AT&T; to Take $7-Billion Charge to Cover Retiree Health Costs

American Telephone & Telegraph Co. said it will take a first-quarter charge of $7 billion, or about $5.20 a share, to account for current and future retiree health care and other benefits.

The one-time charge is about $500 million less than AT&T;’s highest estimate. It stems from the company’s adoption of new accounting standards for health benefits.

In the first quarter of 1992, AT&T; reported net income of $883 million, or 67 cents a share.

Separately, AT&T; said that 1993 net income may increase as much as $500 million because it adopted another new accounting procedure, covering income tax payments.

AT&T; said the effect of the health care charge on its future performance will be negligible. With a payroll of 312,700 and more than 141,000 retirees, AT&T; previously estimated that medical benefit charges would range between $5.5 billion and $7.5 billion.

With the help of its in-house Actuarial Sciences Associates consulting division, the company was able to set the total charge at $7 billion, AT&T; spokesman Dick Gray said. The figure reflects its estimates of future levels of inflation and health care costs, Gray said.

In late 1991, AT&T; started setting aside funds for medical costs. So far, $773 million has been placed in the funds. By 1995, contribution caps will take effect that limit annual premium payments to a range between $850 and $5,650, depending upon a retired employee’s status.

Last year, AT&T; renegotiated its medical contribution practices in collective bargaining with its two major employee unions, the Communications Workers of America and the International Brotherhood of Electrical Workers.