MONTREAL — Former Nortel employees can expect to have their underfunded pensions topped up with their share of the proceeds from the $7.2 billion sale of all its assets from the bankrupt telecom company, but it might not be enough to fully reverse the cuts.
“It’s certainly unrealistic that it’s going to fill up the hole completely,” said lawyer Susan Philpott of Toronto-based Koskie Minsky, 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 Tuesday.
Nortel pensioners will learn more about cuts to their pensions that will begin in late August when they get an update from their pension administrator this Friday.
“They’re all being severely impacted,” said Anne Clark-Stewart of the Nortel Retirees and Former Employees Protection Canada, who has calculated that she will lose 27 per cent of her pension.
“I already have pensioners who are friends and are moving in with each other,” she said. “I know there are other cases where widows have had to move in with their children. A lot of people are selling their homes, just like I am.”
The last of Nortel’s assets — more than 6,000 patents that include technology that’s expected to be the backbone of wireless networks for the next decade — was sold on July 1 for $4.5 billion.
Philpott said the recent patent sale has “really kind of motivated everyone, I think, to try and get this done because there’s a lot of real money at stake.”
Industry Minister Christian Paradis said Tuesday that the Nortel patent sale to a consortium including Research In Motion Ltd. (TSX:RIM) does not need to be reviewed under the Investment Canada Act.
The pension cuts will be interim until Nortel’s global creditors, including about 11,600 Canadian pensioners, have been paid, a process that’s expected to be lengthy, Clark-Stewart said.
The proceeds from the sale of Nortel’s assets won’t be enough to restore pension cuts with numerous other creditors also looking to be paid, she added.
“There’s not enough money to go around,” Clark-Stewart said, estimating the company’s Canadian pension is underfunded by about $1.5 billion.
The average annual pension for a unionized Nortel employee is $12,800 and for managerial and non-unionized employees it’s $22,500, Clark-Stewart said. The average age of the roughly 11,600 Canadian pensioners is 74.
In Ontario, unionized members will get 75 per cent of their non-indexed pensions and non-managerial staff will get 70 per cent, Clark Stewart said. Outside Ontario, union members will get 59 per cent of their indexed pensions and non-union pensioners will get 57 per cent, she said.
Clark-Stewart said retirees had been receiving full pension benefits since last Oct. 1 when the windup of the underfunded plan began and the overpayments since then are going to be clawed back.
Philpott said it could be a year from now when creditors are paid from the assets sales.
“When that happens we do expect the pensions to be adjusted upward to reflect that influx of money,” she said, adding she is prepared to wait for a good deal.
“We’re not going to rush into an allocation of the assets that isn’t the best we can possibly get for our group.”
Philpott also said the U.S. and Canadian courts have ordered creditors in Canada, the United States and United Kingdom to take part in mandatory mediation this fall to resolve jurisdictional disputes concerning the allocation of assets.