Case Status
February 1, 2011:

In May 2009, after the case was transferred to a new judge, Defendant filed a Motion for Reconsideration of the favorable Phase I decision as the case proceeded into Phase II. In February 2010, Plaintiffs filed a Motion for Partial Summary Judgment on Phase II and in March 2010, Defendants filed their Motion for Summary Judgment on Phase II. The case was then stayed pending a decision on the motion for reconsideration. On January 14, the Court granted Defendant's Motion for Reconsideration and entered judgment in favor of Defendant.December 2010

Status of the two class action lawsuits as of December 1, 2010

Lawsuit on behalf of certain retirees who were participants in the Pacific Telesis Group Cash
Balance Pension Plan or Salaried Employees PTG Pension Plan):

A Pacific Bell retiree has filed a lawsuit alleging that certain participants in the PTG Pension Plan who
were eligible to receive a discounted Accelerated Transition Benefit (ATB) when they left their job,
and who later returned to work and "bridged" their service (i.e. worked another 5 years), should have
received a redetermined ATB based on their additional years of service and increased age. On September 1,
2010, the court certified a specific class of PTG Pension Plan participants who terminated their employment
on or after March 22, 1996, received a discounted ATB as a lump sum, were rehired by November 1, 1997,
and then completed 5 more years of service.

Subsequently, the attorneys representing the class have learned that other employees and retirees may have
been harmed by the Plan's interpretation and administration of the Plan regarding the right to a redetermined
ATB. If you were a salaried employee, were eligible for an ATB, terminated employment on or after March 22,
1996, were rehired and worked an additional 5 years, you may want to contact the attorneys to see if the calculation
of your benefits may have been affected.

For additional information on the case you may also contact the following law firm, which the Court has approved
to serve as Lead Counsel for the Class:

COHEN MILSTEIN SELLERS &TOLL PLLC
R. Joseph Barton, Esq. jbarton@cohenmilstein.com
Robyn M. Swanson, Esq. rswanson@cohenmilstein.com
Jason Kolcun (Paralegal) kolcun@cohenmilstein.com
1100 New York Avenue, N.W. West Tower,
Suite 500 Washington, D.C. 20005-3934
Telephone: (202) 408-4600
Or Toll Free: 1-888-240-0775

A summary of the allegations of the lawsuit and certain documents in the case are available on the
following website: http://www.cohenmilstein.com/cases/225/pacific-telesis-group-salaried-pension-
plan-atb-benefit-miscalculation-litigation.

The Telephone Concession Class Action Lawsuit.
The status of this action is the same as reported in July, the judge has the case under review and we do not know
when a decision will be forthcoming.November 2010.

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November 2010

AT&T Expands Stake In Health IT
From KHN Daily Report; Kaiser Health News ~ Nov 04, 2010

The Associated Press: AT&T Inc., the country's largest telecommunications company, on Thursday said it is setting up a division to target the health care industry," in hopes of being part of the action when the industry "adopts electronic medical records, doctor's visits by video-conferencing and wireless gadgets like remote glucose monitors." The company's new "ForHealth" division "will be selling wireless services, networking services like video-conferencing and 'cloud computing' — under which AT&T runs computers and applications for clients who access them through the Internet;" a more ambitious enterprise than what other telecom companies have done in the past" (Svensson, 11/4).

The New York Times: "The new business is the result of 18 months of study and hiring," and includes "300 sales people and 20 others with medical and computing backgrounds who will work with industry partners, doctors, hospitals and community groups to tailor health technology offerings," according to an AT&T senior vice president. "The industry's optimism is partly a byproduct of the administration's ambitious plan, backed by $19 billion in incentive payments, to get the nation's doctors and hospitals to adopt electronic health records over the next five years." Computerized health records are seen as "financial pump-priming — and a technology foundation — for further investments in health technology." Creating "regional and statewide hubs for sharing data, called 'health information exchanges,'" are the first step in coordinating care (Lohr, 11/4).

