Carleton-Mississippi Mills MPP Norm Sterling asked McGuinty why anyone should trust his health care promises after he promised to hire 9000 new nurses in his last Throne Speech. 

“As the Ottawa Hospital just learned, you’re firing nurses, not hiring them,” Mr. Sterling told McGuinty during Question Period.  “Now you say you’ll hire the nurses by 2011.  Why should Ottawa patients believe you?”

Mr. Sterling went on to demonstrate where the Auditor General and the Public Accounts Committee have found that the McGuinty government has misspent taxpayers’ money, either intentionally as in the case of the eHealth scandal, or carelessly in the case of the abuses of the Assistive Devices Program. 

“This afternoon, the public accounts committee is going to hear about the waste in the Assistive Devices Program which cost Ontario taxpayers $350 million a year. The auditor tells us the abuse in this program is in the tens of millions of dollars,” said Mr. Sterling.  “This program could provide the same or better service at a lower cost if the waste was eliminated.  That would leave more money available to hire nurses at the Ottawa Hospital.”

In typical McGuinty style the Premier refused to answer the questions. 

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For more information, call Carleton-Mississippi Mills MPP Norm Sterling at: (416) 314-7900

(Queen’s Park, Toronto) – More than a year after Nortel filed for bankruptcy protection and Nortel pensioners and pension plan members started pleading for help, the McGuinty government is just now announcing it will live up to its existing obligation by funding the Pension Benefit Guarantee Fund. 

“This government’s slow response has left Nortel pension plan members in limbo for a full year,” said Carleton-Mississippi Mills MPP Norm Sterling.  “And even after a year, the McGuinty government is only announcing it will live up to existing legal obligations when a more creative solution like that taken in Quebec would have offered more security at a lower cost to taxpayers.”

According to news reports, Finance Minister Dwight Duncan will announce funding (in the form of either a loan or a grant) to the badly underfunded Pension Benefits Guarantee Fund (PBGF) so that Nortel Pensioners will receive up to $1,000 per month should their pension plan fail.  The PBGF has been so badly underfunded since the McGuinty government took power in 2003 that in the 2009 Budget the government changed the law to allow the Finance Minister to unilaterally make loans or grants to the fund and at the same time stipulated that the government is not obliged to bail out the PBGF.  These contradictory changes left Nortel pensioners wondering what their futures would hold.

“This solution, funding the PBGF, is the easiest and most expensive solution the McGuinty Liberals could find,” said Mr. Sterling.  “Quebec has found a better solution whereby the provincial regulator will take over the management of the remaining pension assets so the plan will continue to exist.  I offered another solution which would have allowed pensioners to transfer their share of the plan into a RRIF or another prescribed retirement savings arrangement instead of being forced to put it into an annuity which offers a very low benefit right now.”

Coincidentally this announcement is being made during by-elections in the two Eastern Ontario ridings of Ottawa West-Nepean and Leeds-Grenville. 

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For more information, call Carleton-Mississippi Mills MPP Norm Sterling at: (416) 314-7900

(Kanata, Ontario) – Carleton-Mississippi Mills M.P.P. Norm Sterling is pleased to see the results of his proposal to create an Eastern Ontario Economic Development Fund come home to his riding.

Today Municipal Affairs and Housing Minister Jim Watson announced a grant to Laurysen Kitchens Ltd. In Stittsville to purchase a new, more environmentally friendly UV water-based wood coating finishing line. 

“I am thrilled to see some money flowing into a business in my riding,” said Mr. Sterling.  “Laurysen Kitchens is a family owned and operated business that has been in Stittsville for almost 40 years and employs 120 people.  They are also great corporate citizens who support a long list of community events and organizations including the Ottawa Rotary Club, Children’s Hospital of Eastern Ontario and many minor sports teams.” 

Mr. Sterling first introduced the concept of an Eastern Ontario Economic Development Fund as a Private Members’ Bill on April 13, 2005 and it was debated in April 2005 and again in May 2006.  On both occasions the Bill passed second reading but was left by the McGuinty government to die while awaiting committee hearings and third reading. 

Then, in July 2008, the McGuinty Liberal Government announced an Eastern Ontario Development Fund administered by the Ministry of Economic Development and Trade.  The Fund provides up to 15% of eligible project expenses for implementation of new technologies, new equipment or skills training for employees for projects valued at $500,000 or more.

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For more information, call Carleton-Mississippi Mills MPP Norm Sterling at: (613) 599-3000

– The McGuinty Liberals dashed the hopes of Nortel Pensioners by defeating a Private Members Bill which was designed to help protect the value of their share of the Nortel pension plan should the plan be wound up.

Bill 213, the Pension Benefits Amendment Act (Transfers on Wind Up), 2009, introduced by Carleton-Mississippi Mills MPP Norm Sterling, would have allowed, if passed, existing Nortel pensioners or their survivors two options on the wind-up of their pension fund.

