Lucent Retirees File Lawsuit

By Paul Monies, The Daily Oklahoman

Oct. 27–Three members of a Lucent Technologies Inc. retiree organization have filed a lawsuit against the telecom-gear maker, claiming the company failed to properly fund health care benefits for retired management employees.

The lawsuit is the latest in what promises to be a long fight between corporations and their former employees, many of whom worked for years with the expectation that they would be cared for during retirement.

Lucent has several thousand retirees in the Oklahoma City area, although none are named as plaintiffs in the lawsuit, which is seeking class-action status. It was filed this week in a New Jersey federal court by members of the Lucent Retirees Organization.

The civil suit alleges Lucent violated federal tax law when it failed to fully fund health care benefits for management retirees and their dependents. In 1999, Lucent used excess cash from a retirement-plan trust to fund another trust that covered retiree health care. The lawsuit alleges Lucent broke the law when it lowered or eliminated benefits during a five-year “maintenance period” when it was supposed to keep benefits at previous levels.

“When it announced these cutbacks and terminations of the retiree medical benefits, Lucent publicly admitted that these actions enabled it to evade benefit obligations in the hundreds of millions of dollars,” the lawsuit stated. “As a result … the costs of coverage have improperly been shifted from Lucent to the retirees and their spouses.”

Lucent spokeswoman Mary Ward said the company doesn’t comment on litigation. But Lucent believes it remains in compliance with the tax law in question in the lawsuit, she said.

The lawsuit covers only retired management-level employees. Lucent and its unions reached a deal last year on benefits for retired hourly employees.

Last month, Lucent sent out $14 million in refund checks to 23,000 management retirees because their health care insurance costs were lower than expected for 2005. Lucent covers about 125,000 retirees and 75,000 of their dependents.

The tension between corporations and their retirees over pension and health care benefits isn’t unique to the once high-flying telecom sector. Airlines, automakers and other industrial companies are all grappling with how to keep promises to retirees as globalization and rising health care costs change they way they do business, said John Palter, an employment and commercial litigation attorney with the Davis Munck law firm in Dallas.

“There is a real tension between the promises that may have been made by the company 10, 20 or 30 years ago based upon projected revenues and the reality of what the economics are today,” Palter said. “From the employee’s perspective, it would appear to be a great injustice to work for a company based upon the representations that there is a pension plan and medical plan that will take care of you in your old age.”

But he said employers can argue that they didn’t anticipate today’s changes when they first offered the benefits.

“I think you can anticipate greater vigilance by retirees’ groups to ensure employers do not unilaterally change retiree benefits without their consent,” Palter said. “This is a problem the graying of America will face with greater frequency. It focuses in on the promises made to these employees under their pension plan, as well as the employer’s ability to continue to be competitive in the world economy.”

Lucent has almost 5,000 former employees in the area who worked at the sprawling factory in western Oklahoma City under Lucent or its forerunners Western Electric and AT&T Corp. Canadian telecom-gear maker Celestica Inc., which took over operations in 2001, closed the plant in 2003 with the loss of 450 jobs.

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