Computerworld: According to the analyst firm IDC, "IT healthcare spending in 2010 is expected to reach $33.9 billion and will growth about 24% year over year for the next four years." Among AT&T's services is a "Telehealth Solutions service" that "uses high-definition video and audio conferencing technology to enable patients in rural or under-served areas to consult with medical specialists and even receive examinations in the comfort of their primary physician's office, community hospital or clinic" (Mearian, 11/4).

The Dallas Morning News- AT&T is also developing an array of consumer-oriented medical technologies," including "sensors that can be attached to a smart phone to scan a diabetic's blood and instantly transmit the results to a doctor." Eventually, the company plans to expand that monitoring system to "help patients manage other chronic diseases, such as heart disease and asthma" (Godinez, 11/4).

In other news, "The Centers for Medicare and Medicaid Services wants industry help in digitizing clinical quality measures so healthcare providers can send them to CMS directly from their electronic health record systems,"Government Health IT <http://www.govhealthit.com/newsitem.aspx?nid=75023> reports. "The work sought by CMS would help streamline the process by which providers could meet pending criteria for meaningful use" (Mosquera, 11/3).

This is part of Kaiser Health News' Daily Report - a summary of health policy coverage from more than 300 news organizations. The full summary of the day's news can be found here http://www.kaiserhealthnews.org/Headlines.aspx and you can sign up for e-mail subscriptions to the Daily Report here http://www.kaiserhealthnews.org/Email-Subscriptions.aspx . In addition, our staff of reporters and correspondents file original stories each day, which you can find on our home page http://www.kaiserhealthnews.org/.

© 2010 Henry J. Kaiser Family Foundation. All rights reserved.August 2010

High-Risk Health Insurance Pool Rules Bar Abortions, Limit Patient Costs
By Phil Galewitz
KHN Staff Writer

Elective abortions will be prohibited and people with pre-existing conditions will be able to get comprehensive benefits without paying any more than healthy people, under new federal regulations for high-risk health insurance pools released Thursday by the Obama administration.

The state-based pools provision is one of the high-profile features of the new health law taking effect this year. It allocates $5 billion to create plans to cover people who have been uninsured for at least six months and have a pre-existing health condition.
The 108-page rule detailing how the new plans will work won praise from consumer advocates for helping to make insurance more affordable and from Republicans, who had opposed any coverage of abortion except in cases of rape, incest or the life of the mother.
"It appears the rule includes a strong prohibition on federal coverage of abortion," said Jessica Straus, spokeswoman for Sen. Michael Enzi, R-Wyo., who along with a dozen other Senate Republicans earlier this week called on the administration to make sure the plans did not cover abortion.

John Hart, a spokesman for Sen. Tom Coburn, R-Okla., added: "Dr. Coburn is pleased (HHS) Secretary (Kathleen) Sebelius is taking to heart our concerns that the health care law will fund abortion. He’s still reviewing the new regulations but is encouraged they are making a serious attempt to address the problem."

But abortion-rights groups were disappointed. Planned Parenthood said the ban "will affect some of the most medically vulnerable women in America" and urged supporters to send e-mails to Congress asking them to "undo this regulation before it takes effect."
Most of the regulations dealt with benefits in the new plans, which would be similar to those given to members of Congress and other federal government workers. Covered benefits include hospitalization, outpatient care, maternity care and home health care.
"This new coverage will help all of us by reducing medical debt, improving health and worker productivity and reducing the amount of uncompensated care provided to the uninsured, potentially by billions of dollars," Nancy-Ann DeParle, director of the White House Office Of Health Reform, wrote Thursday in a blog post.
Expenses not covered by the premiums, deductibles and copayments will be covered by the $5 billion from the federal government.

The pools will be in place until 2014, when health insurance companies will no longer be allowed to deny coverage or charge higher rates due to pre-existing illnesses. Consumer advocates worry the $5 billion could run out long before then.
But the health plans could cap enrollment or change premiums and benefits to help manage costs, which may be necessary to stretch the federal funding.
Michael Degnan, executive director of the New Hampshire high risk pool, said the rules mean premiums will be 25 percent less for its new, federally funded high-risk pool than for the state’s existing pool. “It’s a nice move,” he said. New Hampshire started its new high risk pool in July. So far, demand has been light.

