Alcatel-Lucent Pension Lump Sum Buyout

To:  Formerly Represented Retirees of Alcatel-Lucent

Subject:  Questions Regarding the Alcatel-Lucent Pension Lump Sum Buyout

All,

We have been receiving a number of questions regarding the lump sum buyout recently offered to certain former employees, surviving beneficiaries and alternate payees, who are currently receiving monthly pension payments from the Lucent Technologies Inc. Pension Plan (the Plan).  CWA is not in the position to interpret the company’s offer and does not give out financial advice.  This is an extremely important decision and it requires careful consideration.  We strongly advise you to gather as much information as possible and to consult with your own personal financial planner, legal advisor and/or tax advisor.  Everyone’s situation is different and unique to them. 

Following are the questions, with the answers, that we have received to date.

Q1)  Where can I get more information about this offer?

A1)  Alcatel-Lucent is making available financial and tax education services through Deloitte, an objective, third party organization, at no cost to you.  These resources include group sessions, individual sessions and a Financial and Tax Education Tool.  A schedule of those sessions is in the Financial and Tax Education Guide booklet provided in the program announcement package.   You may also contact the Alcatel-Lucent Retiree Lump Sum Window Benefits Center at (866) 617-7164.

Q2)  Do I have to take this lump sum buyout offer?

A2)  This offer is strictly voluntary.  You DO NOT have to accept this offer.  If you choose to do nothing, your current monthly pension payments will continue.

Q3)  Page 10 of the Alcatel-Lucent Retiree Lump Sum Window booklet says the company has rights to terminate either plan, etc.  Can the company terminate the pension plan?

A3)  The language on page 10 is standard language.  Today, the pension plan is covered by ERISA and is protected by the Pension Benefit Guaranty Corporation (PBGC).  IF the company decided to terminate the plan they would have to do it under government guidelines.  This means that there are specific guidelines that must be followed under federal law.  For a standard termination the company would have to show the PBGC that the plan has enough money to pay all the benefits owed to participants.  They could do that by purchasing annuities through an insurance company.  Any money left over in the fund the company would have to pay a penalty tax on.  All of this is costly to the company.

Q4)  Also on page 15 in the Financial & Tax booklet, provided by the company, it says if they go broke we get    nothing in a pension.  What about the Pension Protection Act?

A4)   What page 15 of the Financial and Tax book is referring to is that if Alcatel-Lucent declares bankruptcy and does not have enough money to cover the liabilities of the plan the PBGC would take over the plan.  Currently the LTPP is funded at approximately 149%.  The Pension Protection Act helps to ensure the plan is appropriately funded.  It doesn’t prevent a company from declaring bankruptcy.

Q5)  Will the new IRS ruling on pensions affect our Lucent retirees taking this lump sum? 

A5)  The new ruling by the IRS addresses discontinuing offering a lump sum buy out in certain circumstances going forward.  Because this offer was already approved and in the works it is NOT impacted by the ruling. 

Q6)  What company is the “new” annuity going to be with? 

A6)  The “new” annuity is a recalculation, for certain individuals, of the old calculations and is still administered by the pension plan. 

Q7) What happens to my healthcare if I take this lump sum buy out?

A7)   If your healthcare premium is currently being deducted from your monthly pension check and you convert your monthly pension payments to a lump sum payment during the program, you will be billed directly for your healthcare premium and you MUST pay the premium in order to continue to receive your healthcare.  The premium amount will still be based on what your current monthly pension amount is today.  You will receive your first bill in mid-November for your December coverage.

Again, this is an extremely important decision and it requires careful consideration.  We strongly advise you to gather as much information as possible and to consult with your own personal financial planner, legal advisor and/or tax advisor.  Everyone’s situation is different and unique to them.