PBGC Covers Nortel Pension Plan

WASHINGTON -- The Pension Benefit Guaranty Corporation (PBGC) today announced it will take responsibility for the underfunded pension plan covering some 23,000 employees and retirees of Nashville-based Nortel Networks, Inc., the U.S. subsidiary of Nortel Networks Corp., an international telecommunications technology concern headquartered in Toronto and formerly a unit of Bell Canada.

The pension insurer’s move comes as the company, in chapter 11 bankruptcy, prepares to liquidate in a series of impending asset sales. None of the proposed transactions will include the pension plan. If the PBGC delayed action until after the sales, no entity would remain to finance or administer the plan, and the possibility of recovering on the agency’s claims for unfunded pension liabilities would be severely diminished.

The Nortel Networks Retirement Income Plan is 58 percent funded, with assets of $716 million to cover benefit liabilities of $1.23 billion, according to PBGC estimates. The agency expects to cover the entire $514 million shortfall. The plan was frozen as of Dec. 31, 2007, for all participants.

The PBGC will take over the assets and use insurance funds to pay guaranteed benefits earned under the plan, which ends on July 17, 2009. Retirees and beneficiaries will continue to receive their monthly benefit checks without interruption, and other participants will receive their pensions when they are eligible to retire.

Nortel Networks Ltd.