TORONTO (Reuters) - Ontario pensioners of Nortel Networks Corp said on Monday they can rest easier after the provincial government pledged to provide funds that will help top up their modest payouts from the failed telecoms equipment giant.
Ontario Finance Minister Dwight Duncan said in a television interview on Sunday that the province will put extra cash into Ontario’s Pension Benefits Guarantee Fund (PBGF), an insurance net for pensioners of failed companies.
A group representing Canadian retirees of Nortel, which filed for bankruptcy protection in January 2009, said this would ensure Ontario pensioners receive the first C$1,000 ($990) due to them each month.
“What this announcement means is that for people with small pensions like pensions of C$12,000 a year, and they had service in Ontario, it means they can sleep at night,” Don Sproule, national chair of Nortel Retirees and Former Employees Protection Canada, told Reuters.
In a statement on Monday, Nortel also said it entered into a settlement agreement with former employees under which it will administer two pension plans until September 30, at which point the plans will be transferred to a new administrator.
Earlier, Duncan told reporters in Ottawa that the province will spend about C$200 million in providing help to pensioners, but the full cost won’t be known until Nortel’s bankruptcy proceedings and the sale of its assets are wound up later this year, according to newspaper reports.
A spokesperson for Ontario’s finance minister could not immediately be reached for comment.
Nortel’s pension deficit was estimated to be between $2.5 billion and $2.8 billion when it filed for bankruptcy protection.
Once North America’s biggest telecommunications equipment maker, Nortel is auctioning off its assets in an effort to pay back debtholders, rather than restructuring the business.
Sproule pointed out that the amount received by Nortel’s Ontario pensioners is small compared to a Nortel plan in the United States.
He noted that he and his former colleagues are also set to lose their private healthcare benefits.
According to Nortel’s press statement, the benefits will stay in effect until the end of this year.
“This is a slow-motion train wreck, we know that we’re about to hit the brick wall,” said Sproule.
According to the group, there are approximately 7,000 to 8,000 active pensioners in Ontario and another 3,000 to 4,000 “deferred” pensioners who are not yet retired.
The PBGF fund, which was paid into by Nortel, applies only to Canadian retirees who worked in Ontario, not the 30 percent of the company’s employees in the provinces Quebec, Alberta or Nova Scotia.
Reporting by Claire Sibonney; editing by Rob Wilson and Jeffrey Hodgson