600 Mountain Avenue Murray Hill, NJ 07974
June 30, 2007
Dear Management Retiree*,
In preparation for the benefits open enrollment for 2008, we wanted to communicate with you as early as we could to summarize the key healthcare changes you can expect. We are providing you this information well in advance of your enrollment period in the fall, so that you have ample time to consider the benefit choices available to you and your family.
What's Changing and Why
While we are part of a new, combined global company, we continue to operate in a very competitive environment and must increase our focus on areas of the business that will maximize opportunities for long-term growth. While we will continue to offer subsidized benefits for our retirees, it is still necessary to ask you to absorb more of the rising costs for U.S. retiree medical coverage.
In that context, following are the key benefit changes that will go into effect January 1, 2008:
The company's prescription drug coverage offered to all management retirees is changing to reflect a drug plan design similar to the Medicare Part D program. As a result, your out-of-pocket costs for prescription drugs will most likely be higher in 2008 under this new plan, and will vary depending on the amount and type of prescription medication prescribed by your doctor. If you need prescription drug coverage, you can enroll in the company's medical plan options (Point of Service and Traditional Indemnity). The medical plan options will automatically include this prescription drug coverage, which will provide retirees with a similar level of coverage as Medicare Part D plans offer for those who are Medicare-eligible. We are working to finalize the 2008 plan design and cost, and will provide additional information with the open enrollment material.
If you are Medicare eligible — Please note that in 2008, the Rx Only option will no longer be offered to management retirees age 65 and over. We are eliminating this plan due to very low enrollment, and due to the fact that this coverage is widely available in the market. If you would like to maintain prescription drug coverage through the Alcatel-Lucent plan, you can enroll in the company's Traditional Indemnity medical plan option, which will include the changed prescription drug plan coverage explained above.
Eligibility rule for dependent children—Effective January 1, 2008, coverage for eligible dependent children will terminate at the end of the month in which they reach age 20, unless they are full-time students. Dependent children who are eligible full-time students may continue their coverage until either the earlier of: 1) the end of the month in which they reach age 24,as long as they are full-time students, or 2) the end of the month in which they no longer qualify as full-time students. Eligibility for full-time student coverage will be verified. Please note that this change does not apply to dependent children who qualify as Class II dependents. Class II dependents will continue to be covered under the eligibility rules currently in effect.
Given the changes described in this letter—specifically with regard to the new drug plan design— the amount that the company contributes toward retiree healthcare coverage will be reduced in 2008. However, for most of you who pay monthly contributions, we expect that your contributions will be lower, or only slightly higher, than what you currently pay. We expect to have more information available in the fall, and will provide any updates in your open enrollment material.
In the meantime, we encourage you to explore other benefit options you may have available to you such as coverage through a spouse's employer, commercial coverage or offerings through associations such as AARP. For your reference, general information about Medicare Part D plans is available through the U.S. Department of Health and Human Services Web site at http://www.medicare.gov, or by visiting your local Social Security office.
I hope that we've provided you with a general understanding of the options available to you for next year, and leave you adequate time for planning before these changes become effective. Additional information, including the benefit pricing, will be provided as part of the open enrollment material in the fall.
Vice President, Human Resources – North America