You're now on the archive server. Commenting has been disabled.
Nortel Pensioners Take it to the Hill
Submitted by Leo Kolivakis, publisher of Pension Pulse.
CTV reports that Nortel pensioners protest bankruptcy laws in Ottawa:
Former
Nortel employees gathered on Parliament Hill to ask for government help
to ensure they continue receiving pension and disability payments -
regardless of what happens to the beleaguered telecommunications firm.
Organizers
said ex-Nortel employees were bussed in from Montreal and Belleville to
attend the demonstration, which took place at noon on Wednesday. They
were accompanied by Canadian Auto Workers union members and leaders
from several federal opposition parties.
The
protesters are seeking amendments to national bankruptcy laws. Their
goal is "to give pensioners and people affected by the Nortel
insolvency a higher priority ranking in the bankruptcy courts," Don
Sproule, chairman of the national committee for Nortel pension plan
members, told CTV News Channel on Wednesday.
Nortel filed for
bankruptcy protection in January. Since then it's been selling off
assets. And in June, the company's shares were delisted from the
Toronto Stock Exchange.Former employees say their pensions are less than 70 per cent covered because the company is in bankruptcy proceedings.
Pensions
are a provincial responsibility in Canada. But bankruptcy laws are
federal, and the protesters say their pension and disability payments
are not protected under the current legislation.
"Right now,
unsecured bond holders are treated the same as Canadian seniors who
have pensions from their employers," said Diane Urquhart, a financial
adviser who has been working with ex-Nortel workers.
Bloc
Quebecois leader Gilles Duceppe, NDP leader Jack Layton and Liberal
leader Michael Ignatieff were expected to join the protest.
Speaking
earlier on Wednesday, Ignatieff said he wanted to thank the Nortel
pensioners "for stepping up and making the question of pension
security, particularly the question of pension security in the case of
bankruptcy, the national issue that it's become."
Ignatieff
pledged to work with the group to change federal bankruptcy laws to
"make sure this kind of thing never happens again to another Canadian."
Sproule said Nortel is paying out around an average of $12,000
per year for unionized former employees. Former white-collar employees
receive approximately $22,000 a year.
"So you take a 30 per
cent haircut off that, and it's going to leave people in real hardship,
in possible poverty and having to sell their house," he said.
Nearly
20,000 workers have been affected by Nortel's financial troubles,
according to Sproule. About 17,500 are pensioners. Another 2,000 were
let go without severance, and 450 remain on long-term disability from
the company.
"The feds like to talk about how sound our
financial system is and how we weathered the financial crisis today
because of sound legislation," Sproule said.
"I don't think
anyone was watching the store in terms of what was happening to pension
plans. This dirty little secret's been going on for a long time. It's
only the high-profile cases like Nortel that are causing the issue to
percolate to the top again."
You should watch the accompanying video from CTV
which shows interviews with Ken Georgetti and Diane Urquhart. I agree
with both of them. We need pension insurance for all Canadian workers
and we need to change bankruptcy laws to secure the pensions of workers ahead of the interests of bondholders.
John Ivison of the National Post reports that pension problems could become a hot issue:
Emile
Ahad is an unlikely rabble rouser. Yet the smartly-dressed Nortel
71-year-old pensioner stood shoulder to shoulder with Teamsters union
members, at a big rally on Parliament Hill on Wednesday, waving his
placard and nodding in agreement with labour leader Ken Georgetti.
“If
Nortel won’t fulfill its responsibilities, it’s up to this Conservative
government,” said the firebrand president of the Canadian Labour
Congress, to applause from a crowd that included leaders of all three
opposition parties. “This will be the number one issue at the next
election,” predicted Mr. Georgetti.
Mr. Ahad was a
research and development manager for the failed telecom giant for 20
years before retiring a decade ago. He said that he hasn’t been
affected by the company’s move into creditor protection yet but fears
be may see his pension reduced by up to 40% and his health benefits
swept away when the company declares bankruptcy. “It would be a big
blow,” he said, giving a sense that this was said with some
understatement.
