AT&T Pension Lump Sum Calculator

AT&T Pension: What You Need to Know

Plan status: Still accruing for some employees

AT&T's pension programs for U.S. management employees are closed to new entrants. They still cover people generally hired before January 1, 2015, under either a cash balance formula (pay credits plus interest credits) or a traditional formula based on a stated percentage of adjusted career income. Nonmanagement employees in the Communications business earn pensions under a flat dollar amount per year of service by job classification or a cash balance formula with negotiated pension band credits. AT&T's 10-K says most employees can choose a lump sum or an annuity.

Buyouts and annuity transfers

On April 26, 2023 AT&T agreed to buy group annuity contracts from Athene for the AT&T Pension Benefit Plan, transferring $8.067 billion of obligations. The deal closed May 3, 2023 and covers about 96,000 participants and beneficiaries. Athene took over their payments starting with the August 2023 pension payment, and the amounts didn't change.

Understanding your lump sum offer

A plan doesn't have to offer a lump sum. If it does, IRC 417(e) sets the least it can pay: the present value of your annuity using the IRS segment rates and mortality table. A cash balance plan usually quotes your account balance instead.

Comparing an offer to the 417(e) number tells you whether the plan is paying at least the legal minimum. It doesn't tell you whether the lump sum is a good deal for you. That depends on your health, your other income, your spouse, and what you'd do with the money. If an offer comes in well below this calculator, ask the plan which month of rates and which start age it used.

The November 2025 segment rates are 4.07% for payments under 5 years away, 5.15% for 5 to 20 years, and 6.01% beyond 20. Many calendar-year plans use them for 2026. Your election packet lists the rates your plan actually used.

Tax considerations

The lump sum is taxable in the year you receive it unless you roll it directly to a traditional IRA or your new employer's 401(k). A direct rollover (plan to IRA) is not a taxable event. Taking the cash is. If you take cash, the plan is required to withhold 20% for federal taxes, and you'll owe the remaining taxes when you file.

A $400,000 lump sum taken as cash has $80,000 withheld, but the whole $400,000 is ordinary income that year. The withholding may not cover the bill. A direct rollover defers the tax until you take money out.

When the lump sum makes sense

For AT&T retirees specifically, the lump sum can make sense when: you have serious health concerns and don't expect to reach the break-even age, you have other guaranteed income sources (Social Security, spouse's pension) that cover your baseline expenses, or you're comfortable managing a large portfolio for the rest of your life.

The annuity is typically the right answer for people who don't have other guaranteed income, whose spouse is younger and may outlive them significantly, or who simply don't want to manage a large portfolio in retirement. The guaranteed payment doesn't fluctuate with markets. It shows up every month regardless of what the S&P did.

Sources

• AT&T 8-K, May 3, 2023 (Athene transfer)
• AT&T FY2025 10-K (plan formulas, $8,067 million transfer)