Leadership Change at AT&T Pension

(June 18, 2012) — The leadership of the pension fund of telecommunications giant AT&T has quietly shifted hands, representing a significant change at one of the largest corporate pension plans in the United States.

Sean Foley, the senior vice president of AT&T’s investment management office which handles the company’s pension fund, retired in early to mid February, sources say. Bill Hammond, based in both AT&T’s New Jersey and Dallas offices, has assumed Foley’s responsibilities as vice president—a role equivalent to the chief investment officer function, someone with the company told aiCIO.

Meanwhile, AT&T’s spokesperson Mark Siegel declined to comment, saying “we typically do not comment on personnel changes.”

Hammond, who was next in line by rank under Foley, has been working at AT&T for nearly three decades. He received his MBA in finance from the University of Pennsylvania’s Wharton School, and his undergraduate degree from Princeton University in civil engineering.

The leadership change was not publicized at the time. Until now, it has gone unreported.

According to AT&T’s filings with the Securities and Exchange Commission, as of December 31, 2011, the company’s defined benefit plan held $45.907 billion in assets against $56.110 billion in liabilities, an 81.82% funded status. Although above the mandated corporate funded level of 80%, under which direct cash contributions to the plan would be required, AT&T’s other post-retirement benefits are in significantly worse shape. Faced with obligations of $34.953 billion, AT&T has set aside only $9.89 billion. Calculating the funded status of both pension benefits and post-retirement benefits yields a funded status of 61.27%. Most analysts contend that, outside of the public sector, only the automotive industry has more burdensome pension legacies than the telecommunications industry.

In early 2011, AT&T announced a decision to alter the way it would handle accounting for its pension fund. Overturning the previous practice in which large gains and losses generated by pension assets were spread out over several years, the company opted instead to implement a mark-to-market approach that would have the fund’s fluctuations affect the company’s balance sheet in the year they occur. Although ostensibly driven by a desire for increased transparency, the shift also freed AT&T from its pension fund’s massive 2008 losses that had yet to hit the company’s balance sheet. Low interest rates further increased the attractiveness of the move because higher future rates would shrink pension liabilities and augment performance. With the old losses no longer weighing down AT&T’s balance sheet, the impact of higher interest rates on the company’s earnings would be multiplied.

Written by Paula Vasan and Benjamin Ruffel.