Frequently Asked Questions (FAQs) (Nortel US Retirement Protection Committee)

Transcription

1 Frequently Asked Questions (FAQs) (Nortel US Retirement Protection Committee) The NRPC (US) is providing this information to help answer questions that many former Nortel employees are raising as a result of Nortel filing chapter 11. The answers are by no means to be interpreted as legal guidance, and should be considered purely as informational. As more information becomes available the NRPC (US) will provide updates and corrections as warranted. April 11, 2009 Pensions Who Is The NRPC Representing? Any former Nortel Employee who may have a claim as a result of the Nortel Chapter 11 Bankruptcy. This includes all Ex-Nortel (NT) employees who have an entitlement to benefits such as Qualified Pensions, Non-Qualified Pensions, Deferred Compensation, Severance Payments and also Health Benefits, Life Insurance and Long Term Care Insurance Will my pension payments continue during the Chapter 11 process? Nortel has indicated that for now, pension payments from the Qualified pension plan are being paid out at their full value. We are not certain whether this will continue in the long-term. Deferred Compensation, Severance Payments, Non Qualified Plan and SERP payments are currently not being paid. If I am not yet retired, but no longer working at Nortel, will my pension rights continue? A request to transfer the commuted value of your pension from the Pension Plan may be put on hold, or if allowed, will be reduced until the value of the fund is known. You cannot be stopped from taking your pension depending on age and years of service as per the Pension Plan. This could change based on the outcome of the BK CH 11 proceedings. Is it possible to agree to a reduced pension if that option is proposed? No. Pension law does not permit a reduction of earned benefits. If Nortel declares bankruptcy (Chapter 7) and the underfunded plan is wound-up, all retirees (and all other Plan members) would most likely see a reduction in their pensions. If Nortel is sold to another company, does the purchaser have an obligation towards pensioners? A successor entity would have no legal obligation to pensioners unless it agrees to accept Plan liabilities. Certain Government laws may provide rights to employees and pensioners, or the Government may insist on some protections. We are not certain whether such obligations will be honored. This is one reason why the NRPC believes we need strong legal representation to protect Ex-Nortel employees.

2 Is the Qualified Pension Plan underfunded? What if the market recovers? The Qualified Pension Plan is underfunded but we are not sure to what extent. The nonqualified, SERP, severance & health care payments were all derived from revenue and have no formal funding trust or pool requirements For the time being, your Qualified Pension payments will continue as usual. If Nortel becomes bankrupt (Chapter 7) and the plan is wound-up, the Plan deficiency will become an important aspect of what benefits that will still be available to ex- Nortel employees. If the underfunding is a result of lower stock values, is Nortel responsible for this deficiency? The law requires the employer to backstop defined benefit pensions. Nortel has an obligation to see that the funds in the Pension Plan cover the disbursements owed to retirees. For now, Nortel is making required Qualified Pension Plan contributions. If the Pension Plan is wound-up (Chapter 7) and I am offered a commuted value for my pension, will I receive 100% of its value? No. If Nortel declares bankruptcy and the Pension Plan is wound up in a deficit, your pension and other benefits will be determined by the BK Court and the PBGC.(Pension Benefits Guaranty Corporation) Who is responsible for the Pension Fund? Nortel through Mercer ( ) administers the Fund and makes decisions regarding investment policy. Investment decisions are usually delegated to a committee of the Board, often with outside advisors. Mercer is the actuary for Nortel's Pension Fund and Northern Trust the custodian of the assets. If the Plan is wound up, the Court will assign the administration of the Qualified Pension Fund to the PBGC. When does the Pension Benefit Guaranty Corporation (PBGC) come into play? The Court can assign the PBGC at anytime depending on court defined circumstances Again, this is why Ex-Nortel employees need a legal voice in the BK proceedings. The PBGC will definitely come into play if Nortel goes into Chapter 7. Can the Pension Plan be wound-up even if Nortel successfully re-organizes and emerges from BK Ch 11 protection? This is possible depending on the findings and outcome of the BK Ch 11 Court proceedings. In bankruptcy (Chapter 7), will the Nortel Pension Plan be discontinued? Yes and it may take several years. The Qualified Pension fund would be transferred to the PBCG who would then assume responsibility for management of the funds. Could the pensioners take over our Pension Plan and manage it? No. Benefits What is happening to our health benefits? Health Benefits are currently being paid. For now, Nortel continues to make these payments.

