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September 29, 2022

AT&T Pension Drop Memo

To: Select management and bargained employees who have an interest-sensitive pension program

Every year, we are required to update pension interest rates based on interest rates set by the IRS, which has an impact on your pension payment. This year’s circumstances are different than the past several years. We’re experiencing rising interest rates, economic uncertainty and outstanding questions about inflation, and other indications that more change is ahead, all of which affect our business and could impact our workforce. In particular, rising interest rates could lower your pension payment calculations.

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We remind you to refresh pension payment estimates every fall because we want to make sure you’re aware of the impact interest rates can have – but it is especially important this year depending on when and how you start your pension payment. Rising interest rates may have a larger impact on your pension payment calculations than in past years.

We know the 2022 pension interest rates, but nobody yet knows the 2023 rates. They won’t be known until late 2022 (often in late December) but signs point to 2023 rates being higher than 2022 rates. One indication of how interest rates could rise is the 10-year high quality corporate bond rate, which is up over 70% from November 2021 to August 2022.

Using August 2022 interest rates and depending on your plan, if rates stay the same and you take your payment in 2023, your lump sum option could decrease more than 15% – and in some cases more than 30%. We want you to be aware of these dynamics because if you’re considering leaving the company in the near future and beginning your pension payment, you might need to make a decision – or start your pension payment – before next year’s interest rate information is available to compare to 2022 rates. We want to make sure you are informed, allow time for evaluation and make a choice that is best for you.

There are resources which may help you better understand these circumstances and make an informed decision regarding when to start your pension payment:

  1. Refresh your pension payment estimates using the Fidelity NetBenefits estimate tool. This tool allows you to run multiple scenarios where you can change your pension start dates and assumed interest rates and see how it changes your payment. If you haven’t used this tool before, you can review this modeling guide for assistance with estimating your payment and for more information on the interest rates that apply to your particular pension program.

  2. Engage an expert – like Fidelity or your personal financial or tax advisor – to review your available payment options at different start dates. Fidelity Service Center representatives are available at 800-416-2363, Monday to Friday from 8:30 a.m. to midnight ET.

  3. Review your pension summary plan description (SPD), which is located at the Fidelity NetBenefits site for general pension information.

There are many factors that affect your decision about when and how to start your pension payment, including reasons well beyond the impact of interest rates. But since this is time-sensitive information, we do want to ensure you’re aware of resources available to help you plan accordingly.