AT&T promised its former workers $100,000 in life insurance for each year of service. Now it’s offering only two years. The change has forced many to sue and leaves the company open to a class-action lawsuit on behalf of all those who worked for AT&T since 1984.

AT&T Slashed Promised Life Insurance for Former Workers—and Time Runs Out at Year

When Dean Allison resigned his position as a property manager at AT&T T 0.36 percent in 1998, the business gave him a severance package that included at least $63,000 if he died.

He accepted the offer, reasoning that the money would one day assist his wife cover funeral costs, pay off debts, and have more money to live on.

Mr. Allison was warned by AT&T in early 2021 that if he died after December 31, the company would only pay him $15,000.

AT&T’s plan to reduce life insurance and death payouts for many of the 220,000 retirees who are eligible as of Jan. 1 has enraged a generation of employees who claim their former company is breaking a promise.

Top executives are exempt from the reduction because they receive life insurance via a separate business-funded program that the firm cannot lower without their agreement. According to securities filings, AT&T will pay $3.6 million to the heirs of Randall Stephenson, who stepped down as CEO in 2020, under a life-insurance plan approved by the board last year.

Other retirees’ benefits will be decreased to put them in line with those at other major firms, according to AT&T, and more than 1,000 retirees’ death payments would be increased as a result of the move. According to the report, just a few Fortune 100 businesses still provide most workers with life insurance that continues after they retire.

“We’re working hard to strike a responsible balance between the demands of the company and our present 200,000 workers and 500,000 retirees and their dependents,” said Fletcher Cook, an AT&T spokesperson. “It is, without a doubt, a delicate balancing act—one that many businesses have failed to master.”

Mr. Allison, 75, of Stuart, Fla., finds this to be of little consolation. “I could have done some preparation if they had warned me 10 years ago that they were going to eliminate this,” he added.

AT&T Inc. is the result of decades of splits and mergers, a relic of the “Ma Bell” telephone monopoly that shuttered its regional operations in 1984. Other ramifications of the split have addressed retiree benefits in different ways.


Monte Baggs, an AT&T retiree, said he anticipated his wife, Phillis, sitting, to get $75,000 in company-paid life insurance when he died, but AT&T has reduced it to $15,000 if he dies after Dec. 31. ‘They’re trying to recoup as much as they can, but on the backs of their retirees,’ he said.

Photo courtesy of The Wall Street Journal’s Talia Herman.

Verizon Communications Inc. has not cut the life insurance or death benefits of employees who have already retired, despite selling business units to firms that subsequently lowered them. More than a decade ago, Qwest Communications International Inc., which is now owned by Lumen Technologies Inc., completely removed retiree death benefits. Health benefits for retirees have been restricted or cut at both firms, including AT&T.

AT&T follows a few other prominent firms in recent years in reducing life-insurance coverage for current retirees. In 2019, 3M Co. cut such benefits in half, and Howmet Aerospace Inc., a company spun off from Alcoa, dropped life insurance for certain retirees.

Unlike AT&T, both companies said that the adjustments extended to executives as well. Corteva Inc., a seed and chemicals firm spun off from DowDuPont, has announced that it would stop providing life insurance to nearly 50,000 retirees on Jan. 1. After pensioners complained, Vanguard Group backed down on plans to cut retiree life insurance and other perks.

When AT&T workers retired, the corporation informed many managers that they had company-paid life insurance, which frequently matched their final year’s salary, albeit the amount would drop by half after they reached the age of 70.

A “death benefit,” depending on final remuneration, would be paid to a surviving spouse or dependent child, according to some. Almost a third of management retirees who were impacted by the recent reduction were qualified for both perks.

If a management retiree dies after Dec. 31, the life insurance payout will be $15,000, regardless of how much it was before. The death benefit will be limited to $25,000 per person.

Retired AT&T union members were often advised that their wages qualified them for life insurance. This benefit, too, was supposed to be cut in half after they were 70. It will now only cost $25,000 if they die after December 31. A death benefit is owed to many union retirees, but it will be restricted at $25,000 after Dec. 31.

John Tucciarone, who worked for AT&T for 42 years in New York and New Jersey until retiring in 2009, said he recalled officials justifying compensation that were somewhat lower than rivals’ by emphasizing retirement benefits. Mr. Tucciarone, 74, of Leland, N.C., said, “At the time, it was a from-cradle-to-grave attitude.” “That put a halt to a lot of individuals seeking for better wages elsewhere,” he added.

AT&T stopped advising most new workers that their spouse would get a death benefit in the mid-1990s. After 2007, it ceased providing life insurance pledges to managers, which would have continued after retirement. It also ceased basing new and existing union employees’ life insurance on their salaries over time, instead offering a fixed $15,000.

Last winter, AT&T told retirees of its intention to reduce their pensions. Retirees objected to the board, and a group met with business benefits executives to enlist their help.

AT&T said it has received the complaints as well as the responses from officials, and it has no intentions to alter direction.

“The environment in which we work has changed. And it’s really caused us to try to stay competitive and make difficult adjustments,” Julianne Galloway, AT&T’s vice president of global benefits, said during a meeting with the retirees.


Mr. Allison claims that AT&T guaranteed him a death benefit of at least $63,000 when he resigned, but that sum has been reduced to $15,000 if he dies after Dec. 31.

Melody Timothee is a photographer for The Wall Street Journal.

Warren Miner, 84, resigned as an AT&T benefits director in 1996 after many years of assisting in the development of health and life-insurance plans similar to those he planned to enjoy in retirement.

Mr. Miner, of Estero, Fla., estimated that he would be eligible for $364,000 in life insurance and a separate death payment.

