Nortel Networks Corporation, November 29, 2018
November 29, 2018
Update on Koskie Minsky’s Role as Legal Counsel
As of November 30, 2018, the funding from the Nortel Estate for legal and professional services of Former Nortel Employees, Pensioners and Long-Term Disability Beneficiaries has come to an end, and any future legal costs must come out of distributions payable to those individuals.
As a result, all members should put questions pertaining to their claims in the Nortel Estate directly to the Monitor, Ernst & Young. Ernst & Young can be reached at their hotline number at 1-866-942-7177. Questions pertaining to pension issues should be directed to the Pension Administrator, Morneau Shepell. For the Negotiated Plan, this number is 1-877-392-2073. For the Non-Negotiated Plan, the number is 1-877-392-2074.
If your matter has not been resolved by contacting the Monitor and/or Morneau Shepell, you may email Koskie Minsky at Nortel@kmlaw.ca and we will see if we can be of assistance.
Second Distribution has been declared
The Monitor declared a second distribution on November 14, 2018. That distribution amounts to 4.71 cents on the dollar. That second distribution, when combined with the initial distribution, results in a cumulative distribution to date of approximately 50.20 cents on the dollar.
Pursuant to section 6.3(b) of the Canadian Plan, the second distribution will be sent via cheque to the address on file with the Monitor as of December 6, 2018. It is anticipated that the second distribution will begin on December 10, 2018 and continue through mid-December 2018. We expect it to be paid by the end of the year. The Notice of Distribution Date can be found here and Notice of Distribution Rate can be found here.
FST Hearing on Behalf of Ontario Plan Members
Koskie Minsky, on behalf of the Court-appointed Representatives, is currently challenging the Superintendent of Financial Services (the “Superintendent”) and Morneau Shepell on the matter of whether certain funds should be recouped by the Pension Benefits Guarantee Fund (“PBGF”) from the Nortel Pension Plans.
After the plan was wound up in deficit, the Superintendent issued orders on May 26, 2011 declaring that the PBGF applied to the Nortel Pension Plan, and then approved interim distributions of $383,977,000. These distributions were made on the condition that whatever was not necessary for the settlement of member benefit entitlements would be returned to the PBGF.
The dispute with the PBGF relates to recoveries made by the Plans from the Nortel estate with respect to lost indexation. The PBGF does not guarantee indexation, whereas the Nortel Pension Plans did provide some degree of indexation for most plan members. The Court-Appointed Representatives and Koskie Minsky believe that the amounts recovered during the CCAA proceedings for indexation should be used only to compensate members, rather than being used to reimburse the PBGF. For further information on this matter, you may review the Written Argument that Koskie Minsky has filed in this matter here.
On April 4, 2018, Koskie Minsky filed a request for a hearing with regards to this issue. The matter will be heard at the Financial Services Tribunal on March 7 and 8, 2019.
Tax Appeal
We have been advised by the CRA and Revenu Quebec that they have completed processing the notices of objection filed by or on behalf of former Nortel employees in respect of distributions in respect of pensioner and LTD life insurance from the Nortel Health and Welfare Trust (the “HWT”) that have been determined to be non-taxable pursuant to the Tax Court of Canada decision in Scott v. The Queen, 2017 TCC 224 (CanLII) (“Scott“). Reassessments in most instances have been issued to affected taxpayers who had filed a valid and timely objection for one or more tax years.
If you received a distribution from the HWT in respect of the loss of group term life insurance and you have not received a reassessment from the CRA, you may still apply to the CRA for a reassessment in respect of the taxation years in which you received such distributions even if you did not have a valid objection filed.
Under section 152(4.2) of the Income Tax Act, the CRA has the discretion to reassess a taxpayer at the request of the taxpayer, provided such a request is filed within ten years of the end of the taxation year in respect of which the taxpayer wishes to be reassessed. The CRA has indicated that it may be willing to exercise this discretion in respect of former Nortel employees who did not file a notice of objection regarding the taxation of these distributions if you apply to the CRA to consider a reassessment, though each case will be evaluated individually, on its own merits.
To apply you should submit a Form T1-ADJ, T1 Adjustment Request in respect of the relevant taxation year to the CRA, which can be accessed from the CRA’s website at the following address:
https://www.canada.ca/content/dam/cra-arc/formspubs/pbg/t1-adj/t1-adj-fill-08-18e.pdf
In addition, in order to assist former Nortel employees in requesting a reassessment, we have prepared a form letter, accessible here, which can be filled out by the taxpayer and submitted to the CRA, along with your Form T1-ADJ.
Affected former Nortel employees who wish to seek adjustments in respect of taxation years are encouraged to consult with their personal tax advisors for assistance in completing these requests.
