AT&T Pension
There are several factors that can have an impact on your pension lump-sum payout.
Factor #1 – Pension Funding
The Pension Protection Act of 2006 does not put new restrictions on lump-sum payouts for collectively bargained plans until 2010. At that point if a plan is funded below 60% the plan cannot payout a lump-sum. If a plan is funded between 60% and 80% they can payout approximately 50% of the participant’s accrued benefits in a lump-sum and the rest will be paid out in the form of a monthly annuity.
| AT&T Pension Benefits (In Millions) | ||||
| 12/31/2006 | 12/31/2007 | 12/31/2008 | 12/31/2009 | |
| Fair Value of Plan Assets | $69,284 | $70,810 | $46,828 | $46,873 |
| Benefit Obligations | $55,949 | $53,522 | $50,882 | $50,850 |
| Funded (Unfunded) Status | $13,335 | $17,288 | ($3,994) | ($3,977) |
| Plan Assets as % of benefit obligations | 124% | 132% | 92% | 92% |
| All data from 2008 and 2009 AT&T Annual Report | ||||
Factor #2 – Interest Rates
For every 1/4% change in interest rates, AT&T lump sums will fluctuate by approximately 2.5%: a 1% swing in interest rates can cause a 10% increase or decrease in the lump sum. This is why it is important to carefully watch interest rates in determining the most financially advantageous time to retire.
Interest rates and your pension will move in opposite directions. A lower interest rate will have a positive effect on your pension lump sum. On the other hand, a higher interest rate will be detrimental to your pension payout.
There are two interest rates that can potentially be used to make pension calculations, the GATT rate and the Corporate Composite Bond Rate (CCBR). The GATT Rate (30-year U.S. Treasury Bond) is backed by the United States government and pays a lower interest rate, because the Federal government carries less credit risk than corporations.
With the ratified contract between AT&T and the IBEW/CWA there are changes to the interest that will be used. The GATT Rate (30-year U.S. Treasury bond) will continue to be used until 2012. This rate will change annually on Janurary 1st. Starting in 2012, the Corporate Composite Bond Rate will start being phase in. For IBEW, the phase-in begins March 31, 2012. This new phased-in rate will increase the interest rate, thus lower your pension lump-sum payout.
Register now for the November 30, AT&T GATT Rate Update Conference Call.
Factor #3 – Pension Band
The IBEW/AT&T 2009 contract
|
|
2009 |
2010 |
2011 |
|
Pension Band Increase |
2% |
2% |
2% + COLA |
- Pension band increases of 2 percent in all three years of the agreement
- Cost of living adjustments (COLA) to the pension band in the third year of the contract
- Continued lump-sum pension payout upon retirement for those who previously had this option; consistent with the guidelines set forth in the Pension Protection Act of 2006, a new rate and methodology will be used to calculate certain Lump Sums and will be phased in beginning in 2012.