To make the plans more affordable, the regulations said that premiums in the new pools cannot exceed the average “standard” rate in the individual insurance market. Existing state high risk pool premiums today vary -- with some having rates more than double those in the individual market. States had set higher rates for their existing high risk pools so that they wouldn't compete with plans in the private market.
“That is a big plus for consumers,” said Cheryl Fish-Parcham, deputy director of health policy at consumer group Families USA. While the rates can’t be set any higher than for healthy individuals, she said, premiums, deductibles and co-payments could still be an obstacle to many potential applicants.

Premiums will still vary based on age and whether the applicant is a smoker. In Pennsylvania, the average monthly premium for the high risk pool will be $283 a month with a $1,000 deductible. In New Hampshire, the premium ranges from $177 to $1,127 for non-smokers based on age and type of health plan.

Excluding premiums, patients annual out-of-pocket costs in the new plans will be limited. This year, that maximum for co-pays and deductibles is $5,940.

The new risk pools will also not require waiting periods before pre-existing conditions can be treated; currently many states have such waiting periods. New Hampshire has had a nine-month waiting period in its existing state-funded high risk pool, Degnan said.
About 30 states have opted to set up their own high-risk insurance pools using the federal money that is allocated based on states’ populations, health costs and number of uninsured residents. The federal government is stepping in to run risk pools in states that don't set up their own.

About 200,000 to 400,000 people are expected to enroll in these new “Pre-Existing Condition Insurance Plans,” the Department of Health and Human Services said in commentary issued along with the regulations. That would double or triple the number of people in existing high risk pools in 35 states today. But these existing pools only catch a fraction of the uninsured largely because of their high costs.

Applicants to the new high-risk pools will have to prove they have a pre-existing condition by showing documentation from their doctors or showing they’ve been turned down by an insurer, the regulations said.

Coverage for enrollees under the pools has started in Montana, South Dakota and New Hampshire, though in most states it is not expected to begin until Sept. 1. So far, demand has been modest. In New Hampshire, 10 people have applied. In Montana, which has set a cap of 400 slots for the high risk pool, 60 people have applied.

July 2010

SBC/ AT&T Telephone Concession Case

This is the situation as of July 1, 2010. The judge who heard and decided Phase l in favor of the employee/retirees passed away and the case has been transferred to a new judge.

Once that happened, AT&T asked the new judge to reconsider and reverse the prior judge’s findings. Attorneys for the plaintiff, of course opposed that request. In April, the Court stayed all proceedings in the Case, including the trial that was set for June 2010. Except for a ruling on AT&T’s request for reconsideration Phase ll of the Case is almost complete. If and when the judge denies AT&T’s motion the Case would be ready for trial shortly after that time.

This is a report on the status of a second Case filed against AT&T Affecting Certain PacBell/ Nevada Bell/Pacific Telesis Salaried Employees.

This lawsuit, entitled Barnes v. AT&T Pension Benefit Plan-NonBargained Program, No. 08-04058 MHP (N>D>Ca), alleges that the pension benefits of certain participants of the Pacific Telesis Group Cash Balance Plan for Salaried Employees (The” PTG Pension Plan” of “Plan”) who were entitled to an Alternative Transition Benefit (“ATB”) may have been miscalculated if they initially took a lump sum distribution and then subsequently bridged service after returning to work for Pacific Telesis (or a subsidiary or affiliate).

Beginning in 1996 as part of a corporate downsizing Pacific Bell (“Pac Bell”) and other affiliated companies began offering an ATB to terminating employees. Under the PTG Pension Plan if an employee terminated employment at less than 55 years of age with 20 years of service, the ATB benefit was subject to a discount to reflect the age and service of the participant at the time of his or her termination. However, if an employee who retired after March 31 ,1996, was subsequently rehired before October 31, 1997, and then worked 5 additional years, the employee “bridged” his or her service and was entitled to a “redetermined” ATB calculated on the basis of the employee’s age and service at the time of his or her n ext termination.

Plaintiff Barnes alleges that the administrator of the PTG Pension Plan only provided the “redetermined” ATB benefit to those rehired employees who elected to receive an annuity, and did not provide the benefit to rehired employees who , like himself elected to take a cash out at the first termination, despite language in the Plan which required that the “redeterminined” benefit be paid to all rehired employees who bridged their service, without regard to whether they elected to take cash out or an annuity at their prior termination.