At present when a pension plan is wound up, the Financial Services Commission of Ontario (FSCO) is required to purchase a life annuity on behalf of pensioners already receiving pension benefits for the value of the pension. With interest rates low, annuities are providing low benefits. Mr. Sterling’s Bill would have allowed pensioners to roll their reduced pension into an annuity or into another prescribed retirement savings arrangement.

Liberal Members who spoke to the Bill objected to it on the basis that it did not address all the problems facing Ontario’s current pension system.

“It was important we pass this Bill now because the Nortel Pension Plan may be wound up before the Legislature returns in February,” explained Mr. Sterling. “This was not intended to be a comprehensive solution to the need for pension reform but it was an interim measure that could have helped thousands of Nortel Pensioners across Ontario who need help now.”

Mr. Sterling told the Legislature that the solution presented in his Bill was not the first choice of Nortel Pensioners, nor was it his first choice. However, FSCO, an arm’s length body, makes the decision to wind up a plan when they determine that the company (in this case Nortel) will no longer survive. Since that could conceivably happen in the next few months, Mr. Sterling’s Bill at least presented an option which would have helped alleviate some of the pain for Nortel Pensioners.

Ontario’s approximately 12,000 Nortel pensioners are taking a double hit. Firstly the value of their pension is reduced to an estimated 69% because the plan was underfunded when Nortel filed for bankruptcy protection. Secondly their only option, a lifetime annuity, is a poor investment at this time.

“I want to thank my colleague, Mr. Sterling for bringing this bill forward,” said Frank Klees, MPP for Newmarket-Aurora. “There is a matter of urgency which is why it is before the House now. We’ve heard honourable members make reference to the fact that pension legislation in this province should be reformed, that we need to approach pensions in a new way. That’s all fine and good. But I think we missed the point of this Bill if we wax eloquent about future discussions about reforming pension plans in this province. What we need to do here is deal with a matter that is affecting people who are caught. They’re caught in a circumstance beyond their control.”

Mr. Sterling concluded his remarks in the Legislature with a plea on behalf of Nortel Pensioners. “Please, please give these people the opportunity to save some of their pension funds should this thing be wound down in the next two to three months.”

Despite his pleas all Liberal Members present in the Legislature voted down his Bill, leaving Nortel Pensioners literally out in the cold this winter.

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 For more information, call Carleton-Mississippi Mills MPP Norm Sterling at: (416) 314-7900

 The Acting Speaker (Mr. Jim Wilson): Order. Please take your seats. Mr. Sterling has moved second reading of Bill 213. All those in favour of the motion will please rise and remain standing until recognized by the clerk.

Ayes

The Acting Speaker (Mr. Jim Wilson): All those opposed to the motion will please rise and remain standing until recognized by the Clerk.

Nays

(Queen’s Park, Toronto) – The McGuinty Government promised in their March 26 budget to create 146,000 new jobs this year.  Last Friday, just seven months later, Statistics Canada revealed that not only has McGuinty failed to create jobs, but Ontario has in fact lost 32,000 jobs since that budget was introduced.

“Dalton McGuinty has taken record economic growth and job creation and turned it into record tax increases, deficits and unemployment,” said Carleton-Mississippi Mills MPP Norm Sterling.  “Now 32,000 Ontarians will now have to figure out how to pay McGuinty’s HST without a job.  At the same time, McGuinty has saddled every Ontario family with an additional $13,500 in provincial debt.”

While McGuinty lets Ontario fall further into have-not status, the Ontario PC Caucus has a Small Business Jobs Plan that would help entrepreneurs create long-term jobs right away.  This plan includes simple steps like implementing a one year payroll tax holiday on new hires and suspending the land-transfer tax for one year.  It also includes re-instating the Red Tape Commission to eliminate unnecessary regulations and repealing McGuinty’s job-killing Bill 119 which forces independent operators and sole proprietors into the WSIB system costing affected small businesses $11,000 a year.

Tim Hudak, Leader of the Official Opposition, is also continuing to fight against McGuinty’s plan to merge the PST and GST into a harmonized sales tax that will take $3 billion out of the pockets of consumers.  The HST will add 8% to the cost of a long list of things including home maintenance and renovations, haircuts, newspapers, fast food under $4, gym memberships, accounting and legal fees and even funeral services.

“McGuinty has obviously lost touch with real Ontarians, especially the 32,000 newly unemployed Ontarians who are trying to figure out how to pay the mortgage and buy Christmas presents for the kids,” said Sterling.  “Ontario needs to move in a new direction and Tim Hudak is offering a road map.”

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For more information, call Carleton-Mississippi Mills MPP Norm Sterling at: (613) 599-3000

At present when a pension plan is wound up, the Financial Services Commission of Ontario (FSCO) can only purchase a life annuity on behalf of a pensioner for the value of the pension.  With interest rates low, annuities are providing low benefits.

Pensioners are taking a double hit.  Firstly the value of their pension is reduced to an estimated 69% because the plan was underfunded when Nortel filed for bankruptcy protection.  Secondly their only option, a lifetime annuity, is a poor investment at this time.

