Filter
Top Products
Retirement plans
The Company has several pension plans. The following descriptions relate to pension plans to which the named executive officers for 2004
and the named executive officers for 2003 are eligible to participate.
The non-contributory defined benefit pension plans (or base plans) in Canada and in the United States are generally available to employees
and executives who were participants prior to May 1, 2000. There is also the Nortel Networks Supplementary Executive Retirement Plan
which is available to eligible executives. The benefit calculated under the Supplementary Executive Retirement Plan is reduced by the pension
benefits payable under the registered/qualified defined benefit pension plans and the non-qualified/excess plans. Effective January 1, 2000, the
Supplementary Executive Retirement Plan was closed to new participants.
Defined Benefit Pension Plan
— Canada
A defined benefit pension plan, the Nortel Networks Limited Managerial and Non-Negotiated Pension Plan, is maintained for eligible
employees and executives in Canada. This plan has two different formulas, called Part I and Part II.
The Part I formula provides a monthly benefit at retirement based on years of service and a pension accrual of 1.3 percent of the average
annual earnings of the best three consecutive years. An early retirement reduction applies for retirement prior to age 60. Eligible earnings
include base salary and, where applicable, overtime, off-shift differentials and an individual sales commission factor. Effective January 1,
1999, the Part I defined benefit formula was closed to new participants.
The Part II formula was introduced January 1, 1999. Employees who were participants in Part I could continue to participate in Part I, or
move to the new Part II formula, at their election. Part II provides a benefit based on pension credits and the average annual earnings for the
highest three consecutive years in the last ten years prior to retirement or other termination of employment. Pension credits are earned during
each year of participation based on the participant’s age attained in the year and on years of service. Eligible earnings include base salary and,
where applicable, incentive awards or bonuses, if any, paid under the Nortel Networks Limited SUCCESS Incentive Plan (or SUCCESS Plan),
overtime, off-shift differentials and sales commissions. Effective May 1, 2000, the Part II defined benefit formula was closed to new
participants.
The Part II benefit can be paid in a lump sum or as an actuarially equivalent annuity. Under the annual income option, there are reductions
for retirement prior to normal retirement age of 65. Certain grandfathering rules exist for employees and executives who were participating in
the pension plan as at December 31, 1998.
The Income Tax Act (Canada) (or ITA) limits the amount of pension that may be paid under a registered pension plan. Pension benefits
within the ITA limit are funded by a pension trust that is separate from the general assets of Nortel Networks Limited. Pension benefits that
exceed the ITA limits are paid from an excess plan, and are funded from Nortel Networks Limited’s general assets and the general assets of
Nortel Networks Technology Corporation (or NNTC), an affiliate of the Company.
155
The Company and Nortel Networks Limited have demanded repayment from the chief financial officer and controller of the restricted stock units issued and settled in
July 2003 with respect to the achievement of the first performance threshold and, with respect to the controller, the restricted stock units issued and settled in January 2004
with respect to the achievement of the second performance threshold. All restricted stock units allocated to the chief financial officer and the controller that were not issued
have been forfeited. See footnote (3) regarding restricted stock units allocated to the president and chief executive officer.
(3) As a result of the terminationof Mr. Dunn’s employment for cause on April 27, 2004, Mr. Dunn’s allocated but unissued restricted stock units were automatically
forfeited. With respect to the restricted stock units issued to him and settled in July 2003 with respect to the achievement of the first performance threshold, the Company
and Nortel Networks Limited have demanded repayment as noted in the “Summary Compensation Table” above.