- The Washington Times - Tuesday, September 21, 2004

TRENTON, N.J. (AP) — For the second time in a year, telecommunications equipment maker Lucent Technologies Inc. is reducing benefits promised to thousands of its retirees.

The Murray Hill company, which reported billions of dollars in losses during the telecommunications industry slump, notified employees by letter it will no longer provide free health insurance for dependents of management workers who retired on or after March 1, 1990, at a salary of $65,000 or more. Instead, those dependents will have to pay their own premiums.

Last September, Lucent announced identical cuts for managers who had retired during the same period but had a base salary of at least $87,000. That change took effect on Jan. 1.

The latest cut affects the dependents of 5,400 management retirees, a total of 7,400 dependents — spouses, disabled children and children age 23 or younger living at home. It takes effect Jan. 1, 2005.

The prior cutback affected about 9,000 dependents of 7,300 retirees.

“We’re astounded that the Lucent executives would continue to take benefits away from dependents of retirees, since many retired based on Lucent’s promise to provide health care benefits for them and their dependents,” Ed Beltram, spokesman for the Lucent Retirees Organization, said yesterday.

Lucent spokesman Bill Price said the company had no choice.

“We have to ask for some cost sharing, as we did last year, with our retirees in order to remain competitive,” he said, noting dependents could stay in the retirees’ health plan by paying their own premiums. The premiums range from $220 per month to $386 per month, which Mr. Price said was about half the cost of comparable coverage elsewhere.

Management retirees’ costs for dental coverage also are being increased, with premiums rising roughly one-third to $32 per month for single people and $85 a month for family coverage.

The new changes should save Lucent about $16 million annually, Mr. Price said. The prior cuts are saving about $75 million a year.

About 40 percent of Lucent’s roughly 50,000 management retirees — those who retired before March 1, 1990 — do not pay premiums toward their health insurance. The rest pay on average $90 per month, if single, and $226 per month if they have dependents, according to Mr. Price.

Two weeks ago, Lucent said it also would try to reduce future health care costs for its retired union workers when it begins negotiating a new contract with their unions. Bargaining is set to start in early October.

Ken Raschke, president of the Lucent Retirees Organization, said it was hard to justify the cuts when Lucent’s chief executive officer, Patricia Russo, received a total of $44 million in compensation in 2002 and 2003.

Mr. Price said the compensation figure is deceptive because it is based on how Miss Russo’s stock options are valued. He said Miss Russo’s compensation for her first two years at the helm actually was $35.6 million and includes $18.2 million in hiring incentives to make up for money she lost by leaving Eastman Kodak to join Lucent. Also, he said, her stock options are worthless because the stock is trading for a lower price.

On the New York Stock Exchange, Lucent shares rose 7 cents to close yesterday at $3.36.

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