February 1, 2007 TELCO RETIREES ASSOCIATION, INC. ANNUAL GENERAL MEMBERSHIP MEETING LA MESA WOMAN’S CLUB 5220 WILSON STREET, LA MESA, CA FEBRUARY 8, 2007 9:00 A.M.-12:00 NOON Election of Directors/Officers Review/approval of annual budget AT&T shareowner proxies Membership plans - 2007 "The new Bell System" Telephone Concession Class Action lawsuit - current status AT&T Retiree Coalition Yellow Page retiree death benefits Pacific Bell/Nevada Bell Retiree Benefits As we begin our 5th year as an incorporated, non-profit Pacific Bell/Nevada Bell retiree organization, I am reminded of our Mission Statement, "TO PROTECT, ENHANCE AND ASSURE THE CONTINUATION OF RETIREES’ PENSIONS AND OTHER BENEFITS PROMISED BY THE COMPANY AT THE TIME OF THEIR RETIREMENT." The Officers and Directors are totally committed to our Mission Statement and AT&T’s recent decision to arbitrarily reduce the basic death benefit for Yellow Page retirees was unprecedented and without conscience. The association has challenged this arbitrary decision by AT&T and the following correspondence provides ample evidence of AT&T’s unwillingness to modify their corporate position. Dear Sue, I had planned to call you this week in order to resolve the continuing concerns relative to AT&T’s announcement of Summary Changes to Pacific Bell’s Yellow Page Advertising retirees but because alarm bells have been ringing throughout the TelCo Retirees Association, Inc. from Rhode Island to California and from British Columbia to Hawaii, I felt a formal letter would be more appropriate. The abruptness of the announcement to the changes in the Supplementary Life Insurance benefit and the limited time permitted for retirees to evaluate the full impact of this Quality of Life Decision was inexcusable. …And now, your December 6th letter making reference to the "Reservation of Rights" clause contained in the Pacific Telesis Summary Plan Description (published 1996) calls into question the "right" of AT&T to modify or terminate "All" benefits promised to Pacific Bell retirees at the time of their retirement. (Medical, Dental, Disability, Group Life Insurance, Death Benefits, Pension and Supplemental Retirement and Savings) mandates a full explanation. I call your attention to the following paragraph which appears in the opening page of the Benefit 90’s Summary Plan Descriptions published July 1996: "This book describes features of the pension plans in effect as of January 1996 and the current savings, health, life insurance and disability plans. Information you receive at retirement regarding your pension, long-term disability and life insurance was based on the plans in effect at that time. Those plans will continue to govern the pension, long-term disability and life insurance benefits you receive." (The merger of Pacific Telesis with SBC became effective April l1, 1997, almost a full year after the publication of the Benefits 90’s Summary Plan Description.) Were all "rights" transferred to SBC effective with the April 1, 1997 date? Because your December 6th letter was declarative in nature and all encompassing, I would like a clarification of the following issue: A. Medicare Part B reimbursement …Medicare reimbursement varies by the retiree’s date of retirement. (PTG managers who retired prior to January 2, 1991 receive full Medicare Part B reimbursement, for the retiree and their dependent spouse. Former PTG managers who retired between January 2, 1991 and December 31, 1998 are eligible for a $45 a month Medicare Part B reimbursement for the retiree and their dependent spouse. Former PTG managers who retired on or after January 1, 1999 have a Medicare Part B reimbursement capped at $45 a month for the retiree only. These changes were announced by SBC as a "cost savings initiative" and were put in place beginning in 1999 and continued as SBC merged with other regional companies. Why the discrepancy in reimbursement for PTG retirees based upon their date of retirement? B. Medical Expense Plan (Flexible) …Why do PTG retirees with the Medical Expense Plan (Flexible) have the right to choose any of AT&T’s Medical Expense Benefit Plans and return to the Medical Expense Plan at any time when other PTG retirees do not have this privilege? Why? C. Special Supplementary Life Insurance Enrollment Opportunity …The Benefits 90’’s publication (page 111) describes the"reduction in the retiree’s Supplemental Life Insurance beginning at age 66 from 90% to 50% at age 70 and older." The AT&T "Special Supplementary Life Insurance Enrollment Opportunity" letter to Pacific Bell Yellow Page Advertising retirees states, "Effective January 1, 2007, employer-paid retiree "basic life" insurance under the AT&T Medical and Group Life