AT&T has taken the rare step of hiring collection agencies to pursue money it says it is owed by its own retired former employees. AT&T claims the retirees mistakenly received excess pension benefit payments, but some say they don’t have the ability to return the funds.
As reported by the Wall Street Journal, pension overpayments, some dating back decades, have been identified by Fidelity, the company’s current pension administrator. Unsurprisingly, many recipients of pension overpayments assume the payments are correct and use the money to pay living and medical expenses, leaving them unable to repay the funds. AT&T says overpayments have impacted “significantly less than 1/10th of 1%” of roughly 517,000 pension participants, and only a small number of those have been referred to collection agencies.
But retirees who have been impacted report significant anxiety. Eileen Ralston, 75, worked for AT&T in two separate roles between 1970 and 1999, and was mistakenly sent excess pension payments because one of her positions was essentially counted twice. She told the Journal she initially thought the higher payments were a mistake, but was reassured by pension administrators that they were correct.
In September of 2017, Ralston found out her suspicions had been correct – she was told she owed the plan $58,500.11 because of the miscalculation. Ralston has not repaid and has not been referred to a collection agency, but worries AT&T will take further action.
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AT&T did not disclose exactly how many of its retirees may be in similar situations, but 17 former AT&T workers have contacted lawyers at the nonprofit Pension Rights Center. Several recipients of excess benefits have cited an inability to pay and asked that the repayment demands be waived, but have been denied, according to the Journal. Some were notified that collection efforts would be put on hold, but that AT&T reserved the right to resume them in the future.
The company’s approach has divided pension experts. The IRS requires that companies make serious efforts to recover excess pension payments, which reduce funds available to other recipients. Failing to recoup overpayments, some pension lawyers told the Journal, could threaten pension programs’ tax benefits, and potentially reduce the fiscal health of AT&T’s pension program – one of a shrinking number of such programs. However, the IRS says missing funds can also be replaced by seeking restitution from plan administrators who caused the errors the first place, or repaying them from company funds. AT&T reported $5.1 billion in net profit in the second quarter of 2018.
A lawyer with the South Central Pension Rights Project told the Journal his service has not previously seen collection agencies involved in such situations, and described AT&T’s tactics as “kind of harsh.” Former Treasury Department officials also said they had not seen collection agencies used in similar cases. AT&T and Fidelity, however, described their tactics as “common and similar to how most other employers handle this issue,” and AT&T emphasized that they often “work with employees to find a solution that takes their individual circumstances into account,” including through installment repayments.
Update 8/5: This article has been updated with additional comment from AT&T.