US Labor Department Approves Provocative AT&T Deficit Deal

(September 9, 2013) – Telecommunication company AT&T has been given the go-ahead to boost its pension plan’s stock contributions to 18% under a new deal with the US Department of Labor.

The move would see up to $9.5 billion of preferred equity added to the pension plan, taking it close to a fully funded status.

The proposal is now open for public comment. If formally approved, the contribution would be made retroactive to September 1, according to a report on the Wall Street Journal.

Normally, plan sponsors are not allowed to put more than 10% of their stock into a pension plan, but it appears the Department of Labor has agreed to allow this deviation on the grounds that other, so far undisclosed, conditions believed to be in the best interest of plan participants have been put in place.

AT&T’s pension was underfunded by about $13.9 billion at the end of last year.

“This is an important step toward allowing us to move forward with our contribution,” an AT&T spokeswoman told the paper, noting the company’s pension plan covers 600,000 current and former employees.

The deal would allow the firm to keep cash for other purposes, and help lower its tax bill, while giving the pension plan future annual distributions of $560 million.

About 89% of Standard & Poor’s 500 companies that offer pension plans were estimated to have underfunded plans as of July, according to an analysis by International Strategy & Investment Group analyst David Zion.

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