The fear is very real. Nortel is
operating in creditor protection to restructure its debts. Companies
are bound to keep operating their pension plans while they are still in
business but, if they go under, they are allowed to wind up those
plans. Since there is an estimated $1.8-billion shortfall in the Nortel
plan, this could mean that pensioners see their income cut.
Employees
are currently at the bottom of the heap when it comes to being paid
from the sale of Nortel’s assets and are asking the government to
intervene and reform the Bankruptcy Act to make them secured creditors,
eligible for payment ahead of others owed money.
The
issue came up in Question Period on Wednesday but Tony Clement, the
Industry Minister, stuck to the government’s line that Nortel operates
a provincially regulated pension plan, so get off our lawn and go bug
Dalton McGuinty (I paraphrase). The Ontario government has said that it
is looking into the issue, while the Quebec government has offered to
manage the Nortel pension plan for members in that province until such
times as asset values rebound.
But this is the classic example of Canadians being agnostic about which level of government intervenes — they just want action.
The NDP was first party to recognize the potential to harvest votes among workers worried about their pensions.
Jack
Layton will unveil his latest plan this morning, which is likely to
include a national pension insurance program that will guarantee
pensioners a minimum monthly income in the event of bankruptcy and plan
failure.
Michael Ignatieff, the Liberal leader, told the
massed ranks of Nortel pensioners that he supports amending the
Bankruptcy Act to ensure pensioners get fair treatment.
But
Keith Ambachtsheer — who as director of the Rotman International Centre
for Pension Management at the University of Toronto probably knows more
about this issue than anyone in Canada — thinks the long-term answer
lies in neither pension guarantees, such as those that operate in the
United States and the United Kingdom, or in tinkering with the
Bankruptcy Act.
Mr. Ambachtsheer pointed out that that the
Pension Benefit Guaranty Corporation in the U.S., the federal body that
will ensure American Nortel pensioners get 100¢ on the dollar, has huge
unfunded liabilities and is widely considered a failure. The U.S.
Comptroller General has testified to Congress that the federal
guarantee encourages companies to leave a shortfall in their pension
plans the government is obliged to fill.
A
commitment to guarantee all defined benefit pension plans would be paid
for by all Canadian taxpayers, including the five million that don’t
have company pension schemes, Mr. Ambachtsheer pointed out.
As
for changes to the Bankruptcy Act to ensure Nortel pensioners rank
above vulture funds and foreign governments, he said there are problems
with the proposals being forwarded by retiree groups. “The problem here
is that you can’t do it retroactively. [Also] you start getting into
how high do they rank? Do they come in ahead of secured creditors? It
would just be another feast for the lawyers,” he said.
His
preferred proposal is to for companies to treat their own pensions the
same way that banks and insurance companies are obliged to treat their
customers — that is, the introduction of regulations that ensure
companies have enough assets on their balance sheets to meet their
obligations.
At the
moment, many companies bet the stock market with up to half their
assets in order to provide pension plans that offer lavish benefits. In
the bad times, this leaves them with huge pension shortfalls.
In
the Netherlands in 2002, the central bank found a solution by
regulating pensions in the same way it regulates banks and insurance
companies. Over the course of an extended phase-in period, they forced
companies to inject more cash into their employee retirement funds to
cover their promises, with the result that businesses watered down the
pledges they made to their pensioners. These “target” pension schemes —
where companies guarantee a minimum payment and distribute more if
there’s anything left — provide a clean solution to the problem of
under-funding because they split the cost of a falling market between
the employer and employee.Of course, this is all cold
comfort for Mr. Ahad and his former colleagues, who face an imminent,
and potentially devastating, hit to their standard of living.
They
are unlikely to be impressed that the entire class of 2004 MPs will be
eligible to retire on full pensions next year, including Conservatives
MPs Pierre Poilievre and Andrew Scheer, both age 30.
