financial system is and how we weathered the financial crisis today because of sound legislation," Sproule said.
"I don't think anyone was watching the store in terms of what was happening to pension plans. This dirty little secret's been going on for a long time. It's only the high-profile cases like Nortel that are causing the issue to percolate to the top again."
You should watch the accompanying video from CTV which shows interviews with Ken Georgetti and Diane Urquhart. I agree with both of them. We need pension insurance for all Canadian workers and we need to change bankruptcy laws to secure the pensions of workers ahead of the interests of bondholders.
John Ivison of the National Post reports that pension problems could become a hot issue:
Emile Ahad is an unlikely rabble rouser. Yet the smartly-dressed Nortel 71-year-old pensioner stood shoulder to shoulder with Teamsters union members, at a big rally on Parliament Hill on Wednesday, waving his placard and nodding in agreement with labour leader Ken Georgetti.
“If Nortel won’t fulfill its responsibilities, it’s up to this Conservative government,” said the firebrand president of the Canadian Labour Congress, to applause from a crowd that included leaders of all three opposition parties. “This will be the number one issue at the next election,” predicted Mr. Georgetti.
Mr. Ahad was a research and development manager for the failed telecom giant for 20 years before retiring a decade ago. He said that he hasn’t been affected by the company’s move into creditor protection yet but fears be may see his pension reduced by up to 40% and his health benefits swept away when the company declares bankruptcy. “It would be a big blow,” he said, giving a sense that this was said with some understatement.
The fear is very real. Nortel is operating in creditor protection to restructure its debts. Companies are bound to keep operating their pension plans while they are still in business but, if they go under, they are allowed to wind up those plans. Since there is an estimated $1.8-billion shortfall in the Nortel plan, this could mean that pensioners see their income cut.
Employees are currently at the bottom of the heap when it comes to being paid from the sale of Nortel’s assets and are asking the government to intervene and reform the Bankruptcy Act to make them secured creditors, eligible for payment ahead of others owed money.
The issue came up in Question Period on Wednesday but Tony Clement, the Industry Minister, stuck to the government’s line that Nortel operates a provincially regulated pension plan, so get off our lawn and go bug Dalton McGuinty (I paraphrase). The Ontario government has said that it is looking into the issue, while the Quebec government has offered to manage the Nortel pension plan for members in that province until such times as asset values rebound.
But this is the classic example of Canadians being agnostic about which level of government intervenes — they just want action.
The NDP was first party to recognize the potential to harvest votes among workers worried about their pensions.
Jack Layton will unveil his latest plan this morning, which is likely to include a national pension insurance program that will guarantee pensioners a minimum monthly income in the event of bankruptcy and plan failure.
Michael Ignatieff, the Liberal leader, told the massed ranks of Nortel pensioners that he supports amending the Bankruptcy Act to ensure pensioners get fair treatment.
But Keith Ambachtsheer — who as director of the Rotman International Centre for Pension Management at the University of Toronto probably knows more about this issue than anyone in Canada — thinks the long-term answer lies in neither pension guarantees, such as those that operate in the United States and the United Kingdom, or in tinkering with the Bankruptcy Act.
Mr. Ambachtsheer pointed out that that the Pension Benefit Guaranty Corporation in the U.S., the federal body that will ensure American Nortel pensioners get 100¢ on the dollar, has huge unfunded liabilities and is widely considered a failure. The U.S. Comptroller General has testified to Congress that the federal guarantee encourages companies to leave a shortfall in their pension plans the government is obliged to fill.
A commitment to guarantee all defined benefit pension plans would be paid for by all Canadian taxpayers, including the five million that don’t have company pension schemes, Mr. Ambachtsheer pointed out.
As for changes to the Bankruptcy Act to ensure Nortel pensioners rank above vulture funds and foreign governments, he said there are problems with the proposals being forwarded by retiree groups. “The problem here is that you can’t do it retroactively. [Also] you start getting into how high do they rank? Do they come in ahead of secured creditors? It would just be another feast for the lawyers,” he said.
His preferred proposal is to for companies to treat their own pensions the same way that banks and insurance companies are obliged to treat their customers — that is, the introduction of regulations that ensure companies have enough assets on their balance sheets to meet their obligations.
At the moment, many companies bet the stock market with up to half their assets in order to provide pension plans that offer lavish benefits. In the bad times, this leaves them with huge pension shortfalls.
In the Netherlands in 2002, the central bank found a solution by regulating pensions in the same way it regulates banks and insurance companies. Over the course of an extended phase-in period, they forced companies to inject more cash into their employee retirement funds to cover their promises, with the result that businesses watered down the pledges they made to their pensioners. These “target” pension schemes — where companies guarantee a minimum payment and distribute more if there’s anything left — provide a clean solution to the problem of under-funding because they split the cost of a falling market between the employer and employee.
Of course, this is all cold comfort for Mr. Ahad and his former colleagues, who face an imminent, and potentially devastating, hit to their standard of living.
They are unlikely to be impressed that the entire class of 2004 MPs will be eligible to retire on full pensions next year, including Conservatives MPs Pierre Poilievre and Andrew Scheer, both age 30.
