Nortel Hit with DB Freeze Suit

June 26, 2008 ( - A group of Nortel Networks employees not grandfathered into the company's defined benefit plan when it was frozen in June 2006 have filed a lawsuit charging they did not receive enough advance notice.

A Toronto Globe and Mail news account said about 40 Nortel workers have signed onto the suit filed in Ontario Superior Court and seeking class action status. The plaintiffs are asking for damages for lost pension benefits and demanding that the company take into account future salary increases when calculating their final pension benefits, according to the news report.

The suit was filed on behalf of employees not meeting Nortel’s requirements to be kept in the pension plan that was frozen as of January 1, 2008, who had at least 20 years of service as of the date the plan was frozen. In June 2006, Nortel made a series of changes to its pension packages and froze its pension plan in favor of a defined contribution program.

Nortel spokesman Mohammed Nakhooda said the changes to the company’s pension plan were implemented to bring Nortel’s benefits in line with those of comparable companies.

At the same time Nortel announced the changes to its pension plan, it also cut its workforce by about 1,100 employees and said the combined measures were expected to generate more than $575 million in savings by 2012.