Good afternoon, honourable members of the committee. My name is Arlene Borenstein, and I'm a Nortel employee on long-term disability. Thank you for giving me this opportunity to appear before the committee members today. I'm here to speak to you on behalf of all my fellow Nortel colleagues who are on LTD, with whom I'm certain you've become familiar by now. We're a very small and very vulnerable group of men and women, some single, some with large families. We were all struck down by illness in the prime of our lives and have not been able to earn an income for, on average, the last ten years. Nortel's bankruptcy has placed our small group of 400, of which very few are able to participate in the advocacy we try to do on our own behalf, within a much larger group of over 20,000 ex-Nortel employees.
My presentation to you today will focus on two areas: working income and its protection as it relates to the retirement income security of Canadians, and the reasons for the federal government's responsibility for protecting workers' disability income benefits.
The retirement income system in Canada is often referred to as having three pillars. The first two, which are designed to provide Canadians with a minimum income at retirement, are provided by our federal government. They are the OAS with the GIS and the Canada or Quebec Pension Plans, both of which recognize the necessity of including a disability benefit for those under the age of 65. The third pillar is the responsibility placed on the individual to use their own discretion in determining the extent to which they'll take advantage of registered savings plans, tax-free savings accounts, or registered pension plans. While these three pillars are a convenient way of presenting Canada's retirement income system, there will be no retirement unless one has the ability to earn a living. So without the protection of a worker's income, one may not have a retirement.
Yesterday we had a press conference at which I asked members of Parliament and all other Canadians to think of their most valuable asset in life. It's their ability to earn an income. All your planning for yourself, your children, your future, and your retirement are based on the assumption that you'll continue to earn that income. Most people realize the importance of protecting that asset by purchasing life insurance, but they don't realize that their chances of losing the ability to earn an income due to illness are much greater than are their chances of dying prematurely.
One worker in seven can expect to be disabled for five or more years before retirement. I can speak for all of us when I tell you that when you're that one worker in seven, all your planning for your family and your retirement are put on the back burner if you have something called a health and welfare trust or an employee life and health trust, a bankrupt employer, self-insured long-term disability, and contributions that are unaccounted for. We buy protection for our income that the Supreme Court of Canada refers to as a “peace of mind” contract, but I can assure you, we have none.
The cost of losing disability income would be equal to never having had it in the first place. For a disability that lasts to age 65, the financial cost can be many multiples of the household's annual pre-disability income earned. The costs are also quite significant for short-term disabilities that last one or two years, as they often involve incurring debt, which is difficult to recover from. The financial impact is not just the loss of income but also the additional expenses incurred by the disabled individual for health care and other items related to the disability. It would obviously be impossible for any of us to save for our retirement with an average disability benefit from Canada Pension of $800 per month or more than $8,700 below the poverty level for a single person.
The federal government would be responsible for protecting workers' disability income benefits for the following reasons.
Because it provides for a CPP disability benefit, the federal government already recognizes that it has this responsibility, and I'll assume that it has protection for that. In addition, it regulates the insurance companies to ensure their reserves are sufficient. In the case of a bankrupt insurance company, Canadians have assurers to fall back on if they have either a private or a group disability policy.
The federal government has the only legislation that deals with self-insured benefits. The rules for Nortel's long-term disability plan can be found in two government agencies, the Canada Revenue Agency and the Canada Pension Plan.
Currently under CRA it's an administrative practice with respect to health and welfare trusts. Now we learn that there is Income Tax Act legislation pending to create an employee life and health trust. So while we have all been trying to get your attention to tell you about the problems with these vehicles, plans and negotiations were going on to not just continue these types of trusts but to make them even less secure for employees.
Since the Canada Pension Plan disability program allows companies such as Nortel, which self-insure their plans, to be a second payer, they owe a duty of care to Canadian taxpayers to ensure that these plans are properly funded, regulated, and legislated so that beneficiaries do not needlessly and unfairly become applicants for other social government services.
By protecting the disability income of all other Canadians who receive these under a traditional insurance contract, and not those in a self-insured plan, the government's lack of action would be contrary to our Charter of Rights and Freedoms, contrary to every provincial human rights code, and, most glaringly of all, contrary to the rest of the states of the United Nations, since Canada's recent ratification of the UN Convention on the Rights of Persons with Disabilities was signed just months ago.
What are we saying as a society if an amendment to the bankruptcy act is not forthcoming? We promise you this. Not one Canadian will answer ”yes” when asked the following question: should 400 Nortel employees who have MS, Parkinson's disease, schizophrenia, depression, Crohn's disease, HIV, cancer, or strokes--employees who paid for their disability insurance coverage--be pushed into poverty so that junk bond owners, Bay Street lawyers, Toronto insolvency professionals, or big investment banks will be able to get a share of the disableds' missing $100 million or so? Are we really that country?
Employers use these self-insured schemes for one reason and one reason only: to save money and keep more of their profits. They're saving in the range of 10% to 20% on the cost of traditional group disability insurance, or, in real-life terms, $64 to $130 per employee, on average, per year. I am confident in saying to all of you here today, without even asking them, that each and every one of Nortel's employees on disability would have gladly opened their wallets, but we didn't know we were self-insured, or even what that meant.
As a society, Canadian taxpayers would not see the wisdom in more of their hard-earned money being used for more consultation, when the answer is very obvious and the funds are available in the hands of those who are financially and legally liable.
For Canada, the impact doesn't register on the radar, but for us 400 Nortel employees it's absolutely everything.
Thank you.