AT&T Pension Outlook: Exploring the Possibilities for Future Adjustments

Healthcare Provider Update: Healthcare Provider for AT&T: AT&T collaborates with multiple healthcare providers to ensure its employees receive quality health coverage. One primary partner is UnitedHealthcare, which offers health plans tailored for AT&T employees. Potential Healthcare Cost Increases in 2026: As the landscape of healthcare evolves, AT&T employees may face significant challenges with rising healthcare costs in 2026. Experts anticipate a steep surge in premiums for Affordable Care Act (ACA) marketplace plans, with some states projecting increases exceeding 60%. This rise is largely attributed to the potential expiration of enhanced federal premium subsidies and soaring medical expenses. Without action from Congress to extend these subsidies, over 22 million enrollees may see their out-of-pocket costs increase by more than 75%, making it imperative for workers to prepare financially for the coming changes. Click here to learn more

Along with other businesses, AT&T is currently attempting to reduce expenses in order to assist in addressing the economic slowdown caused by the coronavirus. The epidemic had a negative impact on the whole economy, but AT&T was particularly heavily hit. In an effort to save labor expenses, AT&T has decided to implement layoffs. Chevron intends to "cut 10% to 15% of its worldwide workforce," according to Reuters. Some corporations, such as ExxonMobil, have opted to reduce perks. The announcement was made by ExxonMobil that it would no longer match employee contributions to their retirement savings accounts. It has also been revealed that they have been using a "Performance Improvement Plan" to fire employees.

But will traditional cost-cutting measures be enough? Could a pension freeze be the next step for AT&T? 

In the past, companies have found success in preserving cash by freezing their pension programs. In 2005, Verizon put a freeze on their pension. As an alternative, they provided workers with an improvement over the 401(k) programs that had been in place since 2006. At the time, ABC reported that Verizon planned to convert from a defined benefit (DB) pension plan to an upgraded 401(k) plan in order to save $3 billion over the course of ten years. 

A growing tendency in the economy is for firms to try and shift from Defined-Benefit (DB) plans to Defined Contribution (DC) plans. Since the early 1980s, the overall number of company pension programs has been decreasing.The number of company pension plans with 100 or more participants has decreased from about 26,000 in 1983, the high, to roughly 8,400 in 2016, according to AARP.That represents a two-thirds decrease in around 35 years. Furthermore, according to a survey by Barron's, defined contribution (DC) plans hold approximately 60% of the $28 trillion in retirement assets in the United States. That percentage was less than 50% in the year 2000, when a lot more firms were offering DB plans. The days of a person working thirty years at the same company and receiving a sizable pension are dwindling. In an effort to better control the amount of their present pension commitments, many companies are offloading or freezing their defined benefit pension plans. By enrolling employees in a DC plan, "the corporate pension plan stops accruing new benefits as workers age and salaries rise," according to Barron's.

Barron's mentions a number of businesses, including General Electric and Lockheed Martin, who have chosen to freeze their defined-benefit pension plans as of late. General Electric has offered 100,000 former employees a buyout option for current retirees and frozen the pensions of 20,700 employees. Another cost-cutting strategy used by organizations is the buyout option. The Retirement Group claims that defined benefit (DB) plans that give retirees a lifetime monthly benefit frequently result in significant pension liabilities for the employer. But "corporations could take the defined-benefit off their books by offering a lump sum to both workers and retirees." This has the potential to transfer risk from the company to its employees for businesses like AT&T.

In general, this trend benefits investors because it lowers the risk of investing in companies who are able to reduce their debt. For employees, who frequently depend on those benefits for their retirement years, losing DB plans is a terrible thing. A pension freeze usually has the greatest negative impact on workers who are in the mid-to-late stages of their careers. Asking your HR department for an estimate of your pension benefits following retirement is a smart idea if your pension is frozen. Asking for estimates for both your lump-sum and monthly payout is advised by AARP. It's a good idea to find out how much your spouse would get in the event of your death.

Featured Video

Articles you may find interesting: