Nortel Networks Corporation – 78
February 16, 2011
Morneau Shepell Ltd. (“Morneau”), the Administrator of Nortel’s pension plans, recently has made several announcements related to Nortel’s pension plans. To access full information provided by Morneau about these announcements, please visit the Morneau website at http://www.pensionwindups.morneausobeco.com
Superintendent’s Approval for Commencement of New Pensions
Over the past several months, members of Nortel’s pension plans who recently became eligible for retirement have been experiencing delays in the commencement of new pensions. Morneau has now received consent from Ontario’s Superintendent of Financial Services to start new pension payments at a level of 50% of full entitlement. For Plan members with Ontario service, new pensions will take into account any amounts payable under Ontario’s Pension Benefit Guarantee Fund (PBGF). From what we understand, this means that for individuals who worked their careers in Ontario, new pensions that are commenced at a reduced rate of 50% will be topped up by the PBGF to ensure that the first $1,000 is guaranteed. Therefore, a member with Ontario service who is entitled to a pension of $1,000 per month under the Plan rules will start their pension at a level of $1,000 per month (half of which is paid by the pension fund and half by the PBGF). A member with Ontario service who is entitled to a pension of $2,000 per month will start their pension at a rate of $1,500 (the first $1,000 of which is guaranteed by the PBGF and the second $1,000 to be paid at a reduced rate of 50%). Full PBGF protection will apply only to Plan members who worked their entire career in Ontario; partial PBGF coverage will apply proportionately to that portion of pension service which was accrued in Ontario; for those who were employed outside of Ontario, the PBGF is not applicable.
All amounts are subject to future adjustment, including in accordance with the final wind-up ratio for the Plans.
Quebec pension legislation does not permit the commencement of new pension payments to those who are not yet in receipt of a pension. The Administrator is permitted to provide temporary advance payments to Quebec members which will be deducted, with interest, from the commuted value transfer that will ultimately be paid to them. Although Quebec members cannot commence a monthly pension from the Nortel Plans now or in the future, Quebec Plan members will have the opportunity at some point in the future to transfer funds into an investment vehicle that will allow for the establishment of a monthly income stream. When this stage is reached, those who are affected will be required to make an individual investment decision based on their individual circumstances.
Plan members who have already requested a retirement quote from Morneau should receive a Retirement Election Option Form in the near future. Those who have not yet requested a retirement estimate or commenced the retirement process, but who are eligible to retire and who wish to do so, should contact Morneau immediately at 1.877.392.2073 or through their website at www.morneaushepell.com.
All Plan members will receive a general communication from Morneau in the near future, which will provide more information about these and other issues related to Nortel’s registered pension plans. Please direct all pension-specific inquiries to Morneau Shepell at 1.877.392.2073.
Superintendent’s Approval of Partial Commutations for Nortel’s Disabled Employees
Disabled Employees who are eligible to retire and who wish to receive a monthly pension should contact Morneau to commence the retirement process. Ontario’s Superintendent of Financial Services has also provided its approval to the Administrator to permit certain lump sum transfers to Nortel’s Disabled Employees. The Superintendent has approved interim transfers of up to 50% of the estimated commuted value that you are expected to ultimately receive from the Plan (that is, 50% of your pension value calculated at the estimated funded ratio; so, if the funded ratio is 60%, you could transfer up to 30% of your pension value) to a locked-in retirement account for Nortel’s Disabled Employees, regardless of whether or not you are currently eligible to receive a monthly pension. The intent of this extraordinary permission is to permit those Disabled Employees who are suffering financial hardship to access a portion of their pension funds through an application to their provincial pension regulator to unlock their pension monies. Click here to access the Ontario Financial Hardship Unlocking form. This option will be available only to Disabled Employees who have accrued benefits from employment in Ontario, Alberta and Nova Scotia. Those three provinces are the only ones where unlocking pension funds is permitted by the applicable pension legislation. Disabled Employees who wish to take advantage of this option should contact Morneau to request an election form. Note that once you have chosen to take your partial CV transfer, you will not be permitted to apply to start your pension from the Nortel plan. The remainder of your pension entitlement (the total of which will be reduced to the wind-up funded ratio) will be paid out pursuant to the final wind-up of the Plan.
Please watch for the general communication that all Plan members will receive from Morneau in the near future, as it will provide you with more information about retirement, the partial commutation option for Disabled Employees and other issues related to Nortel’s registered pension plans. Please direct all pension-specific inquiries to Morneau Shepell at 1.877.392.2073.