Nortel Networks Corp. is looking to take back some $37.9 million in retirement savings that has been put away over the last decade by its top U.S. executives, the Wall Street Journal reports.
The company says the money is in a deferred-compensation plan that participants understood was a “risky undertaking,” because terms allow Nortel to take the retirement savings if the company ran into trouble.
The filing was done in a e U.S. bankruptcy court and once a judge signs off on the settlement the money executives put away in the trust becomes company property. Nortel didn’t name names in the court filing but it involves “a select group of management and highly compensated employees” in the U.S.
According to the company, the deferred-compensation plan it created in 2000 is a “rabbi trust,” which falls outside the protection of U.S. pension laws. Executives were offered an opportunity to delay taking up to 80% of their base salary, and up to 95% of commissions and bonuses, by putting the money in the trust.
The expectation was that they would draw on their earnings after retirement, when tax rates were lower. Nortel says the deal included an understanding that in the event of bankruptcy, the participating executives would get in line with other unsecured creditors to await payment under a Chapter 11 plan.
The move on the executive retirement pay comes as creditors await a definitive statement of what they can expect to collect at the end of Nortel’s Chapter 11 case. It is estimated that Nortel has about $5.7 billion in debts to resolve.