OTTAWA — It’s up to voters to decide whether the Ontario Liberals are trying to buy votes in an upcoming Ottawa byelection by providing an estimated $200 million to help Nortel pensioners or just doing the right thing, Premier Dalton McGuinty said Monday.
“I have a tremendous amount of confidence in voters to draw whatever conclusions they feel are fair and to make their decisions accordingly,” he said.
His government has an “obligation” to Nortel workers who put so many years into the now insolvent company and are worried that they’ll lose their retirement income because its pension plan is underfunded, McGuinty added.
The move comes just a week after a March 4 byelection was called in the riding of Ottawa West-Nepean — where many of the pensioners live — and just a few days after the party’s star candidate Bob Chiarelli urged the government to help Nortel retirees.
Last week on the eve of a Toronto byelection, the government also promised an estimated $15 million to keep a threatened hospital from closing in the downtown riding. The Liberals ended up hanging onto the seat.
Opposition critics accused McGuinty of trying to buy another byelection on the backs of seniors, but the premier brushed off suggestions that his timing was suspicious.
“(The pensioners) have been asking us for an answer for a long time,” said McGuinty.
“Some have suggested that we should keep this a question mark until after the byelection. I think that would be unfair. I think people are entitled to know where we stand on this issue.”
If McGuinty really wanted to help those pensioners “out of the goodness of his heart,” he would have done so eight months ago when they asked for help, not when they’re about to head to the polls, said Progressive Conservative Lisa McLeod.
“He played the worst kind of politics with people’s lives,” she said.
“He strung seniors along for months who were worried about their future, all so he could give Bob Chiarelli a nice media hit in the middle of an election campaign. He put the ’buy’ in byelection.”
But the government would have been on the hook for a much larger amount of money if it had jumped in to help Nortel pensioners a year ago, said Finance Minister Dwight Duncan.
The valuation of Nortel’s pension plan has changed “dramatically” over the past year, he said.
“Quite a bit has changed, and we took this step as a result of a variety of those factors,” he said.
“We laid the groundwork for taking this step more than a year ago.”
It’s not yet clear how much the move will cost the province, which is already grappling with an unprecedented $25-billion deficit this year alone. But a loan of about $100 million to $200 million will likely be required, Duncan said.
That will ensure that there’s enough money available under the Pension Benefits Guarantee Fund to help Nortel once it emerged from bankruptcy protection, he said.
The fund provides Ontario’s pensioners with up to $1,000 a month in the event a pension plan fails to provide its full benefit, or any at all. It is funded by corporate contributions, and the government has no legal obligation to top it up.
In the past, the government has found ways to support the fund when it has been insufficient to meet demand, including when farm equipment maker Massey Ferguson and Algoma Steel filed for bankruptcy during previous recessions.
But the plan is dramatically underfunded and the province has injected about $130 million since the spring to help cover some of the smaller claims.
Duncan said he expects that there will be others “in the queue,” but none have triggered a claim for benefits under the provincial fund.
Don Sproule, president of the Nortel Retirees and Former Employees Protection Canada organization, said the move to bolster the provincial fund will affect about 8,000 pensioners and 4,500 others.
“I wish we’d known this a lot earlier because it’s a slow-motion train wreck waiting to happen,” he said.
There are about 17,500 ex-Nortel employees who are collecting pensions or have a deferred plan, Sproule said.
Only those who worked in Ontario would be able to qualify for the provincial guarantee plan, which is unique in Canada although others exist in the United States and Britain.
Payouts that result from a windup of the pension plan would really only benefit those pensioners earning $12,000 a year, Sproule said.
Nortel’s pension plan is about 30 per cent underfunded, and the guarantee fund doesn’t contain enough money to cover the shortfall. If the guarantee fund kicks in, workers would get up to $1,000 a month.
That means anyone earning more than $12,000 would only get 70 per cent of their pension.
Many pensions are closer to $22,000 a year, so those people would see a big drop in their monthly income.