Unless
governments at all levels pull together to come up with progressive
solutions to this short-term problem, Mr. Georgetti’s prediction that
this becomes the sleeper issue in the next election may well be proved
correct. As one sign on Parliament Hill noted yesterday: “Seniors vote.”
Mr.
Ambachtsheer raises several good points but the reality is that there
is no easy solution to our pension woes. Moreover, the U.S. government
is a lot more aggressive in protecting pensions of employees after companies declare bankruptcy. Last week, Bert Hill of the Ottawa Citizen
reported that Canadian Nortel creditors may regret polite approach:
Canadian
governments are dithering as victims of the Nortel Networks collapse
face an uncertain future of big cuts to pensions, severance and
long-term disability benefits.
But two
U.S. government bodies are not wasting any time. They have moved
aggressively to lock down some assets of Nortel Networks to protect
U.S. pensioners and taxpayers.
The Internal Revenue Service and
the Pension Benefit Guaranty Corp. have effectively tied up the assets
of two choice U.S. subsidiaries -- Nortel Government Services and
Diamondware -- in the $915-million sale of enterprise assets to Avaya.
By
applying strategic legal pressure, they forced Nortel to make the
concessions in a U.S. bankruptcy court in Delaware or face big expenses
and threats to the deal.At first blush, it looked like the IRS
gave up its claim to $3 billion in taxes and accumulated interest in
return for Nortel agreeing that it owes $9.8 million in alternative
minimum corporate taxes on the subsidiaries. In fact, the IRS is
marking time and can still lodge the original claims.
A Delaware
bankruptcy court approved the IRS deal Tuesday. "We'll deal with (the
tax claim) later," James Bromley, a lawyer representing Nortel, told
Bloomberg News.The PBGC, which will back 23,000 current and
future U.S. Nortel retirees for as much as $54,000 U.S. each, seized
the wobbly U.S. plan in July. Since then, the PBGC exposure has jumped
to $593 million from $514 million.
The
move was shrewd. There was a chance that the two subsidiaries might
have slipped through the net because Nortel did not put them into
bankruptcy protection.
But for many Canadian creditors, the
action means the global struggle for Nortel assets just got more
complicated, and U.S. creditors have a new edge.
Meanwhile,
Canadian creditors, who were counselled to work together rather than
disrupt the process by demanding immediate consideration, are wondering
if that was a big mistake.
Certainly, the actions of the IRS and PBGC suggest that there is nothing wrong with kicking up a fuss.
One
of the most frightened groups is also the smallest. An estimated 409
Nortel employees are on long-term disability. Because their benefits
are supported by Nortel operations, rather than insurance plans, they
fear the payments could be swept away once Nortel assets are dispersed.
Arlene
Plante, who has been on LTD since 2000, said we "are a bunch of sick
people ... who are getting sicker by the day because of the stress of
the bankruptcy, getting ignored and forgotten more as each day passes."
She
fears their interests could be squeezed just as LTD beneficiaries were
major losers in the bankruptcies at Eaton's and Massey Ferguson.
Plante
said that the U.S. and British governments are helping their Nortel LTD
employees, "but the Canadian government is the only one that seems to
have no problem with (us) having to fight for a disability pension in a
court for a corporate bankruptcy.
"We're selling off our
properties and some will have to leave nursing homes and likely end up
languishing in hospitals where we don't belong."
Nancy
Ekiert, also on long-term disability, said LTD recipients have fewer
rights than people still on Nortel payrolls. "Nortel says that we are
still employees but we have no guarantees if we are eventually able to
work that there will be jobs for us at Ericsson or other companies
buying Nortel assets."
She fears the LTD cases will be
overlooked as lawyers juggle the interests of more than 20,000
Canadians seeking Nortel pension benefits and severance payments.Still, there is some hope for Nortel survivors.
The
Quebec government moved last week to bring the 6,000 Nortel pensioners
in Quebec under a provincial pension plan regulator. Rather than face
having their benefits slashed, the Quebec pensioners could get five
years of breathing time to rebuild a depleted pension plan.
