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REPORT ON THE NORTEL INSOLVENCY PROCEEDING
THIS REPORT HAS BEEN LIBERALLY PLAGIARIZED FROM A REPORT THAT WAS PREPARED BY KOSKIE MINSKY LLP, REPRESENTATIVE COUNSEL
As you will be aware, the CAW-Canada has joined with the Chemical, Energy and Paper Workers Union to form – Unifor. As a successor union, Unifor has stepped into the shoes of the CAW-Canada as the representative for those former Nortel employees, including LTD recipients, who had been represented by the union at the time Nortel filed for protection under the Companies’ Creditors Arrangement Act (CCAA). The Union also represents about 650 retirees and survivors who signed retainers with the Union in January to June 2009.
Upcoming Distribution from the Health and Welfare Trust (HWT)
On November 19th, 2013, the Ontario Superior Court of Justice approved a final HWT distribution to Participating Beneficiaries, including LTD members.
The distribution for LTD members is expected to be sent in mid-December and will be for:
- 3% of your LTD Income Benefits;
- 3% of your LTD Life Benefits; and,
- 18% of your Pensioner Life, subject to individual adjustments for methodology and any data corrections.
The distribution will bring your total distribution to 38% of the LTD Income Benefits and LTD Life Benefits and 20% of the Pension Life that you are entitled to from the HWT, based on the actuarial calculations approved by the Court. You had previously received 35% of your LTD Income Benefits and LTD Life Benefits and 20% of your Pension Life.
The distribution will be made in mid-December. The balance of your actuarially determined claim for LTD Income Benefits, LTD Life Benefits and Pensioner Life will remain as a claim against the Nortel estate. The actual amount you will receive will be based on the share of Nortel’s remaining world-wide assets that can be obtained by the Canadian Nortel entities in the multi-jurisdictional litigation that is now going on. An update on the litigation is set out below.
There will also be a distribution from the HWT to retirees in early 2014. This distribution to retirees will be approximately 11.2% of their Pensioner Life claim, bringing their total distribution from the HWT to approximately 31.2% of their total actuarially determined claim. The figure of 31.2% reflects a reduction for 2010 premiums paid to continue Pensioner Life coverage for retirees in 2010, and is subject to individual adjustments for methodology and any data corrections.
Any payment you have received from the Hardship Fund will not be deducted from your HWT distribution, but will be subtracted from your ultimate distribution from the Nortel estate.
As was the case in the past, the December distribution relating to LTD Income Benefits are not taxable. However, taxes will be deducted before any payment is made in relation to Survivor Income benefits, LTD Life Benefits and LTD Optional Life Benefits.
HWT Tax Appeal
Koskie Minsky, as Court appointed Representative Counsel, continues to work with the Department of Justice on the test case appeals about the correctness in law regarding whether the above noted LTD Basic Life and LTD Optional Life, in addition to some other benefits paid from the HWT, were taxable.
As previously reported, in an Advance Income Tax Ruling dated July 19, 2011, the Canada Revenue Agency held that these payments were taxable. At the instruction of the Court-appointed Representatives, Koskie Minsky is challenging the correctness in law of these Advance Tax Rulings through test-case appeals to be heard by the Tax Court of Canada.
Koskie Minsky sent out packages in October 2012 to all those individuals who received a payment from the HWT for LTD Basic Life and/or LTD Optional Life during 2011. Packages were also sent to individuals who were taxed for pensioner life insurance and the termination of survivor benefits.
As this matter has not yet been decided by the Court, and the deadline for 2012 objections is April 30, 2014, Koskie Minsky will be sending out packages to those who received a payment from the HWT for LTD Basic Life and/or LTD Optional Life in 2012 in the next few weeks. You must file a second objection for 2012 to benefit from a favorable ruling in the test case appeals for your 2012 tax year. Make sure that you file this objection with the Canada Revenue Agency in accordance with the instruction that you will be provided by Koskie Minsky, if you wish to be part of the appeal relating to the 2012 taxation year. You should also do this if you are the administrator of the estate of a deceased HWT beneficiary relating to the 2012 taxation year.
If you do not receive a tax objection package by January 15th, 2014 and a payment from the HWT was received in 2012, please call Koskie Minsky at 1-866-777-6344 or e-mail them at @email.
Allocation Litigation
On March 8, 2013 Justice Morawetz of the Ontario Court and Judge Gross of the Delaware Court approved an Allocation Protocol which provided that the U.S. and Canadian Courts would decide the outstanding claims and the allocation of the remaining Nortel assets between the various jurisdictions where Nortel operated around the world.
