U.S. Judges Less Likely to Cut Off Nortel Retirees

Canadas federal courts appear intent on giving bankrupt Nortel Networks whatever relief it wants in the form of ending retiree and pensioner benefits but judges in the United States are turning out to be a different story.

The Ottawa Citizen is reporting that the U.S. Court of Appeals has refused to just cut off the 4,000 Nortel pensioners, and 280 long-term disability recipients, in the United States from their drug, dental, eye care and life-insurance coverage. Nortel wanted to end those payments as soon as August. Now, though, the insolvent company has to negotiate with its U.S. retirees and pensioners before it is allowed to modify any of their benefits. That likely means Nortel will have to keep forking out $2 million per month for a while longer, much to its chagrin.

Meanwhile, former Nortel employees in Canada will lose their benefits at the end of this year. And they signed away their rights to sue Nortel when they agreed to the extension  Nortel originally planned to cut them off in March. So many are spending these next several months trying to figure out how to fund their futures. One couple may sell the long-time family home.

One difference the Nortel bankruptcy has highlighted between the U.S. and Canada is that the United States actually has stronger pension plan guarantees and social security benefits than its neighbor to the north  a somewhat surprising revelation given the differences in governmental structures.

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