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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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What Makes Banks Different ?

I have run across a few interesting things that caused me to wonder what exactly are the banks in Canada doing to make folks want to be their customers? Given they continue to have enormous profit margins, do banks differentiate themselves in Canada?

All of the banks advertise (I don’t have their numbers spent on advertising, but no bank in Canada does NOT advertise). You can see some of the ads on this very web site some times, so they must have very deep advertising pockets, I do like the TD ads with the cranky old men, but that wouldn’t cause me to change banks for that reason alone.

Cheques

The first thing I noticed while collecting dues for a basketball team is that  I received 4 cheques from different parents, but I noticed the cheque design for all 4 cheques were EXACTLY the same, even though they came from 3 different banks. The security patterns on the cheques were exactly the same (I compared them under a strong light), the differences were:

  1. Bank Information about which bank this is, address and logo
  2. Customer information (name and such)
  3. What was included in the MICR lettering at the bottom of the cheque

Other than that, there is no difference in the cheque.  In fact most of the banks use the same printer for cheque designs they simply order them, and thus this service is the same.

On Line Bank Interface

This is very different in terms of who designed the interface and such, but my guess is the “back end” of the software is exactly the same. What you can do is remarkably the same, typically there is a lot of advertising around it to get you to try new services with the bank.

Tomorrow, we continue this interesting case study.

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Today is the first day of Spring in the Northern Hemisphere. Spring is a time of renewal and new beginnings, for your finances as well. The first financial quarter of the year is almost over. Time to assess, review and study your plans for this year. Time for some spring financial cleaning.

Spring Financial Cleaning

Saw this in My Backyard, I think I agree

Spring Financial Cleaning

So what kind of financial spring cleaning can you do? Here are some very simple examples:

  • If you are a Couch Potato investor, have a look at your portfolio. Is it time to rebalance? Given the markets, might be a good time to rebalance.
  • Clean out those extra accounts
    • If you have old bank accounts, combine them. Do you have more than 1 “savings” account? Why? Find the one bank that you can stand, and centralize!
    • How many credit cards do you have? Do you really need 6 different Mastercards? Visa? No, you don’t. Close those extra accounts, they are dangerous to keep.
    • You only need 1 checking account, seriously.
  • How is your financial plan for the year going? Time to rethink things? Did you get a raise? Are you falling into lifestyle creep ?
  • Maybe you don’t have a TFSA set up yet? Why not, it is not just a tax free banking account, time to add this account to your arsenal. Use it as your Emergency account?
  • Is your mortgage about to be renewed? Time to go shopping for a better rate.
  • Your insurances coming due? Time to go shopping, and don’t fall for the “insurance saving device” trick either.
  • Planning on some big spring projects? How are you going to pay for it? Plan now how you will pay for them, or start saving for them.

Get out your financial broom, and sweep it clean. Always try to have a clean financial house.

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Bimodal Financial Planning

The importance of Bimodal Financial Planning strategies cannot be discounted for any person or family wanting to succeed in the current economic environment. Ensuring you are taking care of your day-to-day financial life and planning for your future, ensures a strong Bimodal Financial Plan.

Doesn’t that sound exciting and fun? What do I mean by a Bimodal Financial Plan ? If you asked that question, give yourself a gold star🌟, as the first time I heard it, I thought they were talking about Bipolar psychological problems, but no, folks meant Bimodal.

In mathematical terms Bimodal is simply:

Adjective: having or involving two modes, in particular (of a statistical distribution) having two maxima.

What the heck does that have to do with financial planning? Well, right now, I am making this stuff up, however the term Bimodal is the new Buzzword where I work in terms of IT (computer stuff) quoted by Gartner (the folks who create these lovely concepts). For them the definition of Bimodal becomes more literal:

Having two modes of operation (typically in computers: (1) Day to Day Support (2) Long-term evolution and planning.

Doesn’t that fit into financial planning like a hand in glove? Everyone is always taking care of the day-to-day bill paying and making sure they stay out of debt, and most of us also are planning for our Long-Term financial self, hence the most excellent new financial term Bimodal Financial Planning.

Bimodal Financial Planning
Bimodal Financial Planning Graphics

Stripping away the jargon part of this, it is actually a sound idea for planning your financial life:

  1. Take care of today’s problems financially, in terms of paying off bills and debts.
  2. Plan for your future including: Emergency Funds, Vacation Funds and ultimately Retirement Planning
EQ Bank Savings Plus Account

If any folks are dealing with financial advisors or planners, ask them about what their Bimodal Financial Planning Solutions to plan your financial future, see how they react to that catch-phrase. See if they start using it themselves without asking for an explanation about it (that is a bad sign, they should ask for what you mean by that, before they start using it in conversation).

Never let anyone use a term (especially a financial term) that you don’t understand without asking for an explanation. If they can’t explain it to your satisfaction, it is either (1) too complicated and shouldn’t be used or (2) the person you are talking to is bluffing their way through things (and that is very bad as well).

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What Twits are Talking About Money ?

Some classic money tweets from the Twitter-verse in 2015.

Plenty of news on the twitter wire on the election front, but another fun week of interesting money related tweets on the Twitter Machine (remember I am there as @bigcajunman ) and maybe some other social media as well!

With the new economy how will the tax system deal with these new digital currencies? BDO has some advice for you.

Very topical now as well

You never thought I’d be quoting the CIA eh? Well this one is very true about your local library, and specifically it is great for financial resources too (magazines, books and articles), go to your library and support it (or you will have to answer to the CIA).

Your Library is your friend

I did mention the election, and how the Bank of Canada will work if there is a change of leadership would be a very interesting question. Has anyone asked any of the leaders how they might change the Bank of Canada’s mandate?

Roger Wohlner writes about the worst Mutual fund yields, and I wish more folks would check to see what their Mutual Funds yielded they might be horribly surprised.

Now there is three words I wouldn’t think would go in a sentence “designer luxury consignment“? Does Jaguar have a crash and dent section?

For those of you who don’t follow TVO, you are missing out, and here is your deep thought for today.

A quick look at Facebook and I see that the TFSA is good for single income families? That is not what all the Financial Chicken Little Crowd is saying?

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