Since then, a litigation timetable has been established and the parties are currently exchanging documents and cross-examining witnesses in preparation for a trial that has been set to begin on May 12, 2014, for a period of twenty hearing dates. As you can imagine, there are millions of documents and witnesses from around the world who have information about Nortel that needs to be obtained. Just like any other trial, most of the work occurs before the trial begins and given the size of Nortel and the fact that it operated around the world, this means that there is a lot of preparation to be done. All of this takes an extraordinary amount of time and money. Although Unifor covers the legal costs for those it represents, there are numerous law firms representing workers and pension plans in each jurisdiction who would not be in a position to provide years of legal representation without the support provided by the Nortel estates.
There are, of course, corporate interests and vulture bond holders who are in this for profit and who are getting paid out of the remaining Nortel assets. All told, over a billion dollars has been paid out in professional fees since January 2009.
Compensation Claims
The Court Appointed Monitor in the CCAA proceeding continues to review the Personal Information Change Forms (Form B) and Proof of Claim Forms (Form C) that it has received from former Nortel employees, LTD recipients and retiree/survivors. If you have not received a decision with respect to the changes or additional claims you requested on the Form B or Form C that you submitted, please be patient. There is no significance to the order in which reviews are completed. The Monitor is sending decisions in relation to these changes and claims as soon as the claims are reviewed and will continue to do so over the coming months.
WHEN WILL YOU RECEIVE A CASH DISTRIBUTION FOR YOUR CLAIM!!!
The distribution on claims against the Nortel estate depends on the conclusion and outcome of the trial that is to begin in May, 2014. The amount of any cash distribution will depend on how much of the remaining assets is allocated to the Canadian estate and the total claims that are made against those assets. The total amount of the claims against the Canadian Estate has not been fully determined. There are claims that have been made by those outside of Canada against the Canadian estate; these include the UK Pension Plan, bond holders, other Nortel estates in other countries, etc. and the validity and extent of those claims has yet to be determined. Even in Canada, the deficit of the Nortel Canada pension plans has not yet been determined. All of these claims will affect, positively or negatively, on the amount that is available to distribute to Nortel’s former employees, LTDs and retiree/survivors.
Even after the trial is over, there may be those who will appeal the decisions made by the Canadian and US courts and that may further delay any distribution. All of which means, it is unlikely that a cash distribution will happen within the next year.
Hardship Fund
On October 29, 2013, the court extended the next deadline for applications for the Hardship Fund to April 1, 2014. This deadline will continue to be extended by the court as needed. Please check our website for the latest version of the application with deadline information. On July 27, 2012 the Court approved expanding the scope of Nortel’s Hardship Fund to include Nortel LTD Beneficiaries, including those who are receiving CPP-Disability or the Quebec Equivalent.
Payments from the Hardship Fund are treated as an advance on future distributions from the Nortel Estate, so any amount provided will simply be deducted from the recipient's recovery on their claim against the Nortel Estate.
If you are in a position of immediate financial hardship, you may request a payment from the Fund by completing a Hardship Payment Application. The Union can help you complete this form. This will be a private and confidential process, and you will not be required to share your personal information with anyone other than the Monitor, who is responsible for assessing your application, and with the Union’s legal counsel.
Windup of Nortel’s Registered Pension Plans and Member Information Profiles
Morneau Shepell, the administrator of Nortel’s Registered Pension Plans, has been mailing out Member Information Profiles for the last several months in preparation for the windup of the Pension Plans.
Once the mailings by Morneau have been completed and Member Information Profiles have been returned, it will prepare the windup reports and then members will receive Option Forms. These forms will give you the opportunity to advise Morneau what you want done with your pension funds when the pension plan is finally wound-up. The options available will be only those that are legally available, the purchase of an annuity or the transfer to a locked-in RRSP, for instance. The options that are available will be determined by the laws of the province you were living in when your employment terminated.
If you have any questions about the Member Information Profile or Option Form, you may call Morneau Shepell at 1-877-392-2073, if you were in the Union pension plan.
Address Changes
Please ensure you keep your address updated with the Union and also please advise the Monitor, Ernst & Young. A Change of Address Form must be completed and supporting documentation of the new address must be provided. Documentation includes a driver’s license or a recent utility bill showing the address. You can obtain a change of address form from the Union using the contact information below.
Please also ensure that you update the Pension Administrator, Morneau Shepell, with your address change even if you’re not receiving your pension yet. Morneau Shepell can be reached at 1-877-392-2073, if you were in the Union pension plan.
Questions?
If you have been represented by the CAW-Canada (now Unifor) during Nortel’s CCAA proceeding and have any questions, please contact Barry Wadsworth at 1-800-268-5763, extension 3776 or e-mail @email for any forms or information you need.
Website: www.unifor.org