This lawsuit is brought on behalf of the following persons;

Participants of the PTG (Pacific Telesis Group) Pension Plan, who meet the following requirements:

• Who terminated their employment with a company that participated in the PTG Pension Plan after March 21, 1996,

• Who were eligible for an ATB, which because they had not attained the requisite age of years of credited service subject to an ATB Discount,

• Who were subsequently rehired by a company that participate in the PTG Pension Plan on or before October 31, 1997, and worked at least five additional years; and

• Who, either (i) at their next termination, did not have their ATB adjusted to reflect their age and term of employment at their next termination of employment or (ii) are still employed at a Participating Company.

• Beneficiaries of any of the persons described in Group 1.

Additional information can be obtained from:

Cohen, Milstein, Sellers & Toll PLLC
1100 New York Avenue, N.W. Suite 500
Washington D.C. 20005

Their telephone number is 202-4098-4600 and
e-mail is jkolcun@cohenmilstein.com.

On April 2, 2010 the Court granted the Plaintiff’s request to amend the complaint and to assert allegations on behalf of a class of other similarly situated persons whose ATB may have been similarly miscalculated. On April 6, 2010 the amended complaint was filled. At this time we are waiting for the Court’s decision.

If you think that you are a member of this class you should contact the attorneys of record and request a questionnaire.

May 2010

VERY URGENT NRLN Action Alert

Tell Lawmakers To Help Secure Your Pension

MY PREVIOUS MESSAGE TO YOU ASKED THAT YOU SEND A CAPWIZ MESSSAGE TO YOUR HOUSE OF REPRESENTATIVES MEMBER WHO CAN HELP SECURE YOUR PENSION. SO FAR, MANY OF YOU HAVE BEEN CONTENT TO "LET SOMEBODY ELSE DO IT". PLEASE HELP BY TAKING ACTION ON BEHALF OF YOURSELF AND ALL OTHER RETIREES. IF YOU DON'T, IT IS POSSIBLE THAT YOU MAY REGRET IT SOMEDAY.

THE CURRENT STOCK MARKET MELT DOWN COMBINED WITH THE UNETHICAL TAKING OF ASSETS FROM YOUR PENSION PLAN MAY BE PLACING YOUR FUTURE AT RISK AND YOU WILL NOT KNOW IT FOR MONTHS. LET'S STOP COMPANIES LIKE GM, CHRYSLER, ALCATEL-LUCENT, QWEST, AT&T, DETROIT EDISON AND OTHERS FROM STEALING OUR PENSION SECURITY BY DEMANDING THAT H.R. 4213 INCLUDES LANGUAGE THAT WILL PROTECT OUR PENSIONS.

Click Here to access the NRLN Action Alert labeled ACT NOW TO PROTECT PENSIONS. Click the "Take Action" button, type in your zip code and click "GO" to identify your Representative. Click the "Elected Officials" tab and write down his or her phone number! Now personalize the letter with your own comments if you want to. If you have a problem accessing the Action Alert with the above link, go to www.nrln.org and click on the "Take Action Now" at the top of the NRLN website's home page.

SEND YOUR MESSAGE (SEE SAMPLE BELOW) NOW...... ALSO CALL HIM OR HER OR TELL ANYBODY THAT ANSWERS, THAT YOU SENT A MESSAGE AND THAT YOU EXPECT ACTION NOT POLITICAL BS...SAY IT LIKE YOU MEAN IT......MAKE THAT CALL!!!

You can also find your Representative's phone number in the Congressional Directory on the NRLN website

Click Here.

