On Wednesday, May 3, TelCo Vice Presidents Jane Banfield and Ted Mazzella, TelCo Benefits Advisor, and Joann Alix-Gagain, President, Southern New England Telephone (SNET) Retirees Association, and I had a conference call with Julianne Galloway, AT&T Vice President Global Benefits. During the call it was learned a deal worth approximately $7.7 billion had just closed to move 96,000 AT&T pension plan participants, from the AT&T pension plan to annuities from Athene Life & Annuity Company and Athene Annuity & Life Assurance Company.

 

The AT&T pension plan participants to be impacted by this transfer to annuities are those whose pension is generally less than $2,200 per month. The payment will be the same from the annuity.

 

Ms. Galloway said the transition for annuities will be effective starting in August of this year with the first payouts beginning around the first of September. The transaction had been negotiated for AT&T by State Street Global Advisors. It is the same firm that acted as the independent fiduciary for IBM in September 2022 to transfer $16 billion in U.S. defined benefit plan liabilities for 100,000 pension plan participants.

 

In a conversation I had with NRLN President Bill Kadereit on Tuesday, he suggested I ask during our conference call:

— whether the AT&T Pension Trust Fund would be funded at the same level it was at prior to its action with the annuity companies?

— did the deal include purchase of reinsurance that is sufficient to provide a replacement annuity of equal value from a third-party insurer that is independent of the annuity provider and financially capable?

 

The good news is that Ms. Galloway said that the AT&T Pension Trust Fund would be funded at the same level following the transaction.

 

The bad news is that reinsurance was not included in the agreement. I said to Ms. Galloway, “that leaves the entire risk on the backs of the retirees.”

 

Ms. Galloway’s response was that the states have financial oversight of the insurance company that would mitigate the risks. I told her I was not at all trusting of the states to oversee Athene in light of what has happened with federal oversight of the recently failed Silicon Valley Bank, First Republic and Signature Bank plus who knows what others are on the failure block.

 

Should an insurer that provides annuities fail and there is no reinsurance, the maximum coverage by the State Guaranty Associations varies widely by state. Most states guarantee up to $250,000 per person per lifetime, although limits range from $100,000 in New Jersey to $500,000 in New York. Depending upon our financial needs and how long we live, our pension could be gone in 10 years.

 

Our group was told details of the transition plan would be provided soon to the 96,000 impacted and a call center will be established for the transitioning retirees. Athene is expected to send a welcoming kit to all affected retirees by July and AT&T will have a website available to assist and answer questions.

 

I caution the readers of this message that what I captured in my notes during the conference call might not be absolute.

I urge you read the following message from Bill Kadereit to know that actions similar to AT&T’s are being done regularly by pension plan sponsors and understand the federal legislation the NRLN is lobbying for to better protect pension plan participants impacted by the shift from pension to annuity.

 

Monte Baggs, President

TelCo Retirees Association