LRO Leaders Meet With Alcatel-Lucent HR Officers
LRO leaders met on February 6, 2015 in Raleigh, NC with ALU Human Resource Vice Presidents John Hickey and Julie Liptak to discuss pensions, healthcare and other matters of importance to our retirees. A significant portion of the meeting was devoted to discussion of the previously announced lump sum pension buyout of retired management plan participants. LRO President Joe Dombrowski began the meeting expressing the appreciation of the LRO to the ALU leaders for this meeting and also for their continuing assistance throughout the years.
LRO VP & Pension Director Frank Minter next discussed the need for and ALU's ability to grant a Cost-of-Living payment to our retirees. This has been presented at each of the six previous meetings where the Company's position has been that they could not do anything that might cause them to later put cash funding into the plan. The LRO understood that position, but felt this year that ALU was now in a much better position to make such a payment (a one-time payment equal to 10% of the retiree's pension would only use about $150 million and reduce the pension funding level less than one percent). ALU representatives were not receptive to our request.
LRO Benefits Team Director Ron Hoth discussed several items involving health care. ALU and United Health Care have committed they will work together to assure that next year’s open enrollment communications are in synch in relation to accessing out-of-network providers and claims recovery process for the Medicare Advantage PPO healthcare plan. The LRO requested consideration for reduction or elimination of the prescription drug plan deductible . Answer-this is not likely. While there are no guarantees, it appears that current plans are for ALU to offer retiree healthcare coverage for 2016.
The status of the Group Life Insurance (GLI) was discussed. The ALU projection is that the GLI benefit continues to be viable for another seven years or so at the current trust fund level. ALU understands the importance of this benefit to management retirees given the cancellation of the Death Benefit, but is unable to commit at this time to funding beyond that horizon.
We received confirmation that the former represented retirees who moved to the management pension plan still have the death benefit (there are about 400 of these retirees). On another matter, ALU advised that they are optimistic they will soon come up with a process to enable the publication of information pertaining to retiree deaths. We asked for this at last year’s meeting, and they are following through on their promise to try to make this happen.
The meeting then turned to the previously announced proposed lump sum offer to be made in 2015 to 45,000 management plan participants. The LRO participants expressed surprise that after almost a year following the announcement all questions still cannot be answered. ALU stated that there is the outside possibility that the offer might not be made; however, they have prepared contracts for outside help in connection with the offer to handle administrative, legal and participant education matters. These people will be the contacts for our retirees who receive the offer.
ALU has not yet decided on how the various retiree groups would be selected. They cannot use age but possibly retirement date could be used. They will use a unisex table, which is required by law. The lump sum amount offered will be the present value of your current existing annuity. This present value will be calculated using mortality table and interest rates prescribed by the IRS. In addition to the lump sum amount offered, each retiree will be offered a “new” monthly annuity based on the lump sum amount offered as well as a survivor’s option at either 50% or 75% of the retiree’s new monthly offer. Acceptance of the offer will require spouse signature and is voluntary. Retirees can choose to not accept any of the offers and retain their current annuity amount.
As ALU will hire a firm to educate our retirees about the offer, they also may have retiree meetings at various locations. We will try to get dates and locations in advance to assist our members.
Previous lump sum offers by ALU have included continuation of both health care benefits and group life insurance, and the expectation is that practice will continue.
The date of the possible offer is not firm, but ALU still expects any payments to be made during 2015.They also have not decided the length of time a retiree will have to make a decision on the offer. They indicated that it could be from 30 to 90 days. The LRO expressed a view that a minimum of 60 days would be necessary. We would also suggest that documents returned to ALU be sent by registered or certified mail so there can be no doubt about the timeliness of the acceptance.
The LRO wants to provide as much information as possible to those selected, but you must remember that we cannot provide any financial advice as to your action. We encourage you to seek such advice from a professional of your own choosing. In evaluating any lump sum offer the two variables in that calculation are mortality (life expectancy) and a discount rate to determine present value. The total lump sum calculated will be discounted by three separate interest rates which are required by the IRS. ALU will probably use the rates from August 2014. Once the rates are known we will provide them to our members.
The LRO understands the interest and importance of this announced management pension buyout to our retirees. We are committed to following this issue closely and will continue to update our retirees as firm information becomes available.
One final note, you may have heard that ALU announced at their earnings conference plans to also make a lump sum offer to 32,000 formerly represented occupational retirees. We have no further information on that offer.