Nike says it best --- JUST DO IT!
Chuck Gilbert

Click Here for a Sample Letter to send to your Representative.
PDF Format

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April 22, 2010

The Honorable Sander Levin, Acting Chairman
Ways & Means Committee
United States House of Representatives
1236 Longworth House Office Building
Washington, DC 20515-2212

Dear Chairman Levin:

As the President of our respective retiree organizations, we are writing to urge you to include in H.R. 4213, the House Ways and Means pension funding relief bill, language that will protect assets in defined benefit pension plans. The National Retiree Legislative Network has provided proposed language to your Ways and Means staff. As representatives of thousands of your retired Michigan constituents, we believe that companies who take pension funding relief must be prevented from using pension assets for non-pension expenses, such as lump sum severance payments. Since H.R. 4213 is very focused on asset preservation and the long-term funding security of defined pension plans, adding our proposal is a very integral part of what H.R. 4213 seeks to accomplish.
Actions known as “back door reversions” by companies represent a growing practice to circumvent the Congressional intent against reverting pension assets for corporate purposes. In 2009, the Pension Benefits Guaranty Corp. (PBGC) was very concerned that General Motors used $2.9 billion in pension assets to make lump sum severance payments during 2008. The GM pension plan ended that year with a deficit of $20 billion based on the PBGC's calculations. The Treasury Department's bailout loan program to GM included restrictions on GM's ability to continue to use pension assets for non-pension purposes.

On April 12, 2010, the Government Accountability Office reported that GM will need to add $12.3 billion to its pension fund by 2014 and Chrysler will need to add $2.62 billion. If those figures aren’t met, the government will need to step in and pay for the pensions of the 956,000 pensioned employees for which Chrysler and GM are responsible. Surely Congress does not want to offer funding relief to GM and Chrysler yet leave the door open for them to simultaneously remove assets, as GM did in 2008, during the funding relief period?

Delphi's use of the "back door reversions" practice, similar to GM's, contributed significantly to its pension plan being severely underfunded and resulted in the takeover by the PBGC. The use of pension plan assets to pay corporate restructuring costs is not limited to the auto industry. Research by the National Retiree Legislative Network has found that AT&T, Delta Air Lines, Federal Express, Lucent, Qwest and Verizon are among the other companies who have used “back door reversions” to circumvent Congressional intent against reverting pension assets for corporate purposes. Plan participants later suffered benefit reductions as a result.

It simply doesn’t make sense for Congress to authorize a funding hiatus without simultaneously closing this "back door." These "back door reversions" practices place pension plans at risk to be terminated. These actions threaten the security of pension plans and the potential is great that the PBGC might have to take over the plan in the future.

The NRLN's pension asset protection proposal presents a very narrowly-focused synergy of corporate financial relief and pension asset security without any cost to corporations or taxpayers. Please don't miss the opportunity on pension funding relief legislation to enhance the financial security of America's retirees by including pension asset protection.

Sincerely,

Chuck Austin, President

John Christie, President
National Chrysler Retirement Organization General Motors Retirees Association

As the result of a number of NRLN letters sent to the White House, President Obama's staff charged with crafting and managing health care reform policy for the Administration invited the NRLN Washington, DC team to a one-on-one meeting.  Marta Bascom, NRLN Executive Director, and Michael Calabrese, NRLN Legislative Strategist, met on Thursday, Feb. 17th, with key staff members to reiterate the NRLN's primary health care legislative priorities.  The NRLN staff placed emphasis on the reimportation of safe, lower cost prescription drugs; the NRLN's Maintenance of Cost Payment proposal to protect retirement benefits as currently embodied in the House health care reform bill, and Medicare buy-in for retirees ages 55-64 at a cost that will not burden Medicare, plus other issues important to retirees. 

The White House staff restated President Obama's commitment to comprehensive health care reform and reviving the conference on the bills that have been passed by the House and Senate.  The NRLN urged the White House to support the NRLN's efforts on Capitol Hill to get these proposals passed independently should they not pass in a comprehensive national health care bill.  Many of the issues of great importance to retirees are not included in the final, pared-down bills on the Hill and need to be addressed immediately.

The fact that the White House invited the NRLN's staff to a meeting demonstrates that our messages are gaining the attention of government leaders.  The emails and phone calls to Washington, DC from our Grassroots Network members are an important part of making the voices of retirees heard.  Together, our efforts will make a positive contribution to retirement security.