“Time is of the essence for Nortel pensioners as their plan could be wound up any day by FSCO,” said Mr. Sterling.  “My Bill will be debated on November 26 and I certainly hope that all Members of the Legislature will see its importance and support it and that the McGuinty government will call it for third and final reading quickly.” 

Mr. Sterling’s Bill will give pensioners or their survivors another option to roll their reduced pension into an RRSP or another prescribed retirement savings arrangement.  Pensioners can then decide to keep this arrangement or buy an annuity when market conditions improve.

Oddly, the present rules provide these two options to members of a pension plan who have not yet begun to receive pension benefits, but not for those already receiving a pension.

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For more information, call Carleton-Mississippi Mills MPP Norm Sterling at: (416) 314-7900

(Kanata, Ontario) – Norm Sterling, MPP for Carleton-Mississippi Mills today launched a petition demanding the McGuinty Government hold that public inquiry into the $1 Billion spending scandal.

“I have heard from many constituents who believe that a public inquiry is the only way to get to the bottom of this mess,” said Mr. Sterling.  “Our leader Tim Hudak and our Party have demanded a public inquiry and I wanted to give my constituents a way to support this demand.”

The eHealth scandal has been the subject of a report by the Auditor General and will be the subject of a hearing and report by the Standing Committee on Public Accounts.  However, Mr. Sterling noted that the Auditor General lacked the mandate or the resources necessary to answer many of the most important questions about this scandal.

“I have full respect for the Auditor General and, as Chair of the Public Accounts Committee, I know we will ask tough questions, but given that the majority of the members of the Public Accounts Committee are Liberals, people won’t have confidence that we can get to the bottom of what happened and who was involved,” said Mr. Sterling. 

The Auditor General’s report suggests that there may have been deliberate collusion and bid-rigging at eHealth.  His report also highlights the role of the Management Board of Cabinet in waiving the rules relating to untendered contracts.  And maybe most disturbing, the Auditor’s report tells of his being stonewalled for almost six months from starting his audit. 

“I asked the Premier during Question Period whether he would request a forensic audit to find the documents that went missing while the auditor was being stonewalled,” said Mr. Sterling.  “He refused, so the only way to ensure Ontarians find out where their money went and why is an independent public inquiry with a full mandate to subpoena testimony and documents.”

To get a copy of Mr. Sterling’s petition visit www.normsterling.com or call (613) 599-3000.

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For more information, call Carleton-Mississippi Mills MPP Norm Sterling at: (613) 599-3000

(Queen’s Park, Toronto) Despite claims that the HST will reduce the taxes on businesses, the McGuinty government has negotiated a deal which will cost businesses $3.5 Billion over the next three years by denying promised tax credits. 

In one part of the 2009 Budget the McGuinty government says that businesses will be able to save money by claiming the HST they pay as input tax credits.  However, the McGuinty Government’s Memorandum of Agreement with the Federal Government says they could deny input tax credits for five years and then phase out these restrictions over an additional three years.  According to the Budget Impact Summary table on page 134 of the 2009 Budget these Input Tax Credit Restrictions will mean businesses will be paying $905 Million in 2010/11, $1.26 Billion in 2011/12 and $1.31 Billion in 2012/13. 

MPPs Norm Miller (Parry Sound-Muskoka) and Norm Sterling (Carleton-Mississippi Mills) questioned Finance Minister Dwight Duncan about this discrepancy in this week’s Estimates Committee.

“Businesses have been led to believe they will benefit, but they will not see those benefits until the year 2018,” said Mr. Sterling. 

Mr. Sterling asked Minister Duncan if he was misleading businesspeople by saying in one part of the budget that they would receive a tax credit for the taxes they paid on purchases and then denying it for some businesses and expenses in another part of the budget.    

Duncan and his Assistant Deputy Minister dodged the question, indicating that Sterling’s conclusions were correct.  

The ADM did reveal that this tax grab from business will be used to fund the McGuinty government’s promised corporate income tax cuts, demonstrating this government’s slight of hand tactics.

“This government continues its practice of not being straight forward with taxpayers,” said Mr. Miller, who was named Official Opposition Finance Critic earlier this week.  “This contradiction certainly proves that we can’t believe any of his claims that this is not a tax grab.”

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For more information, call Parry Sound-Muskoka MPP Norm Miller at: (705) 645-8538

or Carleton-Mississippi Mills MPP Norm Sterling at: (416) 314-7900

(Queen’s Park, Toronto)  –  Carleton-Mississippi Mills MPP Norm Sterling used yesterday’s Estimates Committee meeting to question Finance Minister Dwight Duncan on what he would be willing to do to protect Nortel Pensioners from having their income slashed once all of Nortel’s assets are sold off.

Mr. Sterling asked, on behalf of Nortel pensioners in his riding and across the province, whether the Minister would indicate to the Financial Services Commission of Ontario (FSCO) that he would be changing the existing rule that pension funds must be rolled over into annuities when the pension plan is wound up.  Pensioners would like the option of rolling the money into an RRSP fund as an alternative to purchasing an annuity.

