Among the many injustices surrounding Nortel’s bankruptcy — and there are many — the one that is the most heart-wrenching is the uncertainty faced by former employees who are currently disabled and are receiving benefits from the company’s long-term disability (LTD) plan. These unfortunate people made regular contributions to Nortel’s LTD plan — in fact, some employees even made optional contributions to top up their benefits — to secure their financial future in the unlikely event that were to become disabled. Now, they are finding that instead of insuring the LTD plan through a third-party, Nortel decided to “self-insure” and fund the liability through its general revenues. With the company in bankruptcy proceedings, Nortel’s disabled former employees face the prospect of being left with nothing.
It is too easy to simply blame Nortel’s past management for cutting corners with disability benefits. The fact remains that regulations do not require private companies to either set aside funds to meet their LTD plan obligations or pay a third-party to assume these liabilities. It is also shocking to read that governments have been asleep at the wheel despite the same situation playing out at Eaton’s in the 1990s and Massey Combines in the 1980s. Instead of displaying indifference to the fate of Nortel’s disabled employees, our governments have a moral obligation to (a) introduce legislation to protect employees who are members of current LTD plans and (b) ensure that the financial benefits due to disabled employees are paid in full. It is simply the right thing to do.
PS: Check your LTD plan to see if the coverage is provided by a third-party insurance provider. If you can’t find this information, ask your HR department how the plan liabilities are met.
Later: Check out “Are your employee benefits in jeopardy?” for Thicken My Wallet’s take on this issue.