Unless governments at all levels pull together to come up with progressive solutions to this short-term problem, Mr. Georgetti’s prediction that this becomes the sleeper issue in the next election may well be proved correct. As one sign on Parliament Hill noted yesterday: “Seniors vote.”
When I testified on Parliament Hill last April, I knew it be a matter of time before pensioners would be protesting their cuts in pensions and benefits. As much as the images of Nortel pensioners taking it to the Hill disturb me, they are nothing compared to the mass protests we'll see all around the world in the future when the pension crisis reaches a boiling point. Politicians should take this as a wake-up call and act in the best interests of all citizens.
Canadian governments are dithering as victims of the Nortel Networks collapse face an uncertain future of big cuts to pensions, severance and long-term disability benefits.
But two U.S. government bodies are not wasting any time. They have moved aggressively to lock down some assets of Nortel Networks to protect U.S. pensioners and taxpayers.
The Internal Revenue Service and the Pension Benefit Guaranty Corp. have effectively tied up the assets of two choice U.S. subsidiaries -- Nortel Government Services and Diamondware -- in the $915-million sale of enterprise assets to Avaya.
By applying strategic legal pressure, they forced Nortel to make the concessions in a U.S. bankruptcy court in Delaware or face big expenses and threats to the deal.
At first blush, it looked like the IRS gave up its claim to $3 billion in taxes and accumulated interest in return for Nortel agreeing that it owes $9.8 million in alternative minimum corporate taxes on the subsidiaries. In fact, the IRS is marking time and can still lodge the original claims.
A Delaware bankruptcy court approved the IRS deal Tuesday. "We'll deal with (the tax claim) later," James Bromley, a lawyer representing Nortel, told Bloomberg News.
The PBGC, which will back 23,000 current and future U.S. Nortel retirees for as much as $54,000 U.S. each, seized the wobbly U.S. plan in July. Since then, the PBGC exposure has jumped to $593 million from $514 million.
The move was shrewd. There was a chance that the two subsidiaries might have slipped through the net because Nortel did not put them into bankruptcy protection.
But for many Canadian creditors, the action means the global struggle for Nortel assets just got more complicated, and U.S. creditors have a new edge.
Meanwhile, Canadian creditors, who were counselled to work together rather than disrupt the process by demanding immediate consideration, are wondering if that was a big mistake.
Certainly, the actions of the IRS and PBGC suggest that there is nothing wrong with kicking up a fuss.
One of the most frightened groups is also the smallest. An estimated 409 Nortel employees are on long-term disability. Because their benefits are supported by Nortel operations, rather than insurance plans, they fear the payments could be swept away once Nortel assets are dispersed.
Arlene Plante, who has been on LTD since 2000, said we "are a bunch of sick people ... who are getting sicker by the day because of the stress of the bankruptcy, getting ignored and forgotten more as each day passes."
She fears their interests could be squeezed just as LTD beneficiaries were major losers in the bankruptcies at Eaton's and Massey Ferguson.
Plante said that the U.S. and British governments are helping their Nortel LTD employees, "but the Canadian government is the only one that seems to have no problem with (us) having to fight for a disability pension in a court for a corporate bankruptcy.
"We're selling off our properties and some will have to leave nursing homes and likely end up languishing in hospitals where we don't belong."
Nancy Ekiert, also on long-term disability, said LTD recipients have fewer rights than people still on Nortel payrolls. "Nortel says that we are still employees but we have no guarantees if we are eventually able to work that there will be jobs for us at Ericsson or other companies buying Nortel assets."
She fears the LTD cases will be overlooked as lawyers juggle the interests of more than 20,000 Canadians seeking Nortel pension benefits and severance payments.
Still, there is some hope for Nortel survivors.
The Quebec government moved last week to bring the 6,000 Nortel pensioners in Quebec under a provincial pension plan regulator. Rather than face having their benefits slashed, the Quebec pensioners could get five years of breathing time to rebuild a depleted pension plan.
Meanwhile, the Ontario and federal governments dance around the problem, trying to divert responsibility.
At a time when 70 per cent of Canadians have no workplace pension benefits, putting tax dollars into the moribund pension and benefit plans of a mismanaged global corporation is a tough sell.
The stalling could continue indefinitely, or both levels of government could engineer a bailout, similar to last year's rescue of Canadian asset-backed commercial paper investors, with taxpayer exposure limited to loan guarantees.
If all else fails, the LTD and other Nortel beneficiaries will have to pray that judges handling the Nortel bankruptcy on both sides of the border use their substantial powers to direct a substantial chunk of Nortel assets to the most vulnerable.
The Calgary Herald reports that the NDP's Jack Layton urges mandatory insurance to protect pensions. CBC radio's The Current covered pensions on their October 22nd show, which included interviews with Ted Menzies, Member of Parliament for MacLeod in Alberta, and Karen DeBortoli, director of the Canadian Research and Innovation Centre at Watson Wyatt. The Ottawa Citizen reports that the Quebec government guarantees Nortel pensions.