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Self Insured Company Disability Plans

As part of the Nortel Bankruptcy, one of the biggest victims were employees who were on disability. The disability insurance ended up in a mess, and those on disability lost their benefits. I knew a few folks who were directly impacted by this, and it makes me very upset thinking of them. Could this happen again? You’d hope not, but nothing much has changed.

More Insurance that Doesn’t Quite Insure

Behold the plight of the 400+ Nortel employees (Canadian) who have been living on disability insurance. They will be cut off from their benefits. This has come to light in the media finally. Nortel officially disappeared a while ago.

How can this be, you ask? Nortel and other large companies typically self insure these kind of plans. This means though it looks like you have your insurance with a large insurance company, you don’t. Your policy is held by your employer and is paid out by your employer (when you make a claim). To the large company it is much cheaper to have the insurance company simply administer the Insurance Policies. The money comes from the large company directly (rather than simply paying premiums to the insurance company and have them profit from the programs).

So what is the problem? The obvious issue with Nortel, is that the company does not exist any more. Anyone who is owed money through this kind of disability policy is now only an unsecured creditor, and is likely to get very little (if any) more money. The fact that this debt can be dodged by the firm by simply declaring bankruptcy is bad (in my opinion).

So what can be done? For the folks at Nortel, not much more. They have hammered out a deal to get whatever moneys they can. As of the cut off date, however, they will be without income, leaving them few options to live on. They may have access to the Canada pension plan disability, but not much else. For those that have disability insurance with large firms that are currently self-insuring, they should be contacting their MP’s right away to have put in place some kind of protection system for this kind of insurance policy.

Former Legislation

There are two pieces of legislation on the books about this topic:

  • Bill S-216 An Act to amend the Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement to protect beneficiaries of long term disability benefits plans (authored by Senator Art Eggleton)
  • C-476 An Act to amend the Bankruptcy and Insolvency Act and other Acts (unfunded Pension Plan Liabilities) (author Wayne Marston (Hamilton-East-Stoney Creek))

Talk to your MP and MPP about these two acts and why they died.

Pension reform is needed as well, but these “policies” being held on the companies books as debt liabilities and not like a pension (which is held by an Arms length company, that is funded by the Insuror), puts 1.1 Million people at risk currently (according to the Canadian Life and Health Insurance Association (from the CBC post Disabilty Insurance at risk for 1.1 Million)).

If you are in this kind of disability insurance program, you may be at risk and it would be in your best interest to follow up on this issue.

What really upsets me, is I paid for this insurance when I worked at Nortel, and it was a very expensive premium that was paid for peace of mind, yet the money effectively went into the companies coffers, instead of a safe place in case I needed it?

The worst part of this whole story, is I know people directly effected by this cut off, and they are the ones who need help. We shall see how this shakes out, but if anyone knows more about this, please feel free to comment.

Addendum

I am most likely in the same situation now. I am a Civil Servant and my guess is that the Government self-insures. This couldn’t happen again, could it? Remember Nortel was too big to fail. The government couldn’t declare bankruptcy, could it?

Other Nortel Disability Stories

From the archives 2010

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Best Financial Decision Ever ?

Whilst wandering through my massive archive of older articles, I tripped across Take the Money or Leave It? I wrote it a month after I got laid off from Nortel. Somehow, this ended up showing the Best Financial Decision I ever made ? Well it certainly looks to be the case. I have a retirement, path to victory.

best decision
Image courtesy of Stuart Miles at FreeDigitalPhotos.net

In that article I mused the following interesting question (remember this was 2008 during the great crash):

The options I have are:

  • Leave the money in my former (or soon to be) employer’s pension scheme and start drawing from it at either age 55 or later.
  • Take the money out and put it into a Locked In Retirement Account (LIRA), or at least the portion that the government allows.

As background my current employers pension plan is under funded, by a fairly large amount. I also have passed a point, so that I can draw from the pension when I am 55.

Thanks to Mrs. C8j, Michael James and a little common sense on my part I ended up doing the second option and it was the best financial decision (read luckiest)  I ever made due to the fact that:

  1. Nortel’s Pension plan was even more under funded than anyone knew and it had serious issues and effectively collapsed. I kept hearing that the Ontario Government had “insurance” to back up the pension, but given the money I took out that “insurance” would not have covered the amount I should have been paid. “There is no way the government would let Nortel and/or its pension fail”? I think we know what happened there as well.
  2. The money I received went into an LIRA in December 2008. This was when stock prices were the lowest, and it grew a great deal, until I took it out to buy into my current employer’s pension plan. Blind luck and no great “market timing” strategy on my part. It was simply me needing to buy, luckily when the market is lowest.

Best Financial Decision Ever?

Many financial decisions cannot be evaluated immediately. Sometimes it takes a while to realize it was the best decision, or a massive blunder.

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On Being Laid Off (a 10 year retrospective)

More than ten years ago about now, I was laid off from Nortel. At the time it was truly a gut punch (spiritually, financially and physically). I worked for BNR then Nortel for 20 years, then I was declared redundant. It wasn’t a surprise, but it still crushed my self-esteem for a long time. I have spoken about this on Podcasts so I won’t rehash too much of this life altering event, but in the end it was a good thing.

laid off
Graphically, the Death of Nortel ( I was laid off mid-year 2008)

Financially I was very lucky, even though it took me a  year to get back on my feet and find a job. If I had been laid off 2 months later, I would have been in a much larger financial world of hurt. I was lucky enough to receive all of my severance package. If I had been laid off any later, I would have waited until Mid-January to get my package, and I would have then received none of it, due to Nortel declaring Bankruptcy.