Insurance Plan-Group Life Insurance will change from one times rounded annual basic pay to $15,000 with no age based reductions." Page 108 of the Benefit 90’s Summary Plan Descriptions (Basic Life Insurance) states, "The amount of your "basic life" insurance coverage is equal to your base pay, differentials paid for night hours, differentials paid for temporary work in a higher classification, lump-sum merit wage payments, incentive compensation (if you are a Directory or Marketing management employee, area differentials, team awards, commissions and bonuses and residuals which are identified as a permanent part of your compensation. The "basic life" benefit will be paid to your beneficiary whether your death is caused by disease, illness or accident." On the adjacent page (109) entitled "Supplemental Life" states, "The amount of your Supplemental Life Insurance is equal to 1, 1 _ or 2 times your basic life insurance while you are working. When you retire, you can elect to continue the supplemental coverage in effect at your retirement." On page 111 of the Benefits 90’s Summary Plan Descriptions it states, "If you retire on a service or disability pension, your "basic life" insurance coverage continues at no cost to you. "Supplemental life" insurance coverage will continue during your retirement until age 65. When you reach age 66, your "basic life" coverage will begin to be reduced according to the following table: Age 66…90%, Age 67...80%, Age 68…70%, Age 69…60%. Age 70 and older..50% "As a retired employee, this percentage applies to the ‘basic life’ insurance coverage on the day you retire." Obviously, AT&T’s Special "Supplementary Life" Insurance Enrollment Opportunity has created a massive state of confusion throughout Pacific Bell’s retiree body. The descriptions of "Basic Life" Insurance (provided to us by the company and equal to our base pay plus various differentials) and the "Supplemental Life" Insurance, paid for by employees during their employment years appears to indicate AT&T plans to further reduce Yellow Page retirees’ "Supplemental Life" Insurance. The descriptions of "Basic" and "Supplemental" have created a massive misunderstanding. A succinct explanation of this dubious life insurance issue is essential if we are to resolve this critical retiree benefit controversy. Sincerely, Sumner K. Emery, President January 5, 2007 Susan M. Colburn Vice President, Benefits 105 Auditorium Circle Room 12-F-7 San Antonio, TX 78205 Dear Sue, My December 18, 2006 letter to your office graphically outlined the imbroglio brought about by AT&T’s corporate "Supplementary Life Insurance Enrollment Opportunity" for Pacific Bell’s Yellow Page retirees remains unanswered as of the date of this letter. You and members of your staff need to realize the negative impact this arbitrary corporate ruling limiting retirees’ promised life insurance for their dependents is having upon TelCo Retirees Association members in the 39 states where they reside. The sheer volume of emails, telephone calls and letters reaching our offices from Pacific Bell retirees has been astronomical. Indeed, a substantial number of these communications are from non-Yellow Page retirees who sense yet another take-away of the benefits promised at the time of their retirement from Pacific Bell. (Telephone Concession for retirees living "outside of an AT&T serving area," radical increases in health benefit co-pays and deductibles for a large number of retirees, ongoing difficulties of obtaining United Health Care’s portion of medical expenses, and Fidelity’s convoluted communication systems for processing retirees’ claims involving death benefits, ESOP and pension payment issues.) A corporate response to my December 18th letter is respectfully requested. Sincerely, Sumner K. Emery, President On January 12, 2007 I received the following letter from Mr. Thomas R. Giltner (General Attorney and Assistant General Counsel, AT&T). Mr. Sumner K. Emery, President TelCo Retirees Association P. O. Box 600067 San Diego, Ca 92160-0067 Dear Mr. Emery: Sue Colburn, Vice President-Benefits for AT&T, Inc. asked that I respond to your recent correspondence dated December 18, 2006 and January 5, 2007 regarding changes to life insurance benefits for certain Yellow Pages retirees because your inquiry questions the company’s legal right to change these benefits. As your correspondence notes, company provided retiree life insurance for formerly bargained-for Yellow Pages retirees has been capped at $15,000, and these retirees were given a one-time opportunity to purchase additional life insurance benefits under the company’s life insurance plan. Basic, or company paid life insurance, is provided under the AT&T