the at&t pension plan funding as of 12/31/201

If you are a participant in the AT&T Pension Benefit Plan, you should have recently received (or will soon) via US mail, a copy of the ANNUAL FUNDING NOTICE for the AT&T PENSION BENEFIT PLAN.

Why is this important?

Because this is the legally-required notice informing participants of how much the pension plan is funded….. meaning, does it have enough money to pay out all the benefits that are actually promised?  This is clearly important to read and understand, not just once, but every year, if you are a current participant in the plan.  Whether you’re an active employee with a pension that continues to accumulate credits (across all credit types), an existing retiree claiming monthly benefits (annuity style), or someone who’s been laid off or retired, still has a claim to benefits, but is not yet of retirement age, or has not initiated pension withdrawals yet (perhaps you plan to work until 70 and don’t want to start withdrawals for tax reasons, etc.)

It’s even more critical to read and understand this now because AT&T has issued a notice to at least some Pension Benefit Plan participants (and many who are off payroll due to a surplus event) a new buy out option — take 100% of the cash balance in your pension account out as a lump sum.  This can be done as a non-taxable event if you plan to roll the money over to another retirement account (individual IRA, Annuity, etc.).



how to know if it’s better to take the pension as an annuity or the lump sum?

The big question on everyone’s mind — What’s better – waiting until 65 and taking the monthly annuity, OR taking the 100% of the cash balance now as a lump sum…. ???

That’s a complex decision that really requires some math and detailed analysis of

  1. your current financial situation,
  2. your age,
  3. your health,
  4. your dependents and spouse,
  5. your “plan” for retirement,
  6. the market,
  7. inflation,
  8. interest rates,
  9. life expectancy, and
  10. your investment knowledge along with
  11. your tolerance for risk.  But that’s a discussion for another day…
  12. and other factors!

And, you can do all that, if you know how.


understanding the at&t pension annual funding notice and how it relates to the lump sum decision

Today, I will explain the ANNUAL FUNDING NOTICE for the AT&T PENSION BENEFIT PLAN so you:

  1. Know how and where to get it
  2. Make time to read it
  3. Feel comfortable that you understand most of it

If you are contemplating taking the 100% lump sum later this year (details to come), the election period is July 31 – September 25, and the money won’t be distributed until October 1, 2019.

October is typically one of the worst months of the year for stock market…. many of the biggest crashes happening in October. So if you take the lump sum, be mindful in what you do with it, and when.

where to get information on the at&t pension plan funding levels… as well as other important info

By law, AT&T must distribute a copy of the annual funding notice to all Plan participants.

The Annual Funding Notice for the AT&T Pension Benefit Plan was recently mailed.  I received mine around 4/27/19.  It’s easy to overlook in your pile of mail.    It’s a 11″ x 17″ sheet, folded to make an 8.5″ x 11″ letter, consisting of 4 pages.  It’s one sheet, folded and sealed with clear stickers (wafer seals) on the edges.  It is not marked as pension information. 

Whether you missed it entirely or ignored it as it looks like all other legalese-type-writing-benefits-info, you should ALWAYS READ this type of stuff.  Anything legally required is something you should pay attention to.  It’s a good rule of thumb.  

>>If it’s pretty, it benefits THEM, if it’s ugly, it probably benefits you….. <<

If you have not received it, you can probably contact Fidelity (the pension plan administrator) and request a copy.   Contact Fidelity at or via phone 800-416-2363.

You can also obtain similar plan information by visiting the US Department of Labor website and perform a search for “AT&T Pension Benefit Plan” then choose “form 5500” and then you can select the plan year you wish to look at.  I’ve done a screen recording (CLICK HERE TO VIEW IT) to show you how to download the pension information from the Department of Labor website, and then what the forms contain, etc.  