Meanwhile, the Ontario and federal governments dance around the problem, trying to divert responsibility.
At
a time when 70 per cent of Canadians have no workplace pension
benefits, putting tax dollars into the moribund pension and benefit
plans of a mismanaged global corporation is a tough sell.
The
stalling could continue indefinitely, or both levels of government
could engineer a bailout, similar to last year's rescue of Canadian
asset-backed commercial paper investors, with taxpayer exposure limited
to loan guarantees.
If all else fails, the LTD and other
Nortel beneficiaries will have to pray that judges handling the Nortel
bankruptcy on both sides of the border use their substantial powers to
direct a substantial chunk of Nortel assets to the most vulnerable.
When I testified on Parliament Hill last April,
I knew it be a matter of time before pensioners would be protesting
their cuts in pensions and benefits. As much as the images of Nortel pensioners taking it to the Hill
disturb me, they are nothing compared to the mass protests we'll see
all around the world in the future when the pension crisis reaches a
boiling point. Politicians should take this as a wake-up call and act
in the best interests of all citizens.
»
All the important points have been named - what shall I say more than muy fellow intellectuals ?
The question is whether we have the choice between our economic and financial system which is
Growth and productivity driven earnings generate decent earnings to those you provide capital and know how - (actually the same).
Survival of the fittest and sometimes of the least socially minded.
Capital markets have been the ideal battlefields of the 21st century.
But Financial Times and smart gaming may soon make no sense anymore as clear needs may become apparent and dominate the political agenda of all countries.
Don't the financiers of governments do everything to convince that giving cheap money to them will make dreams come true ?
If you wish you can call this also "gun pointing" at everybody in charge of more than a private entreprise.
The hold-up mentality has worked very well so far - the collaterals of this behavoiur are going to be felt further down the road.
After all - the only language accepted by everybody seems to be power or fear.
I told you before: Nothing new, just said differently.
You want a pension system - I'll give you an F'in pension system...!!
Do you remember someone telling you when you were young, save 10% of everything you earn?
SocSec TAKES about 10% (Employee 5% - Employer 5%)
So here is the DBLTapPensionPlanForAmerica.
Of the 10% TAKEN right now 5% goes to current SocSec pensioners. The other 5% is placed in a REAL and I mean REAL account. That money is invested half in stocks and half in bonds. As SocSec Pensioners die off the 5% grows until the share going in your REAL account hits 10%. Do that for a lifetime and guess where you end up.
http://www.youtube.com/watch?v=9fW7MoINvQc&feature=related
DBL
The unsecured lenders are probably other pension funds and insurance companies guaranteeing payments to somebody else.
The unsecured bondholders are probably another pension fund or an insurance company guaranteeing benefits to somebody else.
Remember that we had a taste of fearing the unthinkable back in March (PRU at ten something). Kinda hard to run an economy when major insurers are doubted. Do we want to go back there?
I think this is only the beginning of protest movements to guarantee entitlements. The "baby boom" generation is beginning to age and retire. They began life getting everything they wanted and all through their lives insisting that they are entitled to comforts and shielded from sacrifice (1960's anti-war movement). When housing isn't up to par, health benefits are limited or delayed(rationed), or pensions are reduced or eliminated there will be 'hell to pay'.
There will be hell to pay and if politicians don't wake up, they will pay at the polls. People are struggling to make ends meet, and then they watch the news to see all the corporate fat cats get away with ungodly bonuses after they received TARP funds. Even the Goldman Sachs of this world, who repaid their TARP funds, should have used some common sense and delayed bonuses by a couple of years. But "we got to pay talent" is the motto of the day! Total utter nonsense. That 'talent' got us into this mess and it won't get us out of it. We need to address serious governance issues in our pension and financial system and all we get is the same claptraps spewing the same old nonsense. Pathetic.
perhaps so, but will they march or ride shotgun on the Rascal/scooter caravan?
