Human Capital & Careers

Lucent Deepens Retiree-Benefit Cuts

The telecom erases health coverage for 7,400 dependents of retired managers.
Stephen TaubSeptember 23, 2004

Lucent Technologies Inc. has cut the benefits of its retirees for the second time in a year, according to published reports.

The embattled telecom company informed employees by letter that it would no longer provide free health insurance for dependents of management workers earning salaries of $65,000 or more who retired on or after March 1, 1990, according to the Associated Press. From now on, those dependents must pay their own premiums.

The move affects the 7,400 dependents of 5,400 management retirees. The cutbacks, which go into effect Jan. 1, 2005, removed benefits for spouses, disabled children and children age 23 or younger.

Last September, Lucent announced the same exact cuts for managers who had retired during the same period but had a base salary of at least $87,000, according to the wire service. That change, which took effect on Jan. 1, affected about 9,000 dependents of 7,300 retirees.

“We’re astounded that the Lucent executives would continue to take benefits away from dependents of retirees, since many retired based on Lucent’s promise to provide health care benefits for them and their dependents,” Ed Beltram, spokesman for the Lucent Retirees Organization, told the AP.

Lucent spokesman Bill Price, however, said the company had no choice. “We have to ask for some cost sharing, as we did last year, with our retirees in order to remain competitive,” he told the wire service, noting dependents could still participate in the retirees’ health plan if they are willing to pay their own premiums.

The premiums for dependents will range from $220 to $386 per month. That works out to about half the cost of comparable coverage elsewhere, Price reportedly said.

Lucent is also increasing management retirees’ costs for dental coverage, with premiums rising roughly one-third, to $32 per month for individual coverage and $85 a month for family coverage, according to the report.

The new changes are expected to save Lucent about $16 million per year, Price told the wire service.

More broadly, retiree benefits are expected to become an even bigger issue over the next year, as companies struggle to cope with the rising cost of health care and the surge in retiree demographics. That’s especially true in the airline industry, with UAL and US Airways currently in bankruptcy and AMR Corp.’s American Airlines and Delta Air Lines Inc. in financial difficulties.

Retirees, however, are not the only ones whose benefits have a big bulls-eye. On Tuesday, nearly 2,700 unionized Hershey Foods Corp. workers began voting on a proposed contract extension that would increase the out-of-pocket cost of their health-care benefits and reduce wages for employees with less seniority, according to another AP story.

A union official acknowledged that the concessions are needed to keep the company from moving the jobs elsewhere. Under the proposal, employees would see their health- care contributions double from 6 percent to 12 percent, beginning in January 2006.