The Minister tried to sound sympathetic to the concerns of Nortel pensioners and said he would be studying the problem and introducing pension reform legislation in the fall but refused to commit to changing the rules surrounding the end of a pension plan and direct the FSCO to hold off on winding up the Nortel pension until the rules are changed.

“Time is of the essence for Nortel pensioners,” Mr. Sterling told the Minister.  “FSCO could crystallize the pension tomorrow. FSCO has the discretion to wind up the pension plan when it determines that Nortel will cease to exist.”

If the Nortel pension is wound up now, pensioners will be forced to roll their pension into an annuity.  With interest rates at a historic low, the value of the annuities will be very low.   

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For more information, call Carleton-Mississippi Mills MPP Norm Sterling at: (416) 314-7900

Draft HaNSARD TRANSCRIPT – July 29, 2009

STANDING COMMITTEE ON ESTIMATES

MINISTRY OF FINANCE

Mr. Norman W. Sterling: Okay. I’d like to ask you some questions about pensions and what you’re going to do for—specifically, I’m going to talk about Nortel pensioners, many of whom reside in the area that I represent in the west part of Ottawa, but they’re in fairly large numbers across the province of Ontario. In fact, there’s probably something like 20,000 across Ontario. It could be anywhere between 15,000 to 20,000 pensioners.

The average age of these pensioners is 71 years of age, as a group told me yesterday in my constituency office in Ottawa. This is, I think, the third or fourth meeting I’ve had with them. The average pension they’re collecting is about $2,400 per month. But there are many in what they call the negotiated pension or ??union group; their average pension would be $12,000 a year. They’re very, very concerned about what’s going to happen in the next month or two, and they’re concerned because, as Nortel assets are sold off, it is up to FSCO to decide on the date when their pension trusts shall be wound up. As they have been told by a Mr. Gordon of FSCO, it is a discretionary decision on his part or FSCO’s part as to when that pension shall end.

One of the problems with the present legislation in the province of Ontario, as they describe it to me, is that FSCO has few options as to what happens with regard to the funds that are still there in that pension fund going forward. The pensioners describe it to me that there is one option and one option only, and that is for them to buy an annuity going forward. Well, given the fact that, in Canada, the annuity market is very limited, and we all know that interest rates are historically at low rates, the annuities that these people might receive, even if the pension fund is 70% solvent, 60% solvent—we’re not sure of the number; the last number that they have received was 69%; it was 100% going back into the fall, 84% in January; the last number they heard was 69%—will diminish their pensions probably to somewhere between 25% to 50% of what they’re now receiving.

What they would like is a postponement of the winding-up of this pension as they see the equity markets, the economy improving, going forward. That is one thing that they would like the government to act on, and this is an Ontario issue as Ontario makes the laws with regard to their pension. I might add Nortel is an Ontario incorporated company and that the pension laws are within our mandate.

The second thing that they are asking me to convey to you and ask you to do is give them the opportunity on the wind-up pension of not forcing them into necessarily buying an annuity but being able to have the right to roll that over into an RRSP, where they can then make their decision as to whether or not they want to buy an annuity or they want to invest that some other way in order to protect whatever little they might have going forward. Those are two reforms which are within the provincial mandate.

As I understand it, FSCO is an arms-length body and therefore may, at any moment, drop the hat in terms of winding up the pension fund that is a trust for Nortel employers. What I would like you to do, Mr. minister, is to make a public statement so that FSCO would understand that this government will act in the near future to amend the legislation to allow these two things to occur. Would you like to respond to that?

Hon. Dwight Duncan: Thank you for the question. We have had similar representations made to us, and the Nortel situation is one that obviously we’re very aware of and the challenges before them. I think, Mr. Sterling, you’re absolutely right in terms of when that pension deficit is crystallized and the impact that can have first of all on the amount available for an annuity and then obviously on low interest rate annuities and what that would mean. We are looking at that situation along with a number of others in the province.

I concur with the observation that there is a need for amendment to the Pension Benefits Act. We will be bringing forward legislative changes this fall. We will bring forward two packages of amendments arising out of Mr. Arthurs’s report. In terms of the postponing of the windup, I think we have to look very carefully at that. I would not for a moment discount the significance of that in terms of a way of helping to manage this situation. In terms of what individuals can do at windup in terms of what they can roll over into, that is something that, again, as part of the broader look we’re having at pensions, we’re looking at that actively.

The Nortel situation is here in front of us now. There are a number of other situations. I don’t think any of the requests are—I don’t think it’s unreasonable to ask the government to look at those as part of a package of legislative amendments. We are currently, I guess it’s fair to say, doing our due diligence in terms of the Arthurs recommendations. How they would apply to Nortel at this point will in part depend on the moment at which the state of the pension fund is crystallized in law. To that end, I take your questions and your recommendations under advisement, indicate to you and the people that you’ve met with that we take them very seriously, and as we respond to Nortel—and there are a number of other situations in Ontario, as you’re aware—obviously we’ll take them very seriously.

Mr. Norman W. Sterling: I appreciate that. One of the problems with the Nortel people, and I’m not aware of the other bankruptcy situations which may lead to crystallization of pension plan funds, but time is of the essence in this particular situation, and FSCO could crystallize the pension, as I said, tomorrow. The basis upon which, I understand, they crystallize the pension is when they believe that Nortel is no longer going to exist; 40% of the assets were auctioned off, as you know, last Friday, and if that sale proceeds through, then FSCO are going to be caught in a position where they are going to have to make a decision relatively soon, and probably before the Legislature reconvenes on September 14.

That is why I am asking you to consider making a very public statement of the exact nature of the relief that you might provide prior to the Legislature coming back so that FSCO would understand, perhaps, that waiting until the other 60% of Nortel assets are sold, or whatever happens to them, might be more prudent. I understand that there is a downside to postponing too, because, at the present time, Nortel employees who are on pension are receiving their full pension. Ever since the bankruptcy took place in January, the company has not been contributing to that pension plan, so we’re having a depletion of the pension fund and therefore that 69% is obviously going to be less than 69% as we go forward because nothing coming in and everything going out is leading to that. There’s a real spot that FSCO might be in in terms of deciding what their fiduciary obligations are with regard to calling it a day. That’s why I think it’s important that we send a clear signal at this point in time as to what are the options going to be available, if they’re going to change with regard to the wind up of these pensions, now, not a month from now, because that may be, in fact, too late. I hope it isn’t. These pensioners are very worried that FSCO will drop the penny right away.

I also want to ask you, with regard to if the Nortel pensioners receive less than they are, they could be benefactors of the Ontario pension guarantee fund. Presently, that fund is in a deficit position. As of the end of the last financial year, they were $102 million in deficit. The deficit would be much higher had you not lent the fund $330 million shortly after you came to power. On March 31, 2004, you gave them an interest-free loan of $330 million, and that later was discounted because of the no-interest clause, and so the value of it to the fund was much higher than a $330-million loan. We’ve got a pension benefits guarantee fund that’s in deficit. There is no plan as to how this is going to be funded going forward. Obviously the funding provisions in the present legislation for the pension benefits guarantee fund are not adequate to cover the kind of obligations that they have now or are going to have in the near future and maybe in the long-term future. What are your plans to provide for a self-sustaining pension benefits guarantee fund and what are your plans in terms of increasing the maximum from $1,000 to $2,500 as Mr. Arthurs recommended in his report?

Hon. Dwight Duncan: First of all, to verify what you’ve said about the state of the fund, I think, on a cash basis, it’s negative; on an accrual basis, there’s a small positive balance, but you’re right, there’s not enough to cover a claim by Nortel and there are a number of others—

Mr. Norman W. Sterling: On a cash basis, it’s in the positive sense—

Hon. Dwight Duncan: In a reverse, cash it’s positive, accrual it’s negative, so, you’re right about that. There’s not enough money in the fund, there never has; it’s been underfunded. Mr. Arthurs did recommend raising the limit to $2,500. He also recommended having an actuarial study done to look at how to finance that, whether it’s been properly financed, that is under way. I believe we’re going to get the study back and completed—Deputy, do you know when that will be completed?

Mr. Peter Wallace: End of the year, early next.

Hon. Dwight Duncan: The end of this year, early next year. You’re right, there is a challenge, we’re looking at options now going forward. I expect that we will be engaged in a fairly significant discussion among ourselves in the Legislature and obviously with those people affected by it, but obviously that fund has been, historically, not properly funded and it would not be able to meet a large obligation such as Nortel and there are others outstanding out there that we think may be coming forward.

Mr. Norman W. Sterling: How many others are there out there at the present time?

Hon. Dwight Duncan: Well, in addition to Nortel there are at least two other fairly large ones that we are aware of, there are a number of smaller ones as well and there may be, beyond what we’re aware of, more out there. So that’s the best information I can give you at this point, but it is something that we’re looking at all the options available to the government now with respect to how we would respond in the event that any or all of those pensions make a claim on the PBGF.

Mr. Norman W. Sterling: In January of this year, ironically the day after the bankruptcy of Nortel took place, the Legislature of Quebec introduced new private pension guarantees to their pensioners. Nortel has employees in Ottawa, Toronto and Montreal and we’ve got a situation now where perhaps the Nortel employees in Quebec will be more favourably treated because of the legislation in Bill 1 brought before the Legislature of Quebec which was, I believe, passed in mid-January, January 15 or about that time, which guaranteed to pensioners who were benefactors of defined benefit pension funds that their pensions would continue up to the amount that the pension fund, the one that went down, was funded. In my case, if I said 69% for Nortel, then pensioners would receive 69% of their pensions going forward. It was time-limited to five years, many people suspect that that will be extended by the Legislature of Quebec as well. Are there any thoughts on your part of providing Nortel employees in Ottawa and Toronto the same kind of protection that they’re receiving in Montreal?

The Vice-Chair (Mr. Garfield Dunlop): We’re down to about three and a half minutes.

Hon. Dwight Duncan: I’ll briefly say we’re looking at the Quebec model, and I’m going to ask my Deputy Minister and perhaps Steve Orsini to respond in more detail about the Quebec proposal.

