The (Myrtle Beach) Sun News – September 9, 2004 – Entire Article

Lucent seeking more health-care cutbacks for retirees

LINDA A. JOHNSON
Associated Press

TRENTON, N.J. - A year after Lucent Technologies Inc. announced it was reducing health benefits for its 50,000 retired management employees, the telecommunications gear maker is seeking similar cutbacks for its union retirees.

Lucent's chief financial officer, Frank D'Amelio, told industry analysts during a conference Thursday that spending on health care for retired union workers must come down to keep the Murray Hill-based company competitive.

Health care coverage for those 72,000 retirees is a key issue in negotiations for about 3,500 union workers at Lucent whose contract expires Oct. 31. Negotiations between Lucent, the Communications Workers of America and the International Brotherhood of Electrical Workers are to resume next month after a preliminary round in June ended with no progress on the health care issue.

"Are we committed to working with our union colleagues to come up with a workable solution?" D'Amelio told the analysts. "We're going to do the best we can."

Lucent has never paid for retired union workers' health costs - now roughly $600 million a year for retirees and their spouses or other dependents. Those costs have been covered by a trust fund set up when telephone company AT&T Corp. spun off Lucent in 1996.

"It was never intended that these trusts would fully fund health care forever," Patricia Russo, Lucent's chief executive officer, told The Associated Press in a telephone interview.

The trust fund is expected to be exhausted by 2007.

Lucent is trying to avoid having to pay retiree health care costs out of operating income after that, according to Ralph Maly, a CWA vice president involved in the negotiations.

"They made a proposal that would sharply increase health care costs for retirees without Lucent having any skin in the game," Maly said. "The increased costs would be significant and in some cases would cost the retiree their full pension."

That's despite the company's expectation that provisions in the new Medicare law providing prescription drug coverage to seniors will provide subsidies of about $65 million a year on Lucent's retiree prescription costs.

"The Lucent executives are once again showing a total disregard for the commitments they made to retirees," said Ed Beltram, spokesman for the Lucent Retirees Organization, which unofficially represents both union and management retirees. "Their lack of compassion for the retirees is only exceeded by their greed for their own excessive compensation."

Lucent is finally bouncing back after losing tens of billions of dollars during the unprecedented telecom industry slump earlier in the decade. It now has turned a slight profit for four straight quarters and revenues are starting to grow.

Retiree health care costs, a total of about $850 million for both the former union and management-side workers and 100,000 dependents, equal roughly 10 percent of total revenues, now nearly $9 billion annually. Lucent is paying about $250 million a year for the management retirees' health care costs out of operating income.

Since last September, Lucent has eliminated dental coverage for management employees and their dependents and stopped reimbursing them for some physician and outpatient hospital care. Lucent also has increased their copayments for hospital visits, prescriptions and treatment by providers outside their health plan. In addition, for managers who retired with a salary of $87,000 or more, Lucent eliminated health insurance for their dependents.

Beltram, who took an early retirement package in July 2001 under the promise his health benefits would be protected, said the monthly health insurance premium for himself and his wife has jumped from $42 to $516 as a result.

In trading on the New York Stock Exchange Thursday, Lucent shares rose 14 cents, or 4.5 percent, to $3.23.