The history of the Telephone Concession Benefit dates back (at least) to the Southern California Telephone Company. (Prior to WWII.) This telephone company provided benefit was granted to employees and retirees after 25 years of service and to certain management employees based upon the level of management and job responsibilities (regardless of years of service).

Originally, the Telephone Concession Benefit included monthly exchange service, a "reasonable" amount of toll usage charges (later changed to $20 monthly), service connection and installation charges, extension telephones, touchtone and where appropriate, a second residence.

The benefit underwent a company change on July 7, 1985 when Pacific Telesis modified System Instruction 25 and established a $35 monthly "cap" for retirees living "outside" of a Pacific Telesis serving area.

On March 31, 2000 Pacific/Nevada Bell pensioners were informed that effective January 1, 2000 SBC would implement a new tax policy for telephone concession reimbursement. As a post-divestiture pensioner, (retired January 1, 1984 or later) concession reimbursement was subject to Social Security and Medicare taxes beginning January 1, 2000. (This reimbursement was already subject to these taxes but previous company policy did not require withholding of the tax.)

This concession plan continued until March 2003 when SBC again changed the retiree concession benefit to $25 monthly for retirees living "outside" of an SBC serving area (the concession reimbursement would be paid quarterly by the "new" Acordia processing plan.)

October 1, 2005 retiree telephone concession reimbursement was again replaced with the "Block of Time 600 Minutes SBC Long Distance Plan." This plan provided 600 minutes of direct-dial SBC domestic long distance calls per month at no cost to the retiree. (This plan provided no allowance for exchange service charges and retirees were thoroughly disenchanted with the "600 Minute Block of Time concession.")

On August 17, 2004 the TelCo Retiree Association, Inc. filed a formal CPUC complaint against SBC based upon a violation of the existing California Tariff (Cal P.U.C. A5). In January 2005 the Association mailed a letter to the President of the CPUC requesting the status of our formal complaint. (Following a second letter to President Peavy, the Association received a telephone call from a commission staff person stating, "We have lost your formal complaint, and we must ask you to resubmit the documents .")

On September 2, 2005 the President and Vice President of the TelCo Retirees Association, Inc. attended a CPUC pre-hearing conference at the State Office Building in San Francisco, CA before Administrative Law Judge Victor D. Ryerson.

At this pre-hearing conference SBC legal staff revealed all previously filed telephone concession tariffs had been cancelled during the preceding months (without our knowledge). This action by SBC nullified the prosecution of the complaint and the Association reluctantly withdrew legal action effective December 21, 2005.

IV. DISCONTINUANCE OF SERVICE AND CHANGE IN EMPLOYEE RESIDENCE

Discontinuance of concession service results in a loss of grandfathered concession class. Employees who live in the service area are then eligible for Class E only. (See below for exceptions). The current administrative practice, which is subject to change, is not to discontinue grandfathered concession, when the discontinuance of concession service is less than 60 days.

Changes in employee residence may also result in loss of grandfathered concession.

I have attached the policy for the West Region along with a bulletin that was communicated in 1995 for the Southwest Region which details the out of region concession guidelines when an employee or retiree moves out of the service area. Hopefully this information will be helpful in providing the retirees with the guidelines for concession discontinuance for residential moves.

CLASS ACTION LAW SUIT

On March 24, 2005 the Washington, D.C. law firm Cohen, Milstein, Hausfeld & Toll, P.L.L.C. filed a Class Action complaint against SBC Communications, Inc. and the SBC Telephone Concession Plan for violations of the Employee Retirement Security Act. (This is a civil enforcement action brought pursuant to Section 502 (a) (1) (B), (a) (2), (a) (3) and (C) (3) of the Employee Retirement Income Security Act of 1974 (ERISA) concerning the establishment and maintenance by Defendant SBC Communications, Inc. and its predecessor and successor companies, promising the "Telephone Concession" or "SBC Telephone Concession Plan."

The fundamental premise of this law suit is that by informing employees they would receive the Telephone Concession when they retired with a service or disability pension, and by providing the Telephone Concession to retirees, the SBC Telephone Concession Plan within the meaning of section ERISA 3 (35), 29 U.S.C. 102 (35). By establishing and maintaining such a plan Defendant SBC became responsible for compliance with a myriad of statutory and regulatory obligations that apply to such plans under the provisions of ERISA.

(The Class Action law suit document contains 34 pages and encompasses considerable federal and ERISA laws.)

The TelCo Retirees Association, Inc. has taken an active role in this Class Action law suit and is providing substantial amounts of historic documentation substantiating numerous changes in our Telephone Concession Benefits by Pacific Bell, Pacific Telesis and SBC. We have also established ongoing communications with the principle attorney litigating the Class Action law suit.

At this writing (February 2006), the Plaintiffs (Cohen, Milstein, etc.) have filed an amended complaint on behalf of the following groups of persons, (1) Retirees of SBC ( or a subsidiary) or a predecessor of SBC (including Ameritech, Pacific Telesis and

Southern New England Telephone) who received the Telephone Concession Benefit after they retired; and (2) Current or former employees (including retirees) of SBC with more than 5 years of service during the time that SBC had a policy to provide employees with a Telephone Concession Benefit upon retirement.

SBC has filed a motion to dismiss the complaint (a ruling is expected on that motion from the Court). Assuming the Court denies the motion to dismiss, the case will then proceed to discovery. (As stated, the Association has already provided substantial amounts of Telephone Concession Benefit documents and we will continue providing support as requested.

Charles Gilbert, President/CEO

February 2006