>> Special Note:  I am not an accountant, investment professional or a lawyer.  I do however read everything that comes my way, especially legal and official stuff. The more dull and boring it looks, the more inspired I am to read it and understand it because typically, the stuff that nobody wants you to actually read, is the stuff that looks the ugliest.  If they WANT you to read it, it’s simplified, and pretty, with charts and callouts to draw your attention. <<


Now Some Explanation on the Funding Notice

Here’s what it looks like:


What the AT&T pension funding notice says

So here’s the fun part….. explaining what it’s saying.  Key things to know. 

1) The pension fund is just a giant investment account which must be managed so that the money in there earns money… so that the company needs to contribute less from their own pocket.  There are plenty of smart people doing lots of calculations to make sure that the money is invested in “safe” things, so that when payments need to be made, there’s money to do so.   Said another way, the money in the pension needs to make money, so there’s always enough money to pay everyone who is due money.

 There’s constantly money coming in to the plan (gains on investments… or funding deposits) and there’s money going OUT (like payments to retirees).

2) The company provides (annually) the funding target attainment, and the higher the percentage, the better things are.  The target funding attainment is calculated by taking all the money and income of the pension and dividing it by all the money it owes.  If they have just enough money to pay ALL of the money it owes regardless of when the payments are due, the plan would be funded at 100%.  If the funding level is below 100% — and I”m simplifying here — that means that there’s more money going out than coming in.  Typically, more money going out than coming in is a problem!

3) The AT&T Pension is a Defined Benefit Plan, and participates in the PBGC (Pension Benefit Guaranty Corporation) which is a federal insurance agency — kind of like the FDIC for Pensions…. the PBGC insures the pensions in the event the company holding the pension goes bankrupt and cannot pay the pensions. That doesn’t mean that pensioners would get 100% of their pension money from the PBGC, but there is some level of protection.

so the whole “more money going out than coming in” sounds like a big problem. Isn’t 91.9% funding an issue we should be afraid of?

Yes, and No…

The funding level NOT being 100% is not necessarily a problem though, because remember, everyone in the pension plan is at a different age so we’ll all hit the age of 65 at different times.  That creates an automatic staggering of how much money gets paid out of the pension, and for how long at any given time.  

IF everyone who was owed a pension came to collect it at the exact same time, there’d only be enough money (as of 12/31/18) to pay out 91.9% of the obligation.  So either about 10% of the people would get nothing while the other 90% got all their pension, or everyone would collect only 91% of what they were owed.

But – that’s not super likely to happen.

So does that mean the at&t pension is totally safe?

No, it doesn’t.  Pensions are generally invested in safe things so companies can feel pretty certain that the rate of return (growth) on the investments within the pension will generate enough income to the pension that the company itself can minimize contributions it has to add out of the money the company earns.  So hypothetically, it should be kinda safe.

But – companies can go bankrupt.  If that happens, then the PBGC would come in and take over the pension, and benefits could be reduced, or might not be.  It depends on many things.

Also – if the company chooses poor investments, or there’s a market decline or crash, then the funding level could be considerably lower, and I guess, low enough that there wouldn’t be enough money in the pension to cover current payouts, let alone future ones.

And here’s something interesting.  Several years ago, AT&T sent out an email to all employees (and I’m sure retirees receiving pension, etc.) to notify everyone that they were modifying the investment strategy for the AT&T Pension Plan.  The email stated that they were going to invest some portion of the Pension into guess what…… AT&T Mobility Stock!  EEEkkkk.  I recall speaking to my team’s finance guy and saying “that doesn’t feel like a good idea” and he agreed.

Currently, 25% of the AT&T Pension Plans net assets are invested in “equities” (which just means stock) so if I assume the worst, 25% of the pension money is invested in AT&T stock. So that to me is pretty dangerous….. and huge cause for concern. If you want to read some additional opinions on that, click here.

Or if you’re really brave, click here and you can try to read this government article.


And remember what happened in the last financial crisis in 2008?  So many pension funds around the world were in so much financial trouble because they had invested in the US real estate market (which logically, should have been secure investment, but obviously it wasn’t.  If you want to truly understand the financial crisis watch the movie “The Big Short” as it explains it all pretty well) which collapsed, and those pensions lost tons of money.  So there is always risk.

