The Murray Hill, New Jersey-based company will discontinue paying for dental coverage for management retirees beginning next year and reimbursement for them and their dependents for Medicare B premiums, effective October 1, 2003. In addition, Lucent will no longer provide subsidies for dependents of management retirees who retired after March 1, 1990, and whose base salary at retirement was $87,000 or more, according to an Associated Press report citing a US Securities and Exchange Commission (SEC) filing.
Previously, these retiree health-care costs were partially funded health-care trusts. However, the drop in equity markets has reduced plan assets, and lower interest rates on bonds have increased plan liabilities, the company said.
In fact, the trusts that fund health-care costs for retirees will be exhausted in the year ending September 30 and that the company expects to contribute $300 million to $350 million in corporate cash in fiscal 2004 to pay the costs. This comes in addition to the news that Lucent expects the health-care trust for formerly union-represented retirees will be exhausted by fiscal 2006 or fiscal 2007 and that it too requires corporate funding.
Lucent said 50,000 retirees would be affected by the change. Most of them are paying between $75 and $190 per month and will pay anywhere from $150 to $370 per month next year. In addition, the company plans to make additional changes to benefits in fiscal 2005 and beyond.
Earlier this year, Lucent announced that as many as 31,000 retirees would see their death benefits eliminated (See Lucent Disconnects Death Benefits ).The loss of the death benefit amounted to a year’s salary at the time of retirement and will be applied to Lucent managers who retired before January 1, 1998.
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