RETIREMENT PLANNING

Nortel Networks Corporation, formerly known asNorthern Telecom Limited,Northern Electricand sometimes known simply asNortel, was amultinationaltelecommunicationsand datanetworking equipmentmanufacturer headquartered inMississauga,Ontario,Canada. It was founded inMontreal, Quebec in 1895 as the Northern Electric and Manufacturing Company. At its height, Nortel accounted for more than a third of the total valuation of all the companies listed on the Toronto Stock Exchange (TSX), employing 94,500 people worldwide.^[3]

Nortel's 2009 bankruptcy casethelargest in Canadian historyleft pensioners, shareholders and former employees with enormous losses while Nortel executives continued to draw "retention bonuses" totaling $190M US during the eight-year post-bankruptcy period.^[4]Nortel had filed forprotection from its creditorsin the United States, Canada, and the United Kingdom in January 2009.^[5]In June 2009, the company announced it would cease operations and sell off all of its business units.^[6]The period of bankruptcy protection was extended to February 2, 2013.^[7]As part of the bankruptcy proceedings in the United States, Nortel Networks Inc. publishes monthly operating reports outlining cash receipts and disbursements.^[8]By 2016 Nortel had sold billions of dollars worth of assets.^[4]

To Do's:

1.The pensioners at Nortel have been fighting hard through litigation for their pensions.Provide an update on where they are currently at by reviewing recent newspaper/magazine articles. (3 marks)

2.Imagine a scenario where a client comes to you.They've just left their job where they were part of a Defined Benefit Pension Plan.The company has provided them documents which ask them whether they would like to keep and take their pension at retirement, or take their commuted value now.Discuss with them what commuted value means, and the pros and cons of taking either the pension or the commuted value.Provide them some guidance on when one would be more appropriate than the other. (15 marks)

3.If you choose to take the commuted value:

a.What type of account will you set up to hold that money? (1 mark)

b.When can you have access to the money and what is the process for doing so?(3 marks)

4.Can you think of another company that has recently been in the news because they filed a motion to suspend retiree benefits?Discuss (3 marks)