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BERKELEY HEIGHTS, N.J.-AT&T Corp. will provide up to a year of health care coverage as part of a severance package for about 30,000 managerial employees to be laid off.
In addition, it will offer managers nearing pension eligibility a special, expanded grace period to earn credit toward retirement benefits.
In most respects, though, the plan differs little from a buyout offer made by Berkeley Heights, N.J.-based AT&T in November.
AT&T last week unveiled its plans to cut about 40,000 management and unionized workers, three-quarters of them through layoffs. The reduction also includes 4,500 jobs eliminated by sell-offs of AT&T businesses and 6,500 employees who accepted "buyout" offers from the company last fall. Most of those who accepted the buyout will leave by Jan. 13, though some will stay as late as December if needed by the company.
Most laid-off workers are expected to leave the company by March 31, though others will be let go throughout the rest of this year and 1997, according to George Fromme, AT&T's director of benefit planning.
Those who accepted the buyout offer will receive eight extra weeks of salary upon leaving, whereas those laid off this year will not. That is virtually the only difference in severance packages between the two groups. All managers who are leaving will receive the following basic severance benefits:
Up to 30 weeks of severance pay, based on number of years of employment.
Up to five weeks of supplemental severance pay, based on age and years of service.
A bonus of up to $10,000 for education, relocation, retraining or starting a business.
Severance and benefit packages for about 16,000 unionized workers slated for dismissal have not yet been announced.
In addition to the salary and cash benefits, AT&T also will pay COBRA health insurance premiums for workers and their dependents. The company will pay premiums for one year in the case of employees with at least five years of service, or six months for those with one to five years of service.
Afterwards, workers and dependents would be responsible for premiums for the remaining COBRA period, which would typically total 18 months.
AT&T also will permit laid off workers who are two years away from fulfilling pension requirements to apply for a pension after waiting out a two-year transition period.
AT&T managers are eligible for a pension benefit under the company's defined benefit plan based on various combinations of age and years of service. For example, a 55-year-old worker with 20 years of service is eligible, as is a 65-year-old worker with 10 years of service.
Under the terms of the layoff, employees within two years of combined age and service requirements when they are laid off can apply for a "transition to retirement" period of up to two years. During this period, many company benefits can be maintained.
At the end of the interim period, pension payments will start, though they will be based on length of service at the time of the layoff.
During the transition period, the company will begin contributing toward retiree health care coverage. It also will pay for standard dental insurance, life and accident insurance equal to annual salary at the time of the layoff and an automatic survivor annuity. Employees in transition also may elect to pay for dependent life and accident coverages and long-term care insurance.
Employees eligible for the transition period also can obtain such services as child/elder care resource and referral, adoption resource and referral and adult disability services.
AT&T already had an existing retirement "bridge" for employees laid off within one year of their pension eligibility. The new program is an expansion of that, and is likely to open up pension benefits to another 5% of workers who face layoffs, said AT&T's Mr. Fromme.
The severance benefits are generous in some ways, said Don Gasparro, a managing director of The Apex Management Group, a Princeton, N.J.-based health care actuarial consulting group, especially the grant of up to $10,000 for expenses such as education. "It's an interesting benefit," he said. "It kind of gives a lot of flexibility to different age groups. The older group can evaluate the opportunity of going into business on their own, and the younger group can look at college courses. So it's a nice incentive."
The cash benefits, however, do not appear especially impressive compared to those given out by some other large companies in recent layoffs, he said.
"It's not as rich, especially for those who have been there a long time," he said. "I've seen companies that gave out one or two years' pay to long-term employees."
And even though the two-year retirement transition does offer more veteran workers a way to preserve their pensions, the package itself does not offer many benefit enhancements compared with AT&T's standard retirement benefits, one benefit consultant said.
Nonetheless, Stephen Parahus, a consultant for Fort Lee, N.J.-based Kwasha Lipton L.L.C., said AT&T's severance package seems fairly generous and that the paid COBRA health benefit will be especially valuable. Many employees could not use AT&T's cash benefit to start a new business, for example, if they had to worry about maintaining COBRA payments in the first year after a layoff.