The underfunded Nortel employee pension plans will benefit from the $7.2 billion sale of the company’s assets, but the creditor line is long and even this large sum of cash isn’t expected to put the fund back in the black.
“It’s certainly unrealistic that it’s going to fill up the hole completely,” said lawyer Susan Philpott of Toronto-based Koskie Minsky LLP, representing former Nortel employees. “We know there is going to be some recovery for the pension plan. We don’t know how much of that underfunding or that deficit will be covered, but it will be some portion of it,” she said.
“There’s not enough money to go around,” said Anne Clark-Stewart of the Nortel Retirees and former employees Protection Canada, estimating the company’s Canadian pension is underfunded by about $1.5 billion.
Nortel retirees will start seeing cuts to their pension cheques in late August and should receive an update from the pension administrator about just how deep those cuts will be on July 22.
Pensioners have been receiving full pension benefits since the windup of the plan began in October 2010.
The cuts will be interim, says Clark-Stewart, until Nortel’s global creditors—including about 11,600 Canadian pensioners—have been paid, a process that’s expected to be lengthy.
The numbers
The average annual pension for a unionized Nortel employee is $12,800 and $22,500 for managerial and non-unionized employees, she said.
According to Clarke-Stewart, Ontario unionized members will get 75% of their non-indexed pensions and non-managerial staff will get 70%.
Outside Ontario, union members will get 59% of their indexed pensions and non-union pensioners will get 57%, she said.