3 Should Nortel elect to terminate or change any benefits, the Company would be required to petition the Court at which time the Court would appoint legal representation for the retirees (perhaps not representation of the NRPC choosing). This is just another good reason why the NRPC requires strong legal representation. Do benefits include the Life Insurance Plan? Yes in many cases, If this was part of the benefit package extended to the Ex-Nortel employee when he or she left Nortel. Why have I stopped receiving my Non Qualified, SERP or other supplementary payments? Nortel is no longer making those payments that are funded through its operating assets. We are not yet sure whether you will receive these payments in the future, but any payments you were entitled to will now become a claim in the claims process within BK Ch11 Court if at one point you file a Proof of Claim. Is it possible that the government will step in to guarantee our Non-Qualified Pensions, SERP, Health Benefits or other payments if they are discontinued? It is not likely that this will happen. The courts will decide. If Health Benefits are discontinued, will it be possible for us to "step in" to the plan and pay the premiums ourselves? It is not likely that this will happen unless the company emerges from BK 11 protection and agrees to allow you to do so. Is anyone looking for other group plans? This is not currently under consideration. Is there a conversion privilege for Health Care and Life Insurance Benefits without proof of health? We are not sure at this time. It will be necessary to look at the documents to make this determination. Ex-Nortel employees should contact the Dept of Labor within their State for answers to this question as well as COBRA insurance benefits. Will those who receive a Survivor's Pension be included in the group? Yes. Your pensions and other benefits will receive the same treatment as those of other plan members and we encourage you to join and support the NRPC as we need as many people as possible to give us a strong voice in the BK Court. Can deferred pension plan members be part of this group? Yes. Your pensions will receive the same treatment as those of other plan members. Will you represent me if I am currently receiving disability payments and my pension continues to accrue? No. You are technically still an employee of Nortel and therefore we cannot represent you. Chapter 11 Bankruptcy What is the Chapter 11 Bankruptcy? The BK Courts allow companies who are experiencing financial difficulties to file for and obtain

4 court protection from their creditors. This allows the company an opportunity to restructure its business in a process overseen by the Court. What is the usual outcome for companies that undergo a restructuring under the Chapter 11 BK? What will happen to Nortel? Each BK CH 11 restructuring is distinct. The outcome could be that Nortel continues as a smaller entity, is sold in parts or as a whole, or is liquidated in bankruptcy (Chapter 7). There is no one likely or predictable outcome at this time. How long will Nortel's BK Ch 11 process take? This is unknown. Nortel s Council has indicated that the process could take at least eighteen months. Nortel will present their re-structuring plans to the Court sometime in May Who is EPIQ? Nortel has appointed and the courts have accepted EPIQ to collect all data in regards to the US Chapter 11 Bankruptcy proceedings. A complete set of monitor s reports, and many of Nortel public documents are available on the EPIQ web site: Has the NRPC selected a potential Law Firm to represent Ex-Nortel Employees? Miller and Martin was initially selected by the NRPC; There was a stipulation by Miller and Martin for NRPC to obtain1000 retainer forms with associated $ checks from its members in order for Miller and Martin to officially represent the NRPC as their Legal Firm at the BK Court. Unfortunately, only 540 form/checks were received resulting in this Legal Firm not being in a position to represent the NRPC. Has the Court granted an order allowing Nortel the option to stop making payments such as Severance, Deferred Comp, Non Qualified Pensions and SERP The Court has granted an order stating that Nortel is not required to make payments towards unsecured creditor claims which include Severance Payments, Deferred Compensation, Non- Qualified Pension Payments and SERP Payments Where in the BK Chapter 11 "pecking order" do unsecured creditors fall? There are apparently no secured creditors in Nortel's BK proceedings. If Nortel becomes bankrupt (Chapter 7), we will need to negotiate with the Court to determine a payout for unsecured creditors. In the event that Nortel emerges from the BK Ch 11 proceedings, there may be a claims process. Is there any protection in place to prevent Nortel s current senior management from giving themselves preference? The Court will monitor Nortel and ensure that this does not happen. Can Nortel shift assets? The Court will monitor and control the movement of funds and assets.

