AT&T to inject $9.5B into its pension plan
AT&T (NYSE: T) on Friday announced a plan to direct a $9.5 billion stake of its wireless business to their pension trust that provides benefits for 360,000 of its retired employees.
The telco, which filed the proposal with the U.S. Department of Labor on Thursday, said that this measure would not "significantly" affect its Q3 earnings that will be announced on Oct. 24.
An AT&T spokeswoman told Reuters that its pension plan was underfunded by about $10.2 billion at the end of 2011.
"We're making this contribution, which is many times above our estimated required funding for 2013, at a time when many companies have eliminated their pensions," the spokeswoman said.
The Communications Workers of America (CWA), the largest union representing the service provider's labor force, applauded AT&T's actions.
"AT&T's announcement comes at a time when many companies have moved in the opposite direction, eliminating or underfunding their pension plans and putting workers' retirement security at risk," the CWA said.
AT&T is not the only service provider tweaking its pension plans.
Fellow RBOC Verizon Communications (NYSE: VZ) on Wednesday said it was looking to transfer $7.5 billion in pension obligations to insurer Prudential in a process that's called pension terminal funding.
Verizon expects the transfer to occur in December with plans to put $2.5 billion into its pension plan before closing.
Pension plans and health care contributions have been a point of contention between the RBOCs and the unions that represent wireline employees. Both AT&T and Verizon have hammered out the majority of their labor contracts with both the CWA and International Brotherhood of Electrical Workers (IBEW) unions.
AT&T in August ratified agreements with Midwest wireline employees and three agreements with the CWA in the Southeast.
In September, Verizon reached tentative three-year contract agreements with its two primary wireline unions--the International Brotherhood of Electrical Workers (IBEW) and the Communications Workers of America (CWA).
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