July 6, 2005


To LRO Members:


Recently a great deal has been written in the press about Defined Benefit Pension Plans and proposed legislation in Congress to better protect retirees’ pensionsSome basic points are presented below with regard to these often-complex issues.


  1. Lucent’s pension plans are Defined Benefit Plans.


  1. Defined Benefit Plans for many companies are, or have been, underfunded for various reasons, including unrealistic accounting rules and unsuccessful investment decisions.  Such results have recently been highlighted by the press as a result of related troubles in the airline industry.


  1. Defined Benefit Plans are backed to some extent by the federal agency known as the Pension Benefit Guaranty Corporation (PBGC).  Many Defined Benefit Plan obligations have been off loaded to the PBGC. Within their industries, competitive pressures may induce other companies to attempt to off load their pension obligations onto the PBGC as well


  1. The PBGC’s long-term liabilities exceed what it is currently able to pay.  Thus, workers and retirees may be at risk of being left with reduced benefits.


  1. The LRO has been unable to verify Lucent’s assertion that the management pension plan is properly funded, despite our best efforts to gain full funding disclosure.  An effort is being made to schedule another meeting with Lucent executives to discuss pension funding, health care, prescription drug benefits and the life insurance trust.


  1. Reform or “modernization” of federal pension laws is now underway in the U.S. House of Representatives with the recent introduction of the Pension Protection Act of 2005 (HR 2830).  Bill Kadereit, the LRO Public Affairs Director who also serves as the Vice President – Legislative Affairs for the National Retire Legislative Network (NRLN), is deeply involved with efforts to strengthen pension protection laws.  He and members of the NRLN lobbying staff recently met in Washington, D.C. with the staff for the House Committee on Education and the Work Force prior to the introduction of HR 2830.  It appears there are some good features in the bill to make pension plans more secure.  Bill is interfacing with the NRLN’s legal advisors who are analyzing the proposed legislation.  They will identify any areas of concern and recommend changes that will strengthen the bill for retirees.  The focus is on more open disclosure of pension plan information; pension funding reforms, and objecting to forms of Cash Balance Plans that disadvantage older workers. 

We recognize these are unsettling times.  I assure you that the LRO Board and other volunteers are doing a great deal of work in an effort to ensure the security of your pension plan and to prevent further erosion of your benefits.  Your support through the messages you send and your dues that provide the financial foundation for LRO efforts, are deeply appreciated.


Jim Breslin, LRO President