Longer Life Expectancy Will Translate Into $7.9B Charge To AT&T Inc. (NYSE:T) In Fourth Quarter

The increased life expectancy might not sound so exciting to companies, which are responsible to take care of their employees’ pension needs till the time they live. The recent updating made by the nonprofit Society of Actuaries to its mortality tables has costed $7.9 billion to telecommunications giant, AT&T Inc. (NYSE:T). The Wall Street Journal reported that the company said the costs are partially on account of people living longer than before.

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Updated Mortality Tables

The nonprofit Society of Actuaries estimated that retirees now live two years more than those who retired in 2000. That means AT&T Inc. (NYSE:T) will have to adjust its pension to support its retired employees for extra two years. Mercer LLC released an estimate of $2 trillion pension liabilities as at the end of 2013, and the higher life expectancy will increase the cost by nearly 7% for the companies. Such costs may impact the company’s earnings that are scheduled for release in the forthcoming weeks.

In the recent few years, AT&T Inc.(NYSE:T) along with other companies have switched to mark-to-market pension accounting so as to make reviewing of plan performance convenient. This switch enables the company to include pension gains and losses into their earnings, unlike before, and help smooth out the impact over several years. Though the switch decision adds up volatility to the earnings, but in a long run, it provides an accurate picture of pension plan’s health. Last year, AT&T Inc.(NYSE:T) reported a $7.6 gain as a result of the same switch option.

Copper Assets

Apart from the pension charge, AT&T Inc.(NYSE:T) will also post $2.1 billion noncash charge to its earnings, which will accrue due to abandoning of copper assets in one place. The company figured out that its certain copper assets won’t be utilized in network activity on the back of lower demand for data and voice services and more inclination towards new technology.

About the Author

Michael joined US Markets Daily in 2009 and is a national news reporter focusing on economic issues, data analysis and the financial health of state and local governments.

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