CUTS IN HEALTHCARE BENEFITS SPUR SBC RETIREES TO ACTION

Industrywide, ex-employees point fingers at unions, executive pay

Retired non-union SBC workers are angry over new medical benefits enrollment forms sent to them earlier this month that reveal steep increases in their health insurance premiums for 2004. They join a growing list of resentful retirees across the telecom industry and the nation whose benefits are vanishing amid sinking corporate profits and skyrocketing healthcare costs. However, some of those former SBC employees are starting to mobilize.

SBC started requiring managers to shoulder part of their healthcare cost in 1999. In 2002, it asked retirees to do the same (unless they retired before 1992) and asked them each to pay a greater share in subsequent years. Former manager Steve Misner saw his required contributions rise as he retired in 2002. Next year his monthly premiums (for a family of three or more) will rise 77% from $216 to $382.

“I'll have to go back to work in 2004 just to pay my stinking contributions to my family's medical benefits,” Misner wrote in a bitter e-mail to SBC CEO Ed Whitacre this month.

A 21-year veteran of the firm, Misner is trying to organize current and former managers and urge them to use their power as shareholders to push for reform at the company's next annual meeting. More than 82,000 SBC managers and retirees pay premiums toward their company health benefits, an SBC spokesman said. But the number of shares (and votes) they own is unknown.

SBC claims it simply can't afford to continue its old benefits policy. “Last year, SBC's cost for medical benefits was $2.2 billion for employees, retirees and dependents,” the spokesman said. “That's $6400 for every participant. It's staggering.” And the 32% that retirees will contribute next year is still well below the national average of 40%, he added.

Other companies have slashed retiree benefits recently. In October, Lucent Technologies dispatched former CEO Henry Schacht to assuage thousands of ex-employees outraged over the company's decision to cut their health benefits by $85 million next year. Lucent pays $850 million in retiree healthcare a year, Schacht said, about 10% of the company's annual revenue.

“This is a national issue,” the SBC spokesman said. “What's happening here is happening everywhere.”

Still, many angry retirees are directing their ire at what they believe are bloated executive salaries, which they claim is evidence that companies can afford to chip in more for rising healthcare. Whitacre, whose 2002 salary and bonus package totalled $6.1 million, has been a ripe target for ex-SBC employees.

“[Whitacre] sits up there in his ivory tower and acts like he's a god, but he's not,” Misner said.

Misner also resents the fact that SBC's many union employees (like those of most major U.S. carriers) pay no premiums for their health insurance. However, because union benefits are set through negotiation, he has little recourse. There's no telling whether rising healthcare costs will put sufficient pressure on the Communications Workers of America to start chipping in when its four-year contract with SBC expires next spring. Earlier this year, those costs were a major issue in CWA's negotiations with Verizon.

And if history provides any guidance, Misner's posse will face an uphill battle trying to funnel executive pay to retirees using proxy shareholder votes. At SBC's 2003 meeting in April, shareholders failed to pass a proposal that would have eliminated executive bonuses on the grounds that they “spawn greed.” Nevertheless, Misner is prepared to fight.

“This can't go on,” he said. “It's criminal.”