Mr. Peter Wallace: It is worth remembering that Ontario is the only jurisdiction in Canada that does have such a fund in its current form. I’ll ask Steve to speak to the specifics, but it’s frankly not at all clear to us that the Quebec model offers significant protection to any group. I think the way it is structured and the way it is worded is something that we’re continuing to monitor but it is not at all clear to us that that establishes a model that would provide the benefit that might be anticipated and associated with that.

Mr. Steve Orsini: Just to elaborate further on what the Minister and deputy had mentioned and I think, Mr. Sterling, you captured it correctly in your understanding of the Quebec plan, it doesn’t guarantee benefit payments as to what the employer may have committed to the employee. What it does do is prevent that crystallization. So the Quebec model, as we understand it, and the details are still being developed, is that it takes the pension plan as it gets wound up and puts it in so that the investments aren’t converted to annuities.

And I think that as you acknowledged earlier, it’s not a very robust market for annuities. It’s difficult to convert investments that might be in stock, bonds and real estate into these types of annuities.

What Quebec is trying to do is not—at the low end of the financial business cycle, where, as you know from last fall, there were significant reductions in equities and that affected pension plans across the board. We’ve seen them start to recover. The idea was, can you not have them converted into annuities and lock in those losses at that time? It’s not clear whether or not—how conservative Quebec will be in their investments, because then who bears the risk? If they’re guaranteed a 69% funded ratio, as you mentioned, are they prepared to—so we don’t know how their investment plans will roll out. It’s still an uncertainty. So that’s a key point: to distinguish between what Quebec has and what the deputy referred to as what’s available in Ontario.

Mr. Norman W. Sterling: Well, will you commit yourselves to treating Nortel employees at least as well as they are being treated in the province of Quebec?

Hon. Dwight Duncan: As I said, as you can tell, we are actively looking at the Quebec model. It’s not clear to us, at this point, that benefit, but we are looking at that and a number of other options as we move forward.

Mr. Norman W. Sterling: I can assure you that the pensioners believe that the Nortel employees in Montreal are being treated better than they are in Ontario.

Thank you very much.

(Queen’s Park, Toronto)  –  Carleton-Mississippi Mills MPP Norm Sterling used yesterday’s Estimates Committee meeting to question Finance Minister Dwight Duncan on what he would be willing to do to protect Nortel Pensioners from having their income slashed once all of Nortel’s assets are sold off.

Mr. Sterling asked, on behalf of Nortel pensioners in his riding and across the province, whether the Minister would indicate to the Financial Services Commission of Ontario (FSCO) that he would be changing the existing rule that pension funds must be rolled over into annuities when the pension plan is wound up.  Pensioners would like the option of rolling the money into an RRSP fund as an alternative to purchasing an annuity.

The Minister tried to sound sympathetic to the concerns of Nortel pensioners and said he would be studying the problem and introducing pension reform legislation in the fall but refused to commit to changing the rules surrounding the end of a pension plan and direct the FSCO to hold off on winding up the Nortel pension until the rules are changed.

“Time is of the essence for Nortel pensioners,” Mr. Sterling told the Minister.  “FSCO could crystallize the pension tomorrow. FSCO has the discretion to wind up the pension plan when it determines that Nortel will cease to exist.”

If the Nortel pension is wound up now, pensioners will be forced to roll their pension into an annuity.  With interest rates at a historic low, the value of the annuities will be very low.   

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For more information, call Carleton-Mississippi Mills MPP Norm Sterling at: (416) 314-7900

Draft HaNSARD TRANSCRIPT – July 29, 2009

STANDING COMMITTEE ON ESTIMATES

MINISTRY OF FINANCE

Mr. Norman W. Sterling: Okay. I’d like to ask you some questions about pensions and what you’re going to do for—specifically, I’m going to talk about Nortel pensioners, many of whom reside in the area that I represent in the west part of Ottawa, but they’re in fairly large numbers across the province of Ontario. In fact, there’s probably something like 20,000 across Ontario. It could be anywhere between 15,000 to 20,000 pensioners.

The average age of these pensioners is 71 years of age, as a group told me yesterday in my constituency office in Ottawa. This is, I think, the third or fourth meeting I’ve had with them. The average pension they’re collecting is about $2,400 per month. But there are many in what they call the negotiated pension or ??union group; their average pension would be $12,000 a year. They’re very, very concerned about what’s going to happen in the next month or two, and they’re concerned because, as Nortel assets are sold off, it is up to FSCO to decide on the date when their pension trusts shall be wound up. As they have been told by a Mr. Gordon of FSCO, it is a discretionary decision on his part or FSCO’s part as to when that pension shall end.

One of the problems with the present legislation in the province of Ontario, as they describe it to me, is that FSCO has few options as to what happens with regard to the funds that are still there in that pension fund going forward. The pensioners describe it to me that there is one option and one option only, and that is for them to buy an annuity going forward. Well, given the fact that, in Canada, the annuity market is very limited, and we all know that interest rates are historically at low rates, the annuities that these people might receive, even if the pension fund is 70% solvent, 60% solvent—we’re not sure of the number; the last number that they have received was 69%; it was 100% going back into the fall, 84% in January; the last number they heard was 69%—will diminish their pensions probably to somewhere between 25% to 50% of what they’re now receiving.