5 Protecting Our Pensions What is the most effective way to protect our interests as Nortel pensioners? Join the NRPC and spread the word to as many former Nortel employees as possible. This will promote a unified voice. How do we reach out to all members of the Pension Plan? Everyone should spread the word to Nortel ex-employees and encourage people to visit this web site for updates NRPC Scope of Activities & selection of Legal Council What s the relationship between NRPC and Miller and Martin? Miller and Martin will not be representing the NRPC at the BK proceedings for reasons specified above. The NRPC is currently negotiating with M & M for the return of unspent funds from the checks that have been sent in. Some money was spent by M & M and those fees will be justified and checked line by line before the NRPC agrees on the return of the funds. Will left over money be returned? In the original FAQ, the NRPC stated that left over money would be returned. In the event that Miller and Martin did not become the designated legal Firm, then funds not paid towards any fees to M & M, would be returned to those who sent in checks. Currently the NRPC is negotiating with M & M and determining what funds have been spent. The NRPC is reviewing M & M's fees in detail and will dispute any excessive charges. Once the amount owed M & M has been determined, the remaining funds will be placed in a "Trust Fund". At this point, any person(s) who prefers to have their portion of the remaining funds returned will have that option. The NRPC is planning to keep the funds in the Trust Fund to use for future actuarial and legal assistance as outlined below; These services would be provided only to the remaining contributing members. 1) To hire an Actuarial Bankruptcy Firm to calculate dollar amount claims for the various unsecured creditor categories. Considerable investigation has been done in this area and it has become clear that calculations for the various dollar amounts to be submitted on the Proof of Claim form, could be complicated due to variances in mortality and interest rates etc. There may be substantial differences in the various variables used by Nortel compared to "variables" considered to be current or future market rate values. These differences may need to be argued in BK court and it would be prudent to have an Actuarial Firm familiar with bankruptcy proceedings, perform consistent calculations for the various ex-nortel unsecured creditor categories. 2) It may be necessary to hire temporary legal assistance to put forth motions in court to protect the interested of ex-nortel employees or to simply put for motions such as actuarial calculations mentioned above. 3) Currently, benefits such as Medical, Long Term Health Insurance and Term Insurance are still being provided by Nortel. In the event that these benefits are terminated, it would be necessary to quickly form a 1114 Committee in order to protect these benefits. This would require legal

6 assistance and should be done in a timely manner. This could more easily be achieved if funds were readily available from monies in Trust Fund provided by ex-nortel employees. Do I need to be part of this group if my retirement is protected by the PBCG? You should sign up if you are concerned about benefits such as medical care and other benefits. The PBCG will cover pensions up to an amount of approximately $49K per year with no Proof of Claim form required. I am a current employee of Nortel and expect to be laid off soon. Can I join NRPC? NRPC cannot represent current employees. As soon as you are laid off you may sign up. Who is Akin Gump? The BK Court has appointed the New York office of Akin Gump as a court appointed Legal Firm to represent the interests of all Unsecured Creditors. The NRPC has been in contact with Akin Gump who have explained to the committee court proceedings and answered several other general questions pertaining to this particular BK case. Should I submit a Proof of Claim form to EPIQ at this point in time? Akin Gump has advised the NRPC that it is not necessary to download the proof of claim form on the EPIQ website at this point since the bar date (the date by which all claims must be filed) has not been set and this date may be several months away. Nortel will estimate its own claim value for each unsecured creditor and will mail each claimant a unique bar code at one point. Claims with bar codes are less likely to be lost. However, if some people have already sent in a Proof of Claim form the claim can be easily amended simply by sending in a second form with a particular box ticked showing it to be an amended claim. It is best to do this after receiving a bar coded claim form and also after having received actuarial assistance and guidance using standard formulas normally acceptable by BK courts and difficult to challenge if they are all done using the same basis parameters. How do I obtain actuarial assistance so as to complete the Proof of Claim form? The NRPC is currently looking into obtaining and experienced bankruptcy actuarial firm. This research is currently underway and the committee will soon be communicating its findings to NRPC members. There will no doubt be costs associated with this activity and these costs will be outlined in a future communiqué. If I want to join the NRPC today, how do I join and where do I send my check? Do not send checks to Miller and Martin at this time. We are currently looking into establishing a NRPC trust account and we will advise shortly on how you can proceed to join the group once this is in place.