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Nortel pays bonuses to execs and pittance to retirees and disabled

Government not doing enough to protect employees on disability and retirement pensions

Nortel announced that it was paying pension disability benefits to its former employees until the end of 2010. Benefits extended for Nortel ex-employees. New $57-million funding deal will extend coverage to end of 2010, from earlier deadline of March 31 Globe and Mail

Companies who self-fund pensions are not sufficiently regulated by the government. The pensions are not insured and federal regulators don’t keep an eye on them to protect the pensions from collapse.

As we have seen with Nortel, a company can go bankrupt and leave seniors and the disabled without supports that they cannot replace on their own due to age or disability.

“Former employees of Nortel Networks Corp. will see their benefits coverage extended until the end of 2010 under a new $57-million funding deal unveiled Monday.”

“The agreement, negotiated between Nortel and two groups representing former employees, will affect tens of thousands of pensioners, long-term disability recipients and workers whose severance payments were cut off after Nortel filed for court protection from creditors in January last year.”

“Among those affected are 400 employees receiving long-term disability benefits, who will now receive those payments until the end of the year instead of seeing them come to an end on March 31 as expected. Nortel funded its own long-term disability coverage plan for workers, which meant the company’s insolvency has left their fate uncertain.” Globe and Mail.

In the meantime, Nortel has been able to pay tens of millions of dollars to a few executives, despite being in bankruptcy protection. One of the most egregious payments is a compensation raise from $560,000 to $1.68 million for corporate manager John Doolittle.  His name is ironic.

CTV reported that a small number of executives are sharing in a pool worth $40 million.

It’s probably too late to protect Nortel pensioners beyond this year since the company has so many pressing debt problems.

The time to protect employees is before the problems arise. The retired and disabled deserve to be protected from unfunded pensions. The same problems arose with the collapse of the auto industry. Beyond bland warnings about unfunded pension liabilities in audited financial statements, companies have been able to self-regulate their pensions. This turned out to be a failed strategy.

The other side of the coin is that defined benefit pensions are largely extinct except in the case of public sector pensions where the taxpayer is on the hook for decades. The fact that taxpayers are paying for Cadillac pensions is another irony.

Defined contribution pension plans have left many in the population with little resources during their retirement. The double collapse of the stock market in the 2000-2009 decade has reduced many pensioners expectations.

In the case of those on disability, the burden to support them falls back on the Canada Pension. Payments on CP Disability are 30% to 40% below the cost of living, leaving the disabled to live in poverty. Lack of government regulation of disability pensions leaves the taxpayers holding the bag when companies default.

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