This is why it’s good to learn to read financial statements.  All publicly traded companies must file financial reports and earnings reports on a quarterly and annual basis. These reports a public information.  Looking at the financial statements will provide you with some pretty basic information, like how much money is coming in (and from where) and how much money is going out (and to where).  You can look year over year and see trends… is revenue growing or not?  Is cash flow growing or not?  

I’m a Bit Confused, I Don’t Understand It All, So What Does The 2018 Funding Notice Say About The AT&T Pension?

Here’s the super summary (based on what I see in the notice, and my understanding of it all):

The current AT&T Pension Benefit Plan is funded as of 12/31/18 at 91.9% and there’s a little wiggle room in the number because there are a couple different ways to calculate the value of the pension: 

  • Fair Market Value calculation ($49.1B)
  • Market Rates ($51.9B)

So the difference is about $2. billion dollars.  

It also gives us interesting information into who is in the Pension plan.  Currently there are 498,781 participants/beneficiaries covered by the plan.  This includes:

  • 189,950 Current Employees (38% of folks in the pension)
  • 199,588 Retirees receiving benefits (40% of folks)
  • 109,273 Retired or Laid Off or Quit but not claiming benefits yet (22%)

What’s important to note.  Within these three groups of plan participants:

  • Current employee’s pension cash balances continue to grow each year as a percentage of their salary, which maxes out at 10% company contribution at age 55 and stays at 10% until age 65. In addition to pay credits, interest credits are also added to the pension, so every year, employees’ pensions grow bigger the longer the employees stay employed.
  • Retiree pensions and Pensions of those who are not retired, but are off payroll (probably laid off) and not yet collecting pension but will someday – their pension accounts only grow through interest credits added each year, by a specific percentage.  In 2018 it was just under 4%.

 As it stands now, at 91.6% funding level and looking at the distribution of the people participating in the pension, less than half of those who are owed money, are collecting today.  About 60% of the people who WILL collect money from the pension have not yet started, and might not start for years. 

Surprisingly, the last employees who were granted a pension right were hired I believe in 2014, so let’s assume those folks who entered the pension plan in 2014 are fully vested, and let’s assume the  average age of those folks 34.  If those statements are true, then those folk have 31 years before they’ll collect their pension; their pensions will grow for 31 more years, while AT&T is paying out benefits to all the older pensioners who start collecting sooner or are already collecting.  That could mean that AT&T will owe money to a large number of people possibly until the year 2064 or later.

The fear is that like social security…. will it be there when I retire?  Honestly, there’s no way to really know.  I’m sure there could be some statistical analysis to see how often pensions fail, the drivers of the failure, and do some predictive modeling to come up with a probability value for the pension failing, but I am not that mathematician!


So Why The 100% Lump Sum Buy-Out Offer in 2019?

I don’t know, I’m not part of those discussions, but… if I had to guess… I’d say, AT&T wants to put the burden of  the investment risk (whether or not the pension makes money in the years to come) on the pensioners instead of assuming the burden of risk themselves, and also eliminate the cost of managing the pension as much as possible.

Think about it — almost half a million ex-employees that AT&T will have to pay a good amount of money to, every single month, from the time those ex-employees are aged 65 UNTIL THEY DIE.  And who knows how long people will live.  

Back in the day, when pensions were common everywhere,  it wasn’t uncommon for a man to work until 60, retire, and be dead within 10 years.   Things are different now…. People are living much, much longer.

And half a million people is a lot of people, that’s nearly double the number of employees on staff now.  That’s a LOT of people for AT&T to pay…. their employee base, AND the retiree base… year after year after year.  And, AT&T  is legally obligated to make these pension payments, every month, to every retiree who chooses the annuity, in the amount of thousands of dollars a month, for about the next at least 65 years.  That’s a L-O-N-G time.  Will AT&T even exist in 65 years?