Finally, I want to share with you below the text of a letter that I sent to Senator Harry Reid, Majority Leader, with a copy to House Speaker Nancy Pelosi, on the subject of pension asset protection.  A similar personalized letter was sent to six other leaders in the Senate.  We are closely tracking the pension funding relief issue in Congress and may need to call on our Grassroots Network members to send letters and make phone calls to their elected representatives.

Bill Kadereit

President, National Retiree Legislative Network

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February 14, 2010

United States Senate

522 Hart Senate Office Building
Washington, DC 20510-2803

 

Dear Senator Reid:

It is understandable that a number of Senators would be sympathetic to the appeals from numerous companies for temporary relief from pension plan funding requirements due to the steep market slide in 2008.  The National Retiree Legislative Network (NRLN), which represents the interests of more than 2 million retirees who have retired from 114 companies and public entities, recognizes the plight of these companies.  We would not want to force contributions to pension plans that would cause irreparable harm to the companies, trigger layoffs or result in companies declaring bankruptcy.

However, pension plan assets currently held in trust should not be allowed to be used by these same companies to pay for operating expenses.  ERISA should be amended to stop companies from using pension assets to make severance payments during a corporate restructuring.  These "back door reversions" represent a widespread practice by companies to circumvent the Congressional policy against reverting pension assets for corporate purposes. It simply doesn't make sense for Congress to authorize a funding hiatus without simultaneously closing this back door.

To better protect the pensions of retirees and future retirees, I urge you to include in the Senate's pension funding relief bill language similar to the provisions that are in Section 111 (pages 65 and 66) of H.R. 3936, the Preserve Benefits and Jobs Act of 2009, sponsored by Representatives Earl Pomeroy and Pat Tiberi.

 

The language in Section 111 relating to a company's ability to amend its pension plan, in part, states: "No ad hoc amendment to a defined benefit plan which is a single employer plan which has the effect of increasing liabilities of the plan by reason of increases in benefits, establishment of new benefits, changing the rate of benefit accrual, or changing the rate of which benefits become nonforfeitable may take effect during the plan year if the adjusted funding target attainment percentage for such plan year is- ''(I) less than 120 percent, or ''(II) would be less than 120 percent taking into account such amendment."

 

An increasing number of companies have tapped pension assets to pay for lump sum payments equal to six (6) months or even twelve (12) months pay to employees who agree to retire within a specific time window. In 2001 and 2002, a struggling Lucent Technologies charged $2.2 billion in lump sum "termination benefits" to its various employee pension plans.  More recently, GM used $2.9 billion in pension assets to make lump sum severance payments during 2008 - and ended the year with a $12.4 billion pension deficit ($20 billion by PBGC calculations).  AT&T, Bethlehem Steel, Chrysler, Consolidated Freightways, Delphi, Delta Air Lines, Federal Express, Polaroid, Qwest, United Airlines, Verizon and many other corporate plan sponsors have raided pension assets with impunity and used those assets to cover their business restructuring expenses.

 

These back door reversions are not offset by corresponding reductions to pension liabilities and are gone forever. This practice places pension plans at risk to be terminated. It is past time to end this pilfering of defined plan pension assets.  These actions threaten the security of pension plans and the potential is great that the Pension Benefits Guaranty Corp. (PBGC) might have to take over the plan in the future. Furthermore, depleted assets reduce the likelihood the plan will ever generate surplus assets that can be used to offset corporate health care costs for retirees or be available for pension Cost of Living Adjustments (COLAs), a benefit that non-government retirees seldom receive.

 

The NRLN has researched and written a whitepaper on how companies are misusing pension plan assets and provides our proposed amendments to the Pension Protection Act of 2006 to prevent the abuses. I have attached the Executive Summary from the whitepaper.  If you would like to receive a copy of the entire whitepaper, please contact Marta Bascom, the NRLN's Executive Director, on (703) 863-9611 or by email at marta.bascom@linkspace.net .

 

The Senate has an opportunity for a quid pro quo-companies receive temporary funding relief and retirees gain the protection of their pension assets from being used for non-pension expenses.  Please don't miss this opportunity to provide for the financial security of America's retirees. NRLN members who are Nevada residents have retired from AT&T, Alcatel-Lucent, Chrysler, Delta Air Lines, General Motors, Qwest and NRLN individual members retired from many other companies will appreciate your support on this matter.