All protesting must end by 4pm, gotta make the early bird
My proposal is to agglomerate (seize) all of the private and public pensions in Canada into a single fund and disburse payments to all elegible retired citizens based on earnings. Of course all people will need to contribute to maintain the fund. Current contribution levels would not change.
We love these types of fucking socialism so much someone just might take up the idea.
Personally, the only plan I have (other than Canada Pension) is my own funded RSP that I also manage myself. I expect to retire at 68 and maintain my income into retirement for 20 years.
http://blog.atimes.net/?p=1190
So the Unions demand more and more from the company year after year and when they finaly put them out of bussiness because they are no longer competitive they too want a government bail out. This has moral hazard written all over it.
So the Unions demand more and more from the company year after year and when they finaly put them out of bussiness because they are no longer competitive they too want a government bail out. This has moral hazard written all over it.
Leo, thanks for this balanced, well reasoned post. This issue is much larger than the public bailing out a few pensions plans. This is just the first drop of rain in what is likely to be one of the biggest public policy storms of the next decade. The pension crisis is symptomatic of the larger issue, which is that lobby financed policy-makers have facilitated the transfer of collectively generated wealth to the very few people at the top of the food chain. Pension rules are structured to allow current executives to maximize current earnings at the expens of future earnings, or the interests of pensioners. Policy-makers have ensured that the risk is not transferred to senior creditors, as they rank ahead of pensioners in bankruptcy proceedings, so all the risk is born by those with the least sophistication and the most to lose. I would argue that the horse is already out of the barn, but policy makers have a duty to change the lows to protect the interests of pensioners over sophisticated senior creditors.
Thank you Gestalt and you have articulated your point very well. The concentration of power in the hands of financial oligarchs has corrupted the democratic system and yet people still (mistakenly) worry about government intervention. Unfortunately, both parties are pandering to the financial elites.
As a 59 year old 25 year Nortel employee in the US I do not disagree that pensions are a thing of the past, however, to be given a pension benefit for years only to have that benefit revoked in virtual "old" age is devastating. Were I 20 years younger it wouldn't matter as I would simply get another job and put back money myself.
We forget that workers at any given point in time operate basically from a position of whats "given" at that time. I recall my dad being cut loose from his lifelong company at age 58. That action influenced me to never trust that I would have lifelong employment anywhere, however, my dad received the benefits that accrued to him during his work years. I was not prepared to have benefits accrued revoked. That was a new situation. Nortel was a 110 year old company. Who could have predicted it would go under?
Why pay for Nortel pensioners? Why pay for golden public sector pensions? Why should you pay for 40 million poor people who can't afford healthcare insurance? Why? Because we live in a society. We are not animals. Go back to read Hobbes, Locke, Rousseau, Hume, Rawls, Berlin, Walzer, Taylor and other great philosophers to understand the role of the state in protecting its weakest citizens.
I happen to believe that private DB plans are not working. For the most part, they're a disaster, not that public DB plans are any better. We need to have a serious discussion on pensions and our whole financial system. You cannot reform pensions without reforming the Wall Street culture that permeates our financial and pension system.
You lose all credibility telling someone their worldview is the view of "animals" when you are mandating your "human" philosophy at the point of a gun... which is what forced taxation is. Nobody who uses force to impose their values can claim a moral high ground - and your approach is actually more "animalistic".
The problem is that you don't want to do the hard work of CONVINCING your fellow citizens that these people need and deserve their help. Perhaps they would give our of the goodness of their heart if you did (although granted it would take a lot more work). Instead, you pursue the easier course of trying to MANDATE your view. If you were REALLY interested in helping those people you mention, you would realize that it is only by doing the hard work of convincing people that you will have any permanent and lasting positive impact on the lives of your fellow citizen.