Medical and Group Life Insurance Plan - Group Life Insurance. Supplementary, or retiree paid life insurance, is provided under the AT&T Supplementary Group Life Insurance Program. Both of these plans are successors to the basic and supplemental life insurance plans described in the "Benefits 90’s Summary Plan Descriptions" document that you referenced in your correspondence. When Pacific Telesis Group and Pacific Bell merged with SBC Communications, Inc. (now, AT&T, Inc.), the administration and design of these life insurance benefits is determined by the merged entity. Your correspondence accurately re-states the description of the basic and supplemental life insurance benefits in the "Benefits 90’s Summary Plan Descriptions" document. However, these provisions only describe the life insurance benefits as they existed on the date the document was published. As we previously pointed out, the "Benefits 90’s Summary Plan Descriptions" document also includes a statement that the company reserves the right to change these benefits even during retirement. The company has exercised this right. We have evaluated plan documents, summary plan descriptions and communications materials, and we are not aware of any promise to continue these life insurance benefits at a specified level for any retirees. However, if you are aware of any written commitment to continue retiree life insurance benefits at a specified level, we would be happy to evaluate and consider that documentation. While the company did make a decision to cap company paid retiree life insurance at $15,000, the company contemporaneously agreed to modify the supplemental, or retiree paid, life insurance benefit so that affected retirees are able to purchase additional life insurance to make up for the reduced basic life insurance. In your correspondence, dated December 18, 2006, you also inquired about the different level of Medicare Part B reimbursement for various groups of retirees and a provision of the Pacific Telesis Group Medical Expense Plan that is not available to all retirees. In exercising its discretion to amend these benefits, the company has elected to make changes prospectively. Accordingly, these benefits are different for separate groups of retirees dependent their date of retirement. We regret that there has been a misunderstanding regarding retiree basic and supplementary life insurance benefits and the company’s right to amend these benefits. Retirees did have the opportunity to maintain their level of life insurance coverage by purchasing additional supplementary life insurance. The company is acting consistent with the terms of the life insurance plan. Signed: Thomas R. Giltner General Attorney and Assistant General Counsel (As a result of Mr. Giltner’s letter, I held a lengthy conversation with the lead attorney in the telephone concession Class Action lawsuit against AT&T. The purpose of the conversation was to explore merger agreements between SBC and Pacific Telesis Group relative to retiree benefits. Mr. Barton is currently researching this issue to determine if a reasonable cause exists to legally challenge AT&T’s arbitrary decision to radically change Yellow Page retirees’ death benefits.) We currently await a response from Mr. Barton. January 17, 2007 Mr. Joe Barton 1100 New York Ave., Suite 500 Washington, D. C. 20005 Dear Joe, Pursuant to our conversation yesterday relative to AT&T’s decision to radically alter Yellow Page retirees’ death benefits, I am enclosing a number of documents challenging that issue. Included in the documentation are copies of the Pacific Telesis Group Summary Plan Descriptions dated January 1991 and July 1996. I have also included copies of correspondence with AT&T officers requesting justification for the decision. My primary interest in this issue is to ascertain if AT&T (SBC) is in violation of merger agreements with Pacific Telesis Group. I sincerely appreciate your interest in this issue and would be grateful for your advice and counsel. Sincerely, Sumner K. Emery President "To each there comes in their lifetime a special moment when they are figuratively tapped on the shoulder and offered the chance to do a very special thing, unique to them and fitted to their talents. What a tragedy if that moment finds them unprepared or unqualified for that which could have been their finest hour." Sir Winston Churchill (Speaking as President of your TelCo Retirees Association, Inc., may I tell all of you that your Officers and Directors are meeting the challenges laid before them by the "new" AT&T Corporation…and are resolved to "ensure the continuation of the benefits promised to you at the time of your retirement!") Sumner K. Emery’ President