Lucent Disconnects Death Benefits

January 8, 2003 ( - As many as 31,000 Lucent Technology retirees will see their death benefits eliminated, as the struggling telecommunication company continues to cut costs, according to a report by the Asbury (NJ) Park Press.

The loss of the death benefit, scheduled for February 1, amounts to a year’s salary at the time of retirement and will apply to Lucent managers who retired before January 1, 1998. Under the current system, the benefit is payable only to a surviving spouse, unmarried children under age 23 and dependent parents.

However, life insurance, paid for by the company, and pension benefits are not affected, Lucent spokesman John Skalko said.   “Life insurance has become more pervasive, and more companies have eliminated the death benefit.   A death benefit today is unusual among our competitors.”

Skalko said the death benefit was first instituted in 1913 before life insurance was generally available. Lucent’s life insurance policy pays a death benefit of one year’s salary until age 65 and is then reduced by 10% every year until age 70, at which point it stabilizes.  

Further, the move to eliminate the benefits was necessary in Lucent’s continued quest for profitability, Skalko said.   “We have to take those steps that we believe will assist us in returning to profitability as soon as possible.   We owe that to our employees, our customers and our shareowners.”

The death benefit has been eliminated before.   In 1997, Lucent eliminated the death benefit for management employees who retired on or after January 1, 1998.  

Lucent is now looking to cut costs anywhere executives can find them as revenues drop. Past cost-cutting measures have included tens of thousands of layoffs. In October, the company said it would lay off another 10,000 employees by September 30, bringing the number of employees down to 35,000.