 

Sincerely,

  Signed

Bill Kadereit

President, National Retiree Legislative Network

 

Attachment

 

Copy to: Representative Nancy Pelosi, Speaker

                U.S. House of Representatives

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The use of pension assets to make severance payments during a corporate restructuring is the largest and most widespread "back door reversion" by which some companies are seeking to circumvent the Congressional policy against reverting pension assets for corporate purposes.  When pension funds were used to finance hostile takeovers and the mass layoffs that typically followed, in 1990 Congress stopped the practice by imposing a 50 percent excise tax on pension reversions.  But today's "back door reversions" are more insidious.  Although ERISA explicitly prohibits the use of qualified pension assets for "layoff benefits," companies can amend a plan at any time not merely to offer older workers enhanced early retirement benefits (by awarding extra years of service credit), but even to offer lump sum severance payments equal to a year's salary or more as part of a corporate restructuring. 

 

The 2006 Pension Protection Act tightened up on this practice somewhat by requiring plan sponsors to pre-fund a plan amendment that increases benefit liabilities to the extent the plan's funding level would fall below 80 percent (after taking account of the new benefit liability).  However, as the 2008 stock market meltdown demonstrated, a plan that is only 80 percent funded during a bull market could easily end up below 60 percent funded in a bear market - and in default with the PBGC if the plan sponsor declares bankruptcy.  Moreover, any significant reduction below full funding not only leaves all plan participants insecure, it also reduces the ability of the plan to build a surplus that could be used to grant cost-of-living adjustments to longtime retirees, whose fixed monthly benefits erode with inflation, or to offset the cost of retiree health benefits through a Section 420 transfer.

 

The trend toward distressed companies using employee pension assets to pay severance costs - instead of relying on a restructuring reserve or other corporate assets - is not new to the current financial crisis.  Lucent, United Airlines, AT&T, Verizon, Qwest, Federal Express, Delta and Delphi are among the other companies that have tapped pension assets to pay corporate restructuring costs. Some of these companies drained pension assets for severance payments as they spiraled downhill toward bankruptcy and an eventual taxpayer bailout courtesy of the PBGC.  Other companies, left under-funded, cut other retiree benefits across the board.  And some others, although their plans remained solvent, used up "surplus" assets that could have benefitted the vast majority of plan participants if used instead for cost-of-living adjustments or offset the cost of retiree health care benefits.  In the current crisis, General Motors used pension assets to pay for billions in severance payments during 2008 - and ended up with such a dangerous degree of under-funding that in early 2009 the Treasury Department restricted the practice as a condition of the federal bailout loan package.

 

The most effective way for Congress to protect plan participants (and taxpayers) from unfunded liabilities from severance, layoff or any other benefit increase is simply to increase the target funding level threshold required for unfunded benefit increases and lump sum payouts from the 80 percent level, currently required under the PPA, to 120 percent. Severance or other benefit increases to selected individuals that are not funded should be paid out of the company's operating expenses, not from the pension trust.  This would not limit the ability of plan sponsors to enhance benefits. What it does do is require companies to currently fund lump sum payouts or other benefit increases that would otherwise cause the plan to become under-funded or worsen its level of under-funding. Amendments increasing benefits that are collectively bargained or negotiated between a plan sponsor and bona fide union representatives, or in the context of a jointly-trusteed Taft-Hartley plan, should be exempted from this more restrictive funding level. 

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EMPLOYEES’ PENSIONS,
DISABILITY BENEFITS AND DEATH BENEFITS.

REVISED AMMENDENTS-EFFECTIVE JUNE 1, 1969

ANY EMPLOYEE WHOSE TERM OF EMPLOYMENT HAS BEEN 30 YEARS OR MORE AND WHO HAS REACHED THE AGE OF FIFTY-FIVE AND WHOSE TERM OF EMPLOYMENT HAS BEEN 25-OR MORE YEARS, OR ANY FEMALE EMPLOYEE WHO HAS REACHED THE AGE OF FIFTY YEARS MAY, IF THE CASE IS APPROVED FOR SUCH TREATMENT, BE RETIRED FROM ACTIVE SERVICE AND, UPON SUCH RETIREMENT SHALL BE GRANTED A SERVICE PENSION.

