AT&T recently announced fairly significant changes to its retirement benefit policies. While AT&T employees are most likely aware of these changes, you may be uncertain of what they really mean for you and your retirement plans. In the post below, we will break down the changes and our interpretation of them. Of course, AT&T does provide resources to help you understand your benefits and should be considered the ultimate authority on these changes. However, you are personally responsible for making the best choices for your own financial goals, ideally with the help of a financial advisor. In fact, research from the Employee Benefit Research Institute’s annual survey shows that retirees rank financial planners as their number one retirement planning resource.
Continue reading to learn more about the upcoming changes, how they’ll affect AT&T retirees, and your options for adjusting your retirement planning strategy.
2021 Updates for AT&T Retirement Plans
In mid-December of 2020, AT&T notified impacted employees that future pension credits will be calculated differently moving forward and pre-Medicare health insurance will be eliminated. They also announced a reduction in retiree life insurance. These changes impact both management and bargained‐for employees who retire after December 31, 2021.
Firstly, pension accruals will be reduced moving forward. Fortunately, retirees’ vested pension benefits will remain unaffected. The annual basic and supplementary compensation credits for those in AT&T’s Legacy Management Program will be lower, and the amounts applicable to the work total salary and Pension Band Minimum formulas are being diminished for those in AT&T’s Nonbargained Program. In simple terms, management employees planning to retire after December 31, 2021 will receive a lower pension than they are eligible for under the current plan.
Secondly, for those who retire on or after January 1, 2022, the pre-Medicare medical and dental subsidy will be discontinued. While AT&T has historically covered a portion of healthcare costs for retirees, they will now have to enroll in the AT&T group medical and dental programs at full price until they qualify for Medicare. We suggest anyone planning to retire before Medicare eligibility look into less expensive options, like joining a spouse’s plan or researching alternative providers.
AT&T will also reduce life insurance and death benefit amounts for management employees retiring in 2022 or later. This change may be negligible to some, but retirees with spouses and/or dependents will likely be negatively affected. We can help you evaluate your situation and determine if it’s necessary to seek these benefits elsewhere.
What Should AT&T Employees Do to Maximize Retirement Benefits?
Every situation is unique, and we always recommend working closely with a financial advisor that specializes in retirement and can guide you through your options. This will become especially important after retirement, when you’ll need to manage your funds closely to ensure a comfortable lifestyle. Working with an independent financial advisor ensures you benefit from a relationship that has only your best interests in mind, not those of the company.
These changes are hugely impactful to AT&T employees planning to retire this year or in the next few years. Many employees will likely consider retiring early this year to secure their benefits, including the higher pension calculation, subsidized health insurance, and others. This decision will depend on many factors, including your personal financial situation, lifestyle, and goals. Some considerations for employees that are potentially interested in retiring early may include…
- How soon will you be eligible for Medicaid?
- Will retiring early result in enough additional money to surpass the money you would earn by continuing to work for a few more years?
- Where will you save money by retiring early (commuting, dry cleaning, etc.)?
- What additional expenses will you have (vacations, hobbies)
- Do you have any major expenses coming up, like home improvement or paying for a dependent’s college tuition?
- Have you saved enough to continue enjoying your current lifestyle?
These are just a sample of the considerations and calculations we suggest undergoing before reaching a decision. Again, a financial advisor can help you think through these situations and calculate some rough estimates to help reach a decision.
Ultimately, many people are displeased with these changes AT&T has announced. You’re not alone if you’re confused and unsure of the next steps for your retirement plan. We are following the situation closely in order to provide our clients with the most sound advice possible, but changes may happen after the publication of this blog. Contact your employer for the most up to date information about retirement benefits.
Key Contact Information
AT&T Benefits Center (Health and Welfare)
Fidelity Service Center Website (Pension and Savings)