Dear Mr. Looking to Leave AT&T,

Thank you for the question. With the latest monthly segment rates showing a large increase and no indication that rates will drop soon, the lump-sum payment value for AT&T employees who plan on retiring in 2023 are most likely going to drop drastically. This is because when interest rates increase or decrease, the lump-sum value will shift in an inverse direction. The precise pension that AT&T workers receive from the AT&T Pension Plan is established based on the date they were hired, original company, and if they were in management or not. In regards to the estimation process of the core pension benefit, the company takes into account the individual’s length of employment and average wage to compute their monthly annuity. From then on, they have the ability to make a decision either between a joint annuity or a lump-sum. For the lump-sum projection, it would be determined based on one’s age and the contemporary interest rate conditions.

AT&T applies segment rates when enumerating a person’s lump-sum payment amount. There are three various segment rates which are updated every month and reported approximately three weeks into the next month that depend on the number of retirement years. The first segment is utilized for the initial five retirement years; the second segment is for the following 15 years (having the most substantial weighting on computations); and the third segment is for all of the years after the 20th one (an individual’s age will dictate how long this segment will be applied).

AT&T takes the November segment rates and apply them to the anyone retiring the following year. Therefore anyone retiring in 2022 will use the 2021 November segment rates to determine their pension amount. Rates have risen almost 1% since November 2021, meaning if current rates were applied to an AT&T employee’s lump-sum, that lump-sum would drop 10% in value. According to a user on a discussion board on The Layoff about AT&T, they said, “I’m anticipating a lot more departures in 2022 if the rates increase by November 2022.”

Even a modest change in a person’s retirement date can have a considerable effect on their pension because of altering rates every year. Although precise effects on an individual’s lump-sum are established by their age, a 1% change in rates, on average, is equivalent to an 8% to 12% shift in lump-sum amounts.