And of course, the executives have doubled their own salaries…. from making $10M to making $20M while the rest of us get laid off…


Then number of participants in the pension will not grow; AT&T no longer offers it to any new employees.  But it will go down as people die.  Or the number will go down as people choose the 100% Lump Sum option. Once you take the Lump Sum, you are officially OUT of the pension plan.  If you lose the money, that’s it, it’s gone.

So it’s ALWAYS a good thing for AT&T for as many people as possible to take the lump sum, and sometimes it’s good for you…. But it’s not ALWAYS good for you.


How To Determine If The Lump Sum Is Good For You

You need to collect a bunch of data and start doing some calculations.  It’s not easy, but it’s smart to try.

Remember up above I rattled off a list of variables in the equation:

  1. How much money you have now (in your savings, in your IRA, Roth, other investment accounts, etc.
  2. How much debt you have (mortgage, car payments, living expenses, taxes, etc.)
  3. What your living expenses will be in retirement (do you plan to stay where you are, or move elsewhere? Downsize?  Travel?
  4. Your age and the age you plan to retire.
  5. Your estimated lifespan… (no fun)… do folks in your family tend to live long, or not?  Is there illness?
  6. Your dependents and spouse – do you have enough life insurance to replace your money if you die?  Can your family survive without you?
  7. The market stuff — is the stock and bond/investment maret doing well?  Or is it near the end of a cycle and going into recession when gains are typically lower?
  8. How much do you know about investing? Do you have a trusted advisor?  How do you know they are any good?  Do you know enough about investing to have some basis to think they’re good or not?
  9. How much risk are you willing to take?
  10. What social security payments do you expect to receive and when do you plan to start taking it?

Here’s one way to look at it:

Go to Fidelity’s site and navigate to the pension area.  Do some modeling.  Estimate what your monthly annuity (pension payment) would be if you started taking it at age 65 and did not choose the spousal survivor benefit. This would give you the highest pension payout monthly.

Multiply that number by 12. This would be your annual pension income. 

Then look at your Lump Sum amount.  See how many year’s worth of pension payments that is by dividing the Lump Sum amount by the annual pension income amount.

And see what that says to you.

In general, the ONLY time it ALWAYS makes sense to take the 100% Lump Sum without doing detailed and careful analysis, is if you have a terminal illness and know you are going to die soon.  Because remember, if  you go for the Monthly Annuity Pension Payment, once you die, the payments stop unless you’ve elected the lower monthly payout in order to get spousal benefits.

So some folks will do better with the lump sum and investing it while others are better off with the monthly annuity.  And in terms of leaving something behind after you pass for your spouse and/or children, a smarter way to do that is to take the higher pension monthly payout and then buy a term life policy that will pay out when you go.  Your family will likely get more money that way.  

Good luck…. read everything, and be on the lookout for more information, insights and resources to help you on your journey.

Very SPECIAL OFFER for AT&T surplus folks and retirees only

From me… [Kate]

Since I was unjustly laid off, just like most of you were…. in the prime of my career, I have a soft spot in my heart and conscience for anyone from AT&T who is surplussed.  As you have probably seen on my FB page and other posts, part of why I am so knowledgeable in all this stuff is my husband is in the finance industry and does this for a living.  So I pay extra careful attention to everything that AT&T does because I know how much it affects me, my family, my money and my future retirement.

So – if you have no advisor to speak to, or if you don’t know if the one you have is even any good, then my husband Lou is happy to speak to you and help you sort out whether it makes sense to pull the lump sum out, or leave it in the pension, and also give you some insights on why it’s better to roll over your 401K into a better investment vehicle (there are tax and beneficiary reasons you’d want to do this) but again, there’s no one size fits all.

If you’d like to schedule a free phone call or even a video-chat with him, all you have to do is click the button and fill out the quick form.  There is no cost, but it’s ONLY for AT&T surplus or retired/laid off employees.  

Just click the button below, fill out the form with your preferred contact info, and just know that the email it comes to is my business email: — so don’t be alarmed!  I’ll answer whatever questions I can and pass the rest to my hubby.

Set Up A Chat With Lou