NRLN
AT&T Moved 96,000 Retirees to Athene
What Happened?
On Wednesday, May 3Julianne Galloway, AT&T Vice President Global Benefits, during a call said 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 were single payment annuities-no survivor benefits–those with payments less than $2,200 per month. The payment will be the same from the annuity. The dollar amount of the pension was the only criteria. Whether you were management, union, non-management, grandfathered made no difference.
Transition for annuities is effective starting in August,2023, with the first payouts beginning September, 2023.
What is Pension Plan De-risking?
Pension plan “de-risking” is the removal of participants of a pension plan through the purchase of an insurance company annuity. While de-risking causes pension plan participants to lose the protection of the Employee Retirement Income Security Act (ERISA) and the Pension Benefit Guaranty Corporation, it is currently allowed under ERISA.
Why do companies do it? Simply put, to reduce debt on the balance sheet and/or to rid themselves of PBGC insurance premiums. PBGC which is the government insurance for pensions charges a per person amount vs a $ amount. Low pension payment amounts may fall into a category of higher administrative expense. It is just business! Little or no concern is given to the downside for pensioners.
Telco’s Questions of Concern!
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 is funded at the same level following the transaction.
The bad news is that reinsurance was not included in the agreement. This leaves the entire risk on the backs of the retirees. The annuity company has no obligation to continue management and could resell it to someone else with even less requirements.
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.
What is the Current Fall-Back Plan?
Ms. Galloway’s response was that the states have financial oversight of the insurance company that would mitigate the risks. The States do not oversee Athene but are to provide payment in case of failure.
Should an insurer that provides annuities fail and there is no reinsurance, the maximum coverage by the State Guaranty Associations varies widely by state. But the big question is how do you apply for it—is it up to each individual person, in their home state or home of the corporation? None of these questions are answered. Most of us have learned to never say “That will never happen. ”Most states guarantee up to $250,000 per person per lifetime, but that amount may vary by State.
Plainly stated there is no established fallback plan.
What is Telco Retirees doing?
ERISA is over 50years old, and it does allow pension de-risking with minimal restrictions. It has been tested by Verizon in the courts and found valid. It appeared the main requirement was that the annuity company was responsible and solvent, at the time of transition.
NRLN had been developing a legislative remedy for many years. Pension de-risking gained high exposure when the Secure Act passed by Congress charged the Dept of Labor with evaluating the procedure and testing the pension security for those sold to an annuity company.
With our legislative partner, an amendment to ERISA is proposed. Also,Telco is proposing procedural changes that would make the transition smoother and consistent. For example, verification of all personal data must be verified 90 days prior to transition. This is part of regulatory operations, not legislation.
What Happened to our Retirees?
This time there were several retirees that received their check but it was not the same and there was no explanation as to why it was different or how to proceed. Part B reimbursements had been included in the pension checks previously and now they were not. There was no verification of personal data, withholding or bank accounts. Several retirees asked for assistance. As one of them said, “That $350 may not mean much to them but it does to me”.
Another problem was for children helping to manage their parents’ funds. The information was so minimal it left them with questions and nowhere to turn for answers.
Retirees who had selected survivor benefits were inaccurately transitioned. The data sent to Athene was incorrect and needed to be changed. Luckily retirees noticed this and contacted us. What would happen if they had not?
What can we do and Why Should I be concerned?
An Amendment to ERISA is critical. There is active lobbying in the Senate Congressional HELP committee to review and consider this amendment.
Unless we force standardization, there will be none. It is a challenge we are willing to take on with your assistance. If any of you had problems, please let me know. Jane Banfield 908-268-5088, janebanfield@aol.com.
Other companies did their pension transition in waves. This may be the only one that AT&T does. Do you want to bet your pension on it?
If you want to read the Dept of Labor presentation, ERISA amendment and accompanying background go to NRLN.org.
The Current NRLN Newsletter can be found by clicking HERE
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