AT&T Changes Life Insurance Promises To Retired Employees

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wall street journal How many retired AT&T . ran a story about
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Workers found that they were told that life insurance programs would not be available, at least not at the same rate that workers were told.

As the Journal reported:

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AT&T’s decision to cut life insurance and death benefits from January 1 for many of the 220,000 retirees eligible for benefits has upset a generation of workers who say their former employer is reneging on a promise. Is.

The deduction does not apply to top executives who have life insurance under a separate company-paid program, which the company cannot reduce without their permission. AT&T will pay the heirs of Randall Stephenson, who left as chief executive in 2020, $3.6 million under a life-insurance plan reviewed by the board last year, securities filings show.

That’s a considerable fee, though hardly a corporate setback. A look back at history shows that one corporation after another has left pension responsibilities on a federal organization that raises them so that people don’t lose the support they expect as they age.

I sent questions to AT&T on Tuesday and received answers late on Wednesday. Here’s both and some analysis later. First, an overall description of the company:

“We are proud to be one of less than 10% of Fortune 100 companies in the U.S. that provide company-sponsored life insurance and death benefits to our retirees. Our comprehensive offering is still typically offered by others in the industry. benefits and we are subsidizing additional policies that these retirees can buy.

Now for the questions:

1. If workers are generally told they will receive $60K when they die (taking the example in the story), that would be about $12 billion in outstanding future liabilities, right?

“This is wrong, it’s simple math that doesn’t acknowledge the many employment and labor agreements we have with our employees that are based on programs from the various legacy companies that now constitute AT&T. AT&T is not the same company today.” In addition, this oversimplification does not take into account common actuarial factors such as discount rate assumptions, time value of money and retired demographics. Retirement benefits that are offered to employees vary from company to company. was changed over time and the liability was much less than the figure you quoted.

2. Was the life insurance benefit offered dependent on people taking early retirement?

“We are proud to be one of less than 10% of Fortune 100 companies in America that provide company-sponsored life insurance and death benefits to our retirees. This life insurance benefit for retirees is one of the benefits offered to employees. benefits and was not in any way related to the “early retirement” or “voluntary separation” proposals.

3. Offering life insurance benefits usually means funding an insurance program with the expectation that the current dollar will grow. Did AT&T have an investment program?

“Our pension and OPEB payments are made from trusts that we fund for those purposes, last year in 2020, we paid out $5.1B in pension benefits and $1B in OPEB benefits – this is part of our free cash flow. To fund benefits for current and future retirees, for the full year 2020. Over the past 10 years (2011 to 2020), we paid out a total of more than $50 billion in pension benefits Divided roughly equally between the annuity and the lump sum, for only 500,000 retirees. In addition, we continue to subsidize medical coverage for approximately 370,000 retirees and their dependents.

4. How much is in the fund at present?

“As a publicly traded company, we report all of our financial obligations.”

5. What will be done with any invested funds after this year, when your company says it will no longer cover the insurance promise?

“The premise of your question is incorrect; we didn’t collect retirement life insurance benefits from anyone. We are one of less than 10% of the Fortune 100 companies in the US that provide company-sponsored life insurance and death benefits to our retirees. Despite the recent changes we’ve made, our retired life insurance benefits exceed the average retirement benefits offered by some Fortune 100 companies in the US that offer them. Life insurance is one of many retirement benefits What we provide to our former employees, including pensions, 401(k) accounts and health care subsidies.

6. Given such actions, how can AT&T say it values ​​employees when it promises them to retire early and then breaks the promise?

“Our comprehensive offering still exceeds the benefits typically offered by others in the industry and we are subsidizing additional policies these retirees can purchase. The reality is that we are growing our current 200,000 employees and AT&T. T’s benefit from working hard to responsibly balance the needs of the business while taking care of the less than 500,000 retirees and their dependents. It’s believed to be a balancing act—one that many companies have successfully done. Haven’t navigated — and many other companies don’t seem to consider — and it’s something we take seriously.

We are committed to running the company in a way where we care for our employees and retirees in a sustainable fashion, and in doing so we must keep our costs online so we can remain competitive and attract capital .

7. Why would you expect existing employees to believe any promises you make?

“At no time have we gone back on any promises we made to any of our employees or retirees,” he said. We remain one of less than 10% of Fortune 100 companies in America that offer company-sponsored life insurance and death benefits to our retirees. In addition, our retirement benefits package is competitive with the market and still provides benefits not commonly available to retirees by other companies. We offer retirees a strong suite of post-retirement benefits – based on merit – including Medicare, Complementary Medicine (CarePlus), Dental, Vision, Life Insurance, Defined Benefit Pensions and 401(k) benefits.”

Now for a place of analysis. The point of the journal article was that many were told they were entitled to larger amounts, and life insurance and death benefits were told that the promised benefits were reduced. Talking about other benefits is a distraction. When a retiree dies, the value of medical, dental, vision and even pension benefits evaporate.

Avoiding “less than 100% of Fortune companies in America that provides company-sponsored life insurance and death benefits to our retirees” does not address the reduction in benefits over time. Nor does it mean that other companies outside of the Fortune 100 never offer life insurance and death benefits.

“We are acting responsibly to the needs of the business and to care for our current 200,000 employees and 500,000 retirees and their dependents,” AT&T spokesman Fletcher Cook told the Journal. “It’s really a balancing act — one that not many companies have successfully navigated.”

AT&T’s responses are still on the table that people once told they’d get a thing were reduced to only finding a profit. As noted in the journal article, top executives are exempted from the deduction.

It’s not just about AT&T. Many other companies offered one-time benefits which they reduced or even eliminated. But corporations make promises and even though they are not legally obligated to keep them, there is an issue of ethics and morality.

People take jobs based on a number of factors, including what they have been told they will get in the future. Many accept a more modest present gain because they view the future as important. When a company says, “Oh, sorry, we can’t do this any more,” it may in a sense be true. But where were the efforts to fulfill the obligations set by him?

And yet, companies want employees to be more than loyal. They want a “passion” for the work being done. They want employees who will put the company first. Why would anyone trust such employers when it is the likely end result of the promises made? Especially if the officers are being treated differently. By the time things change, workers can’t go back in time and make different arrangements. Trust is something that is cheap to one side and very dear to the other.

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