CBS News - July 19, 2005

Companies Downsize Death Benefits





When Lucent stopped providing death survivor benefits, Norma Tischendorf lost out on close to $100,000.  (Photo: CBS)


Norma Tischendorf always looked forward to the good life of retirement with her husband John, but after he stopped working, he was diagnosed with ALS, commonly known as Lou Gehrig's disease.

"With ALS, it's basically a death sentence," Tischendorf said.

As CBS News correspondent Trish Regan reports, retirement benefits are becoming a favorite target of corporations looking to boost their bottom lines.

Norma knew she'd lose her companion, but she believed the general retirement package he had earned would leave her financially secure.

John, who died at age 74 in 2003, also believed Norma would be taken care of after his death. "Absolutely," Norma, 72, said.

Then a letter came from Lucent Technologies, which had taken over the company where her husband had worked for 34 years.

While John was on life support, Lucent had decided to cancel payments to surviving family members. So unless John died within 30 days, Norma would be out close to $100,000.

"It was like saying, well, if you turn off this life support then all this money will come to me as a widow," Norma said. "But if you decide to live, it will no longer be an option."

What Lucent optioned to Norma is a death benefit and for years many corporations offered some form of it to its retirees. But with Wall Street demanding higher profits, cutting a cost like the death benefit has become a quick way to save money.

"It's certainly sad, but it is not wrong," said Mike Johnston, a benefits consultant with Hewitt Associates in Lincolnshire, Ill.

Johnston says global competition and pressure to make a profit can trump a company's compassion for its workers.

"We just can't provide different benefits than what the global workforce will provide, or we'll see all our jobs move elsewhere," Johnston said.

For Johnston, the decision hinges solely on staying in business.

"That's what companies have to do," Johnston said.

In an e-mail to CBS News, Lucent said eliminating the death benefit was "one of the very difficult decisions" it had to make to ensure the company's survival. Johnston added the cuts are both perfectly legal and humane.

"It is ethical," Johnston said.

"I absolutely feel the company did not live up to its end of the bargain," Norma said. "They're getting the big money. They're making the millions of dollars, whereas they're cutting off the people who work for them all those years."

In the end, Norma and John couldn't face the prospect of ending his life on a deadline. So, she lost the money that would have made her retirement more secure.

"It was a very tough time for me," Norma admits.

The love of her life now gone, Norma believes the company her husband devoted his career to let them both down.