Seventy-three-year-old Ken Raschke spent 36 years in the management ranks at Western Electric and AT&T Network Systems, a time he refers to as a "golden age" when loyal, hard-working employees could expect good wages, years of service, a defined pension and ample retirement benefits.

Things are different today, and Raschke, who retired in 1989, knows it. Not only do workers face the threat of layoffs, frequent career changes and the need to fund their own retirements, but retirees are seeing their benefits cut as the corporations they used to work for restructure amid a weak economy.

Raschke is president of the newly formed Lucent Retirees Organization (LRO), which came together early this year after Lucent Technologies-which took over the retirement plans for AT&T Network Systems employees-sent retirees a letter saying it would eliminate the death benefit for those who died after Feb. 1, 2003. In 1998 Lucent eliminated the benefit for current employees. Now it was going after those already separated from the company.

Part of the plan

The death benefit provided a portion of the pension for a widow or widower after a spouse's death. According to Raschke, the benefit was part of many employees' financial plans for retirement, and many opted to take a 10 percent reduction in their pensions so that their spouses could collect 50 percent of their pension checks after they died. The largess of the plan meant many employees opted not to purchase additional life insurance, he said.

Lucent Technologies corporate spokesman Bill Price explained that Lucent had to eliminate the death benefit to stay competitive amid sluggish business conditions. He added that the corporation still offers retirees group life insurance, a health care plan, defined-benefit pensions and a 401(k) plan. Even though costs like health care co-pays have increased depending on which plan the individual selects, Price noted that "Lucent still pays more than half of health care costs for employees and retirees."

Currently, 127,000 retirees collect pension and health care benefits from Lucent. The company has 38,500 active employees on its payroll worldwide.

Raschke, who last managed an AT&T telecommunications equipment plant in Winston-Salem, N.C., says he himself won't feel the loss of the death benefit because he has his own savings, but he knows there are "lots of innocent people being hurt" by its elimination. Many of them receive less than $1,000 per month from social security and other sources, he said. "There are people who depend on this [death] benefit," said Raschke, describing one 75-year-old retiree whose spouse is dying of cancer and who has no additional insurance. Those "who have less will get less" once this plan is eliminated, he said.

Unfortunately, Lucent retirees aren't the only ones whose benefits are at risk in this economy. The LRO has aligned itself with other retiree groups pushing for larger reforms, notably the National Retirees Legislative Network (NRLN), which represents 2 million retirees across the United States working to safeguard pension and benefits rights. NRLN includes among its members retirees of the Bell System companies, IBM Corp. and a number of other major companies.

"Defined-benefit plans are going away, and it's a societal problem that's a sign we're headed for trouble as a country," said Raschke. He pointed out that as executive compensation packages balloon and retirement benefits to rank-and-file workers decrease, the United States will soon become a society of only "the very rich and the very poor."

To help fight cuts in retiree health care coverage, the LRO and NRLN are asking members to write to their representatives in Congress in support of H.R. 1322, the Emergency Retiree Health Benefits Protection Act. Introduced by Rep. John F. Tierney (D-Mass.), it would prohibit postretirement cutbacks in promised health benefits.

Meanwhile, the Bush Administration is pushing for IRS regulations that would allow companies to convert defined pension plans to cash balance plans, an option that critics say would be bad news for retirees. Reps. Bernie Sanders, an independent from Vermont, and George Miller (D-Calif.) have introduced the Pension Benefits Protection Act to prevent that conversion. A version has also been introduced in the Senate. Other measures favored by the administration, such as privatizing Social Security, would basically tell retirees "you're on your own."

Grass-roots groups like LRO and NRLN are a trend as an increasingly aging U.S. population comes face to face with this harsh reality. Retirement benefits that were once considered standard are rapidly disappearing, and younger workers may never see them. Today, many employers have shifted the burden of retirement savings to employees, sponsoring 401(k) and other plans that contain few, if any, protections for workers and spouses.

John Hotz, deputy director of the Pension Rights Center in Washington, a national consumer organization that focuses on pension rights for workers, retirees and their survivors, said that plans like 401(k) are fine, "but they should be part of a three-legged stool for retirement funding that includes a defined pension and Social Security."

'Injustices exist'

In recent years, he said, society's mind-set has shifted from retirement security to wealth accumulation. However, recent events such as the volatility of the stock market and the collapse of Enron and other giants, as well as the huge compensation packages that executives earn even if they leave a corporation in ruins, "have caused the populace to take another look at this issue and see the injustices that exist," Hotz said.

Hotz believes corporations have put too much emphasis on the "economics of the moment" in their decisions to trim defined pension plans and health benefits. "Even when times were good, companies were working hard to get out of the retirement game," he said.

Raschke and other retirees' anger over the planned cut in death benefits motivated them to form the Lucent Retirees Organization in February. The first order of business for the group, which claims 3,700 members, was scheduling a meeting with Lucent executives over the proposed cuts.

Executive bonuses

Representing the group at an April 14 meeting at Lucent headquarters in Murray Hill, N.J., were Eli Shaff, vice president; Jim Goodman, secretary; member Herb Zydney; and Raschke. Lucent's chairman and chief executive officer, Patricia Russo, was joined at the meeting by Henry Schacht, former chairman and CEO and a current Lucent board member, along with executives from Lucent's human resources, legal and public relations staffs.

The LRO members presented questions about the company's administration of pensions and benefits, the governance of the pension trust funds and various aspects of the business, Raschke said. They also questioned Lucent's practice of providing bonuses and retention payments to its executives while retirees "are suffering the erosion of their benefits and incurring increased costs to keep the level of benefits they still have," Raschke wrote in an online letter to members (at www.lucentretirees.org).

The LRO representatives requested that the group be allowed to appoint one or more members to the Lucent Pension and Benefit Task Force to have input on future decisions affecting retirees. According to Raschke, they left the meeting appreciative for the executives' time, but "disappointed by the lack of any assurance that Lucent would do anything more than laws require to protect our pensions and benefits." The group has hired lawyers to investigate whether Lucent has the legal right to cut the death benefit, as the company claims it does.

Hotz at Pension Rights said that a death benefit is, like health care, considered a welfare benefit that is unfunded, uninsured and not vested. Such benefits cannot hold up unless there is rock-solid language saying the employer will pay this benefit for life. Without such language, companies can amend, modify or terminate these benefits, he said.

Price, the Lucent spokesman, said that while the company is busy trying to maintain its costs in a difficult market, "we are trying to understand their [retirees'] concerns." The company is still in the midst of a restructuring that began in 2001 and said it intends to reduce its work force to 35,000 by the end of September.

In addition, Lucent's defined pension fund is underfunded as a result of the stock market implosion and lower interest rates. According to SEC documents, the plan was underfunded by $7.4 billion at the end of September. Financial analysts have said the company could trim retiree benefits to reduce the burden.

Retirees like Raschke don't want their hard-earned benefits and pensions to suffer and are willing to fight for their rights. "We want to be their [the company's] best friends, but in some cases we may be their worst enemies," Raschke said he told the Lucent executives. Yet, despite the changes in employer-employee loyalties over the years, Raschke said he and other retirees still feel loyalty to the corporation. "That emotion is not unusual among us old guys," he said.

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