231 Pinetuck Lane Winston-Salem, NC 27104 336-765-9765
November 13, 2007
Mr. John Hickey
Human Resources Vice President
600 Mountain Avenue
Murray Hill, NJ 07974-0636
On November 6th, the LRO’s Communications Director sent an email to Mary Lou Ambrus to inquire whether a report was true that there had been a merger of an Alcatel pension plan with the Lucent management pension plan. Mary Lou responded the next day that a “frozen” Alcatel pension plan that covered a cross-section of Alcatel employees in North America had been merged with the Lucent management pension plan (the Lucent Retirement Income Plan or LRIP). Mary Lou noted that the Alcatel plan is about 1 percent of the assets and liabilities of the Lucent plan and the diluting effect on the overall funded status of the combined management plan is about ¼ of 1 percent.
We believe LRIP Plan Participants are owed full disclosure and answers to the following questions:
1. What was the dollar amount of accrued liabilities under the Alcatel plan that were added to the management plan as a result of this merger and were they actuarially calculated as to their impact on the Lucent management pension plan? How and when were the Alcatel liabilities measured, and by whom?
2. What was the dollar amount of Alcatel plan assets transferred to the Lucent management plan? How and when was the value of assets determined and by whom?
3. If transferred assets were insufficient to cover accrued liabilities of the Alcatel plan that were transferred, why were additional assets not provided by the company?
4. It appears to the LRO that Alcatel-Lucent’s action impairs the funding of ERISA-protected benefits in the LRIP plan. Under what section of ERISA does Alcatel-Lucent presume to have the authority to add plan participants from another company (foreign) plan to the U.S.-based plan and isn’t there a requirement to ensure no dilution of funding for Lucent benefits, such as the requirement to accord priority to the participants in the better-funded Lucent plan when allocating assets upon a plan termination? Has the Lucent plan been amended to incorporate the required provision protecting funding of benefits under the better-funded Lucent plan?
5. What are the legal descriptions and PN #’s filed with the DOL and IRS for those plans from which new participants were transferred to PN 501 LRIP? Please provide copies of the latest IRS Form 5500’s filed for these plans. Also, if a Form 5310-A has been or will be filed for this plan merger, please provide a copy of the Form and all of its attachments and schedules.
If the LRO’s math is correct, there may be $16 billion in the Lucent management pension plan and by your notice the funding of accrued LRIP benefits for Lucent retirees has now been impaired by ¼ of 1 percent, or about $40 million, as a result of this plan merger. The LRO does not believe that Alcatel-Lucent can simply make a management decision to short-change the PN 501 LRIP and its participants $40 million with the excuse that the plan is over-funded under some undefined methodology, as of some undefined date. As you know, the new mortality tables that become mandatory for LRIP on January 1, 2008 will result in PPA funding calculations showing that LRIP is under-funded. Any supposition that LRIP is over-funded is a fiction.
The LRO will appreciate your response with more information about Alcatel-Lucent’s merger of the two pension plans so that we can more fully inform Lucent retirees as to what has taken place.
Ken Raschke, LRO President