Instead, his wife may get a total of $40,000 from the two programs after December 31.

Mr. Miner said, “If there isn’t a legal responsibility, there is surely a moral obligation not to treat people this way.”

“Our decision is very much about us fulfilling a moral commitment for more than 700,000 people, not just a chosen handful,” AT&T’s Mr. Cook said.

Although federal law prohibits employers from reducing pension benefits for retirees, courts have ruled that other types of retiree benefits, including as healthcare, life insurance, and a death benefit, may be adjusted if businesses retain the right to do so in official documents.

AT&T has incorporated wording in plan agreements since the early 1990s reserving the right to adjust retiree benefits at any time. Life insurance isn’t changing for retirees whose plan contracts precede this phrase.

Many retirees said they were aware that AT&T might adjust their benefits, but they never anticipated it to do so after decades of service.

Karla Billings, who was widowed at the age of 32, joined AT&T in Topeka, Kan., in 1996. In 2017, she announced her retirement. She claimed she chose against purchasing extra life insurance since AT&T’s $65,000 policy for retired union members at her level was sufficient. The compensation will now be $40,000 less if she survives through December 31.

“You’re at their mercy, and there’s nothing you can do,” Ms. Billings added.

AT&T said it regularly examines its perks to ensure it stays competitive and relevant to previous and current workers in letters announcing the changes.

Mr. Cook, the spokesperson, added, “We continue to give significant retirement benefits that many in corporate America no longer provide.” He claims that the firm’s pension plan covers four out of five workers and virtually all retirees, and that the corporation also offers subsidized healthcare to pensioners. In addition, unlike many of its rivals, the wireless network operator employs a substantial number of unionized workers who are covered by collective bargaining agreements.

Working at a blue-chip company used to come with life insurance that continued after you retired. When the Labor Department ceased monitoring it in 1997, it was still accessible to roughly a third of U.S. employees at medium and large enterprises. Willis Towers Watson, a benefits consulting business, estimates that around 13% of the 732 U.S. and international corporations it monitors provide retiree life insurance. Few of today’s new business behemoths have done so.


When he was an AT&T manager, Mr. Baggs was at the middle of an awards ceremony.

Photo courtesy of The Wall Street Journal’s Talia Herman.

Companies aren’t compelled to lay away money for future retiree payouts the way they are for pensions. They must, however, hold a liability on their balance sheets equal to the present value of every dollar they intend to pay in future pensions or retiree benefits.

At the end of 2020, AT&T’s commitment for retiree healthcare and life insurance policies, which it aggregates in its filings, was about $14 billion, down from almost twice that amount five years before.

AT&T had $12.75 billion set up for these benefits around a decade ago. According to regulatory reports, disbursements surpassed investment returns and business contributions, bringing the fund’s value down to $3.8 billion in December 2020.

AT&T’s retiree life and health policies resulted in a $2.7 billion accounting advantage last year. The business stated “a considerable percentage” of this came from decreasing its commitments for retiree life insurance and death payments, but declined to say how much.

AT&T has informed retirees that they may purchase new life insurance plans at a discounted rate via the firm.

Few people in their 70s and 80s should really consider obtaining life insurance, even at a discount, according to Scott Witt, an actuary and fee-only insurance expert. “They’ll withdraw the coverage and then they’ll be worse off for having acquired it,” he added if it gets excessively pricey.

According to a price schedule AT&T provided to workers in September, an 80-year-old would have to pay $328 per month, or over $4,000 per year, to keep a $50,000 life-insurance payout.

“If I live to be 90 years old, which I anticipate to do, and pay a growing premium, I would be considerably better off putting the money in stocks,” said Monte Baggs, 80, who worked for AT&T in California and Colorado for 31 years until retiring in late 1991.

Mr. Baggs claimed he rejected down a perk that would have given his wife a monthly annuity after his death because he assumed she would collect at least $75,000 in life insurance when he died. She will now get $15,000 if he dies after December 31.

Mr. Baggs said, “It’s evident what they’re trying to do—they’re trying to recoup as much as they can on the backs of their retirees.”

Despite its shares falling by about 40% over the previous five years, AT&T remains lucrative, paying nearly $15 billion in yearly shareholder dividends as of last year. AT&T’s investments on entertainment businesses DirecTV and Time Warner Inc. alienated investors. AT&T has started unwinding such bets due to investor pressure. It sold a share in DirecTV and announced intentions to split up its WarnerMedia subsidiary with Discovery Inc. via a merger.

Let us know what you think.

Is it permissible for a firm to reduce employee benefits such as life insurance after they retire? Participate in the discussion below.

In retirement, AT&T Chief Executive John Stankey, 59, is entitled for life insurance equivalent to his last pay, which is now about $2.4 million. At age 70, or after he has been retired for five years, whichever comes first, the insurance amount will be reduced to half of his last year’s wage.

Mr. Stankey and his predecessor, Mr. Stephenson, have purchased supplementary life insurance via AT&T, with the firm subsidizing the cost, according to the company’s filings. Since 2015, AT&T has paid roughly $1.5 million for Mr. Stankey’s coverage and about $889,000 for Mr. Stephenson. Through an AT&T representative, the executives refused to comment.

Other businesses have also paid for special life insurance for at least some CEOs, according to AT&T.

AT&T’s finances are still focused on retiree payouts. In a consulting arrangement with John Stephens, a former AT&T finance head, the firm has given him an additional $500,000 if AT&T hits any of three financial benchmarks. One is reducing AT&T’s liability for retiree pensions and benefits by $1 billion. Mr. Stephens refused to respond via an AT&T spokeswoman.

Theo Francis and Drew FitzGerald can be reached at [email protected] and [email protected], respectively.

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