Pension plans at Pacific Telesis Group and SBC Communications Inc. probably will be merged into one fund with almost $20 billion when the two regional Bells operating companies merge, industry experts predict.
But company officials say it's too soon to tell.
A spokesman for Pacific Telesis, San Francisco, said the subject of how to handle the pension funds hasn't been addressed, but will be in the future.
R.W. Wohlert, managing director-finance and assistant treasurer at SBC, San Antonio, Texas, said once SBC has obtained regulatory approval to acquire Pacific Telesis, he expects a joint task force to be formed to work on the pension funds. "But right now I'd have to say it is too early to know."
SBC has defined benefit assets of about $8.2 billion and Pacific Telesis has defined benefit assets of about $11.4 billion.
The two have similar asset mixes. At year-end 1995, SBC had 71% equities, 25% fixed income and 4% real estate equity. PacTel was 68% stocks, 21% fixed income, 3% cash, 5% real estate equity and 3% alternative investments.
The two companies share one asset manager, IDS Advisory Group, for different mandates. IDS is a domestic equity manager for Pacific Telesis and an international equity manager for SBC.
One big difference between the two funds is internal management - PacTel has $1.4 billion of internally managed domestic stock and bond assets, while SBC has nothing managed internally.
PacTel has a staff of 