I was lucky that I withdrew my pension from Nortel, before that plans problems came forward. The reasons for withdrawing the money were emotional (i.e. I am not letting those bastards keep my money), however that emotion-based decision worked out well.

In hindsight being laid off was the luckiest thing that happened to me, and caused me to make the most brilliant financial decisions I have ever made. It always astounds me that the most gut-wrenching events in my life usually end up causing something good.

Ideally, it would have been nice if I could have found a job in less than a year, however, the job I found I am still in and I still enjoy.

Laid Off but Lucky ?

You didn’t think you’d read that headline today, did you?

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Nortel : What is Left?

Most of my regular readers know that I am a survivor of the great Nortel debacle, and I have had a lot of folks ask me questions about whether I am one of the unlucky people (still) standing in line hoping to get money from the former Canadian Technology Demigod, and the easy answer is no (fortunately), I don’t think they owe me anything (but I am not positive, there may be payments for patent work).

I first wrote about leaving Nortel in On Being Laid Off, which was just a raw statement that I had been let go after 20 years working there, but I have mostly stayed away from the topic of Nortel. Given time has passed, let’s look back 6 years ago and I can expand on a few areas where I have had many questions about what happened to me in specific after I got laid off.

I Love Nortel
I Love Nortel

In my article Nortel Teeters, I hinted that things might not go well should Nortel declare bankruptcy in January, 2009, but I really had no sense of just how lucky (and prophetic) that I was with my statements. At the time, I still thought the Canadian government would not let Nortel go into full bankruptcy, there was too much on the line, but I was sadly mistaken. I even did buy the dip and hoped the stock would go up. I was sadly mistaken

On January 15, 2009, I saw how close a bullet I had dodged (more like a howitzer shell) and learned Sometimes it’s Better to be Lucky in life. To paraphrase what I wrote:

  1. I had already been paid all of my severance money before the bankruptcy declaration
  2. I had removed my funds from the Nortel pension plan (earlier than I had planned, again by blind luck)

So, in fact, I wasn’t just lucky, I was the same as  the Irishman who decided not to take the Titanic, and take an earlier  boat. How was I this fortunate ? Thanks go to Michael James, My Wife and a few other folks, as they made me act quickly enough and I am lucky I did, because anybody owed money by Nortel on January 15,2009 were out of luck. Who might these unfortunate folks have been (aside from the folks who loaned them money (bond holders), subcontractors and other real creditors)?

  • Anybody owed severance payments of any kind, have received next to nothing (if not nothing) since that date (that I am aware of)
  • Folks on their disability insurance program, as Nortel was self-insuring, thus those folks stopped getting payments as well
  • The Nortel Pension was owed a great deal of money, as it was in a short-fall before the bankruptcy, that never got paid back (that is one of the bigger arguments about remaining funds).

In the news lately (this being 2014) there are discussions going on about the remaining funds from the Nortel dissolution (mostly from the patents sales  and the like), and who will be getting funds from this pool of money? Bond holders will be getting some money, that is for sure, and some of the European pensioners will get some money, but who gets what of the remaining money remains in question , the money seems to be in the hands of two people now. Two bankruptcy judges one in the US and one in Toronto are now deciding what to do with the left over billions.

For me, I was lucky (the understatement of the century), I am owed nothing more (that I am aware) from Nortel, for those waiting for hopefully a few crumbs from the remnants, I wish them Bonne Chance, and hope for the best for them, and their families. At times I have had survivor’s remorse, in that I managed to get away in one piece, and I know of others that were not so lucky, but that is how life works, I suppose.

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Another Day the World Changed

This day in 2001, the world changed, and I still feel the effects of the attacks on New York, and Washington on 9/11/2001 (and the attacks in London on 7/7/2005).

When that day started, it was a normal day for me, I had gone to work, and was in a meeting when a teammate called me over and showed me a picture of the second plane going into the towers on the CNN.COM web site. At first I was positive someone had photo shopped something and hacked the CNN site, but it quickly became obvious that this was really not the case. As the day unfolded, it was obvious that this was going to change the world as we knew it.

For me a bunch of things came out of that day that changed my world:

  • The economic tailspin contributed to Nortel’s problems (no it didn’t cause Nortel’s downfall, but it did help it along a fair amount). This eventually led to me getting laid off (again not a direct cause, but a contributing factor).
  • I spent a lot of the day trying to figure out if my Brother was safe (given he was travelling at the time), he was fine, but I then found out about friends who had family who were killed.  I don’t know a lot of folks who had family who died, but the anguish they still feel is heart-rending.
  • I tried to explain it all to my kids (who were very young at the time), not sure that I succeeded, since I really couldn’t make a logical explanation up as to why it happened.  Do they remember the day? Sort of, but not with the clarity that my wife and I do.

My life didn’t change directly because of the attacks, however, it did change the world, and it continues to change the world.

There have been many days when the world changed, but this one looks to be the one (in my lifetime) that will live in infamy.

What are your 9/11 recollections?

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