Empty Promises

By: Edward Stone

Back in the day, a job with Ma Bell meant a lifetime of job and retirement security.

Fast forward to 2023 and Ma Bell’s promises seem as empty as The Boötes Void (known as the great nothing – it’s a spherical region of space found in a constellation containing very few galaxies).

As many of you already know – having found out the hard way – Verizon made a decision back in 2012 to amend the legacy Pension Plan and kick out 41,000 retirees.

The decision to amend the plan could not be successfully challenged in Federal Court (or even the US Supreme Court) because the decision to amend or terminate a pension plan is considered a “settlor” or administrative decision and therefore does not require the Plan Sponsor to act in a fiduciary capacity with respect to its business decision to kick retirees to the curb.

They basically said: “If it is good for the company today – so sorry to all of you who dedicated your lives to an employer that you thought had your back.”

Other Ma Bell folks are feeling the same pain you felt in 2012 today. AT&T recently decided to kick out another 96,000 retirees in an $8.1 billion deal with Athene, an insurance company wholly owned by Apollo – a private equity firm founded by Leon Black after the Executive Life Insurance companies went bust back in the 1990’s.

The AT&T deal impacts those retirees who chose single life annuities paying less than $2,200 per month and this deal impacts CWA members as well as non-union retirees.

In an FAQ shared with AT&T retirees, AT&T claims that: “Athene is a highly-rated insurance company that manages the financial risks associated with annuity payments as part of their core businesses. They are experts in what they do, and they do it well. For AT&T, this model is more cost effective and will simplify the administration.”

In other words, the pension de-risking deal saves AT&T money, and retirees be damned. Take a look at the summary below that compares Surplus to Liabilities at three different similarly sized life insurance companies – Athene, NY Life, and Pacific Life as of year-end 2022.

The industry average surplus to liabilities ratio is 7.4%. Did AT&T look out for retirees when it chose Athene for 96,000 plan participants? Or, did AT&T simply choose the cheapest possible alternative for its corporate bottom line?

Shortly before kicking another 96,000 retirees out of the Pension Plan, AT&T slashed retiree life insurance benefits for more than 200,000 retirees.

Corteva, a DowDuPont spinoff also got rid of retiree life insurance after the spinoff of DowDuPont into three separate companies: Dow, DuPont, and Corteva. Retirees’ complaints fell on deaf ears – even when Retirees for Justice raised a stink with the Department of Labor.

Unfortunately, under existing law, Plan Sponsors are allowed to cut welfare benefits (i.e., life and health insurance benefits) if it makes business sense for the company.

AT&T maintains that they warned retirees that this might happen when the adopted a broad and sweeping reservation of rights clause in all Plan documents that says: “the Company (“AT&T”) has the absolute and unconditional right at any time and from time to time to amend the Plan, in whole, or in part and whether or not retroactive, on behalf of the Company and all Participating Employers.”

In a recent case involving a challenge to Allstate’s decision to curtail life insurance benefits to its retirees, the 11th Circuit Court of Appeals ruled in Lass v. Allstate Insurance Co. that Allstate did not violate ERISA when it terminated retiree life insurance benefits because Allstate “reserved the right to change, amend or terminate the plan or the provisions of the plan at any time.”

Retiree rights are under siege and retiree benefits are at risk.

Together with the Association of BellTel Retirees, Retirees for Justice is working to shed light on these issues and work with state and federal legislators to amend ERISA and enact state legislation protecting retirees impacted by pension de-risking—pension stripping—transactions.

It is not too late to act and there truly is strength in numbers. Let’s work together to force corporate America to keep promises and protect retirees’ earned benefits.