AT&T Takes a $2.7B Pension Charge

NEW YORK, ( TheStreet) -- AT&T ( T) has groomed its books a bit ahead of the company's earnings announcement later this month.

Ma Bell says in the interest of transparency it will now book the adjusted value or charges associated with its pension fund in the fourth quarter of each year, rather than spreading the non-cash gains and losses over multiple years.
AT&T

The move signals a $17 billion decline in retained earnings from pension fund investments in 2009, according to the company's federal filing Thursday. AT&T says it will book a $2.7 billion or 28 cent a share charge in its fourth-quarter earnings, which it expects to report Jan. 25.

"The cumulative effect of the change on retained earnings as of January 1, 2010 (the most recent year for which gains and losses are available) was a decrease of approximately $17.0 billion," AT&T said in its filing.

AT&T says the charge is related to a drop in the benefit plan discount rate to 5.8% from 6.5%. This decline was partially offset by the pension fund's strong investment performance and slightly lower-than-expected health care costs.

Wall Street tends to ignore these non-cash adjustments, which are excluded from the company's pro forma earnings. The charge, however, does put a focus on the heavy costs associated with Ma Bell's retiree obligation.

Both AT&T and its telco peer Verizon ( VZ) have an enormous number of former employees whose retirement benefits are paid from the companies' pension funds. The value of the funds, which are invested in stocks and bonds and other securities, tend to fluctuate with the market.

AT&T shares were down 8 cents to $27.96 Thursday.

--Written by Scott Moritz in New York.

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