The Ontario government has changed its mind and now intends to give ex-Nortel employees the choice to opt out of a windup plan for their pension and enlist private financial institutions to manage the pension fund.
Finance Minister Dwight Duncan informed the group that the province plans to introduce legislative amendments that would give Nortel pensioners a choice to invest in life income funds. Last year, Duncan had rejected a similar proposal as too risky.
The government will give retirees the option to stay in the pension plan and have their pensions wound up as part of the company’s bankruptcy process. That means those plan members would be eligible to have their pension payments topped up by the province’s Pension Benefits Guarantee Fund, which is only available for pension plans in liquidation.
“The government intends to move forward with a solution that will respect pensioner choice while safeguarding benefit security,” Duncan told the Nortel retirees committee in a letter sent December 17.
Retirees urged the province’s Liberal government in the fall to rethink the original decision, saying many plan members felt winding up the pension plan and locking in a massive shortfall was an even worse alternative. They also complained about having to convert the pension plan into annuities at a time when interest rates are extremely low and pricing is unattractive in Canada’s thin annuity market.
In changing the prior decision, Duncan said the government will require pensioners to be given full disclosure of the risks of opting to convert their pensions into a new investment fund, which includes losing the certainty of pension payments that they would receive if the money is immediately converted into an annuity.
The default choice will continue to be wind up and the purchase of annuities unless retirees actively choose the alternative option.
But the news is less positive for 400 former Nortel employees that had their long-term disability benefits cut.
Disability benefits for the employees were to cease at midnight on December 31, 2010 as part of a court-approved pension settlement among Nortel and its former employees.
The federal government has nixed an opposition proposal to give the affected workers preferred creditor status when Nortel is finally dissolved, effectively changing the settlement retroactively. But Industry Minister Tony Clement has said the government is working on “real solutions” for the employees.
While these solutions are being sought, the government is urging the workers to check if they’re eligible for disability benefits under the Canada Pension Plan and has promised to expedite a review of all such applications.
Ottawa is also working with the provinces to ensure access to all available provincial disability programs.