ANY EMPLOYEE WHO HAS REACHED THE AGE OF FORTY YEARS AND WHOSE TERM OF EMPLOYMENT HAS BEEN 15 OR MORE YEARS AND WHO, ON OR AFTER JUNE 1, 1969, LEAVES THE SERVICE OF THE COMPANY FOR ANY REASON, SHALL BE ELIGIBLE TO A DEFERRED SERVICE PENSION COMMENCING WITH THE MONTH IN WHICH HE/SHE ATTAINS AGE SIXTY-FIVE.

DEFERRED VESTED PENSION

ELIGIBILITY: TERMINATION OF EMPLOYMENT AFTER COMPLETING AT LEAST 5 YEARS OF VESTING SERVICE, AND BEFORE REACHING ELIGIBILITY FOR SERVICE PENSION.

BENEFIT: THE MONTHLY BENEFIT PAYABLE AS A STRAIGHT LIFE ANNUITY STARTING ON THE PARTICIPANT’S NORMAL RETIREMENT AGE (THE LATTER OF AGE 65 OR THE FIFTH ANNIVERSARY OF PLAN PARTICIPATION, EQUALS THE PARTICIPANT’S ACCRUED BENEFIT ON THE DATE OF TERMINATION. THE BENEFIT IS ACTUARIALLY REDUCED IF COMMENCED PRIOR TO NORMAL RETIREMENT AGE.

DATE PAYMENTS BEGIN: A PARTICIPANT WHO TERMINATES EMPLOYMENT WITH 5 OR MORE YEARS OF VESTING SERVICE RECEIVES A DEFERRED VESTED PENSION COMMENCING AT NORMAL RETIREMENT AGE OR AT TERMINATION OF SERVICE, IF LATER. IF THE PARTICIPANT HAS SUFFICIENT SERVICE FOR EARLY RETIREMENT ELIGIBILITY, THE DEFERRED VESTED PENSION MAY COMMENCE EARLY WHEN THE PARTICIPANT LATER MEETS THE AGE REQUIREMENTS.

SURVIVING SPOUSE’S BENEFIT

BENEFIT: THE ELIGIBLE SPOUSE OF AN ACTIVE PARTICIPANT WHO DIES PRIOR TO NORMAL RETIREMENT AGE AND BEFORE BENEFIT PAYMENTS COMMENCE IS
ENTITLED TO ONE OF THE FOLLOWING BENEFITS:
IF THE PARTICIPANT DIES WITH FIVE OR MORE YEARS OF VESTING SERVI CE, HAS LESS THAN 15 YEARS OF PENSION ELIGIBILITY SERVICE, AND IS NOT ELIGIBLE FOR A SERVICE PENSION, THE ELIGIBLE SPOUSE RECEIVES A DEFERRED MONTHLY SURVIVOR BENEFIT FOR LIFE BEGINNING ON THE DATE THE PARTICIPANT WOULD HAVE REACHED EARLIEST ELIGIBLILITY TO COMMENCE A DEFERRED VESTED PENSION.

IF THE PARTICIPANT DIES ELIGIBLE FOR A SERVICE PENSION OR WITH 15 YEARS OF PENSION ELIGIBILITY SERVICE, A SURVIVING SPOUSE RECEIVES A MONTHLY SURVIVOR PENSION PAYABLE FOR LIFE EQUAL TO 45% OF THE ACCRUED BENEFIT.

WHO TO CONTACT FOR BENEFITS

FIDELITY SERVICE CENTER
P.O. BOX 770003
CINCINNATI, OH 45277-0065
TELEPHONE: 1-800-416-2363

INFORMATION REQUIRED
YOUR FULL NAME AND SOCIAL SECURITY NUMBER (SINGLE/MARRIED NAMES)
LENGTH OF SERVICE (START DATE/TERMINATION)
JOB TITLES (MANAGEMENT/NON-MANAGEMENT)
IF YOUR SPOUSE WAS THE EMPLOYEE, HIS/HER NAME AND JOB TITLE.