Imagine that I don't agree with you that these people should get my money, but instead of CONVINCING me, you have the government force me to help them... do you think that will engender a more ethical society? No - exactly the opposite. Instead I'll be RESENTFUL of the people whom I don't agree should be getting my money, I'll be RESENTFUL of you because you did not respect me enough to try to convince me of your point of view, and I'll be RESENTFUL of my government, because instead of playing its proper role, which is to defend my life, liberty, and property, it is imposing itself on me. The recipient of the money, convinced they are entitled to MORE money, will be at worst resentful, at best ungrateful, of me, the government, and you because they don't feel like they've gotten ENOUGH.
I agree that DB plans are not working. They can never work bcause it is a promise based upon predicting the future. None of us can know if a company or even a government will be able to keep its promises. The automobile market has been in turmoil because of a market change. U.S. and Canadian automakers could not predict the globalization of auto production in 1965. The managers believed they could maintain a North American monopoly on production forever and they promised pensions and medical benefits based on their lucrative monopoly. Now the pensions and medical benefits are in peril. It will always be that way. We can't depend on a prediction of the future. The best we can do is take responsibility and try to plan for any eventuality. A mix of cash, property, stocks, bonds, relatives, government and personal skills is what I'm using.
You know all the facts on what's included in the 40 millon (illegal aliens, Medicaid eligible folks, etc). And many of the 40 million uninsured can afford it -- they have made a poor decision to buy other things instead (which is the same reason they do not save for retirement).
The biggest problem is that a large and growing number of people are more than happy to be declared "weak" and have someone else take care of them. That is a natural consequence when nearly 50% of the people pay no income tax.
Having said that, even though I pay income taxes at the very highest of levels, I think it is good and right to give to charities and I match that talk with my walk -- to that end am willing to bet that my annual double digit percentage of GROSS income giving exceeds what you give to charity as a percentage of your gross. I am just not a big fan of confiscation - forced taxes to an inept, corrupt and wasteful government with misguided priorities. It is always amazing to me those who think taxes should be higher don't volunatarily send in more than they owe to the government (they take checks and money orders and you get a charitable deduction) -- what hypocrisy.
When government starts taking from one group (any group) to give to another group (any group) by the force of LAW all groups will eventually loose their freedom because over time more and more groups (any group) demand their share of the redistribution until we get to the point that their is nothing to redistribute because very few are engaged in productive activities. How can anyone believe that any part of being free consists of being forced by the LAW to support anyone for any reason? Freedom allows one to support or not support as their conscience dictates.
Leo, love your posts, but you might pull Rousseau off your list above. He was a major league moocher and pretty much all around gad. Twice he impregnated his mistress and rather than man up, he convinced her to give the newborns to the orphanages, which back then was a death sentence. IMO,like Marx, Rousseau designed a social philosophy, as beautiful as it might read, that has society taking care of schmucks like him.
Another reason why defined benefit plans are not great for employees -- you just sit and pray the company survives longer than you live. Retirement savings (like health care) should be a portable asset of the individual (not connected to the government or the company you work for).
Individuals should take personal responsibility for their own retirement. It requires forethought and discipline (i.e., saving) over multiple decades -- which is why most in this country prefer someone else to take care of it. Problem is that "someone" is not disciplined either - it is my understanding Social Security is beyond broke, for example.
This is really simple stuff -- but people do not want to take responsibilty for themselves. Again the responsible will be asked to care for the irresponsible. Sad.
Let's throw everybody but the rich under the bus - yeah, that's the ticket! Not.
Let's encourage everyone to rely on someone else - yeah that's the ticket.
Why should you expect to be paid what you were contracted for! The nerve of workers. Only banksters and high level executives are entitled to their full contracted pay and benefits ahead of the bondholders when a company failed.
Executives of a failed company need to be compensated for their management & leadership skills. Otherwise we'll run out of executives to run failed corporations.
To the employees of Nortel Networks, to whom myself and my fellow North Americans will be providing pensions: you're welcome.
Of course, I fully expect that when I retire, the employees of Nortel Networks will pay to provide me with a pension.