What they would like is a postponement of the winding-up of this pension as they see the equity markets, the economy improving, going forward. That is one thing that they would like the government to act on, and this is an Ontario issue as Ontario makes the laws with regard to their pension. I might add Nortel is an Ontario incorporated company and that the pension laws are within our mandate.

The second thing that they are asking me to convey to you and ask you to do is give them the opportunity on the wind-up pension of not forcing them into necessarily buying an annuity but being able to have the right to roll that over into an RRSP, where they can then make their decision as to whether or not they want to buy an annuity or they want to invest that some other way in order to protect whatever little they might have going forward. Those are two reforms which are within the provincial mandate.

As I understand it, FSCO is an arms-length body and therefore may, at any moment, drop the hat in terms of winding up the pension fund that is a trust for Nortel employers. What I would like you to do, Mr. minister, is to make a public statement so that FSCO would understand that this government will act in the near future to amend the legislation to allow these two things to occur. Would you like to respond to that?

Hon. Dwight Duncan: Thank you for the question. We have had similar representations made to us, and the Nortel situation is one that obviously we’re very aware of and the challenges before them. I think, Mr. Sterling, you’re absolutely right in terms of when that pension deficit is crystallized and the impact that can have first of all on the amount available for an annuity and then obviously on low interest rate annuities and what that would mean. We are looking at that situation along with a number of others in the province.

I concur with the observation that there is a need for amendment to the Pension Benefits Act. We will be bringing forward legislative changes this fall. We will bring forward two packages of amendments arising out of Mr. Arthurs’s report. In terms of the postponing of the windup, I think we have to look very carefully at that. I would not for a moment discount the significance of that in terms of a way of helping to manage this situation. In terms of what individuals can do at windup in terms of what they can roll over into, that is something that, again, as part of the broader look we’re having at pensions, we’re looking at that actively.

The Nortel situation is here in front of us now. There are a number of other situations. I don’t think any of the requests are—I don’t think it’s unreasonable to ask the government to look at those as part of a package of legislative amendments. We are currently, I guess it’s fair to say, doing our due diligence in terms of the Arthurs recommendations. How they would apply to Nortel at this point will in part depend on the moment at which the state of the pension fund is crystallized in law. To that end, I take your questions and your recommendations under advisement, indicate to you and the people that you’ve met with that we take them very seriously, and as we respond to Nortel—and there are a number of other situations in Ontario, as you’re aware—obviously we’ll take them very seriously.

Mr. Norman W. Sterling: I appreciate that. One of the problems with the Nortel people, and I’m not aware of the other bankruptcy situations which may lead to crystallization of pension plan funds, but time is of the essence in this particular situation, and FSCO could crystallize the pension, as I said, tomorrow. The basis upon which, I understand, they crystallize the pension is when they believe that Nortel is no longer going to exist; 40% of the assets were auctioned off, as you know, last Friday, and if that sale proceeds through, then FSCO are going to be caught in a position where they are going to have to make a decision relatively soon, and probably before the Legislature reconvenes on September 14.

That is why I am asking you to consider making a very public statement of the exact nature of the relief that you might provide prior to the Legislature coming back so that FSCO would understand, perhaps, that waiting until the other 60% of Nortel assets are sold, or whatever happens to them, might be more prudent. I understand that there is a downside to postponing too, because, at the present time, Nortel employees who are on pension are receiving their full pension. Ever since the bankruptcy took place in January, the company has not been contributing to that pension plan, so we’re having a depletion of the pension fund and therefore that 69% is obviously going to be less than 69% as we go forward because nothing coming in and everything going out is leading to that. There’s a real spot that FSCO might be in in terms of deciding what their fiduciary obligations are with regard to calling it a day. That’s why I think it’s important that we send a clear signal at this point in time as to what are the options going to be available, if they’re going to change with regard to the wind up of these pensions, now, not a month from now, because that may be, in fact, too late. I hope it isn’t. These pensioners are very worried that FSCO will drop the penny right away.

I also want to ask you, with regard to if the Nortel pensioners receive less than they are, they could be benefactors of the Ontario pension guarantee fund. Presently, that fund is in a deficit position. As of the end of the last financial year, they were $102 million in deficit. The deficit would be much higher had you not lent the fund $330 million shortly after you came to power. On March 31, 2004, you gave them an interest-free loan of $330 million, and that later was discounted because of the no-interest clause, and so the value of it to the fund was much higher than a $330-million loan. We’ve got a pension benefits guarantee fund that’s in deficit. There is no plan as to how this is going to be funded going forward. Obviously the funding provisions in the present legislation for the pension benefits guarantee fund are not adequate to cover the kind of obligations that they have now or are going to have in the near future and maybe in the long-term future. What are your plans to provide for a self-sustaining pension benefits guarantee fund and what are your plans in terms of increasing the maximum from $1,000 to $2,500 as Mr. Arthurs recommended in his report?

Hon. Dwight Duncan: First of all, to verify what you’ve said about the state of the fund, I think, on a cash basis, it’s negative; on an accrual basis, there’s a small positive balance, but you’re right, there’s not enough to cover a claim by Nortel and there are a number of others—

Mr. Norman W. Sterling: On a cash basis, it’s in the positive sense—

Hon. Dwight Duncan: In a reverse, cash it’s positive, accrual it’s negative, so, you’re right about that. There’s not enough money in the fund, there never has; it’s been underfunded. Mr. Arthurs did recommend raising the limit to $2,500. He also recommended having an actuarial study done to look at how to finance that, whether it’s been properly financed, that is under way. I believe we’re going to get the study back and completed—Deputy, do you know when that will be completed?

Mr. Peter Wallace: End of the year, early next.

Hon. Dwight Duncan: The end of this year, early next year. You’re right, there is a challenge, we’re looking at options now going forward. I expect that we will be engaged in a fairly significant discussion among ourselves in the Legislature and obviously with those people affected by it, but obviously that fund has been, historically, not properly funded and it would not be able to meet a large obligation such as Nortel and there are others outstanding out there that we think may be coming forward.

Mr. Norman W. Sterling: How many others are there out there at the present time?

Hon. Dwight Duncan: Well, in addition to Nortel there are at least two other fairly large ones that we are aware of, there are a number of smaller ones as well and there may be, beyond what we’re aware of, more out there. So that’s the best information I can give you at this point, but it is something that we’re looking at all the options available to the government now with respect to how we would respond in the event that any or all of those pensions make a claim on the PBGF.

Mr. Norman W. Sterling: In January of this year, ironically the day after the bankruptcy of Nortel took place, the Legislature of Quebec introduced new private pension guarantees to their pensioners. Nortel has employees in Ottawa, Toronto and Montreal and we’ve got a situation now where perhaps the Nortel employees in Quebec will be more favourably treated because of the legislation in Bill 1 brought before the Legislature of Quebec which was, I believe, passed in mid-January, January 15 or about that time, which guaranteed to pensioners who were benefactors of defined benefit pension funds that their pensions would continue up to the amount that the pension fund, the one that went down, was funded. In my case, if I said 69% for Nortel, then pensioners would receive 69% of their pensions going forward. It was time-limited to five years, many people suspect that that will be extended by the Legislature of Quebec as well. Are there any thoughts on your part of providing Nortel employees in Ottawa and Toronto the same kind of protection that they’re receiving in Montreal?

The Vice-Chair (Mr. Garfield Dunlop): We’re down to about three and a half minutes.

Hon. Dwight Duncan: I’ll briefly say we’re looking at the Quebec model, and I’m going to ask my Deputy Minister and perhaps Steve Orsini to respond in more detail about the Quebec proposal.

Mr. Peter Wallace: It is worth remembering that Ontario is the only jurisdiction in Canada that does have such a fund in its current form. I’ll ask Steve to speak to the specifics, but it’s frankly not at all clear to us that the Quebec model offers significant protection to any group. I think the way it is structured and the way it is worded is something that we’re continuing to monitor but it is not at all clear to us that that establishes a model that would provide the benefit that might be anticipated and associated with that.

Mr. Steve Orsini: Just to elaborate further on what the Minister and deputy had mentioned and I think, Mr. Sterling, you captured it correctly in your understanding of the Quebec plan, it doesn’t guarantee benefit payments as to what the employer may have committed to the employee. What it does do is prevent that crystallization. So the Quebec model, as we understand it, and the details are still being developed, is that it takes the pension plan as it gets wound up and puts it in so that the investments aren’t converted to annuities.

And I think that as you acknowledged earlier, it’s not a very robust market for annuities. It’s difficult to convert investments that might be in stock, bonds and real estate into these types of annuities.

What Quebec is trying to do is not—at the low end of the financial business cycle, where, as you know from last fall, there were significant reductions in equities and that affected pension plans across the board. We’ve seen them start to recover. The idea was, can you not have them converted into annuities and lock in those losses at that time? It’s not clear whether or not—how conservative Quebec will be in their investments, because then who bears the risk? If they’re guaranteed a 69% funded ratio, as you mentioned, are they prepared to—so we don’t know how their investment plans will roll out. It’s still an uncertainty. So that’s a key point: to distinguish between what Quebec has and what the deputy referred to as what’s available in Ontario.

Mr. Norman W. Sterling: Well, will you commit yourselves to treating Nortel employees at least as well as they are being treated in the province of Quebec?

Hon. Dwight Duncan: As I said, as you can tell, we are actively looking at the Quebec model. It’s not clear to us, at this point, that benefit, but we are looking at that and a number of other options as we move forward.

Mr. Norman W. Sterling: I can assure you that the pensioners believe that the Nortel employees in Montreal are being treated better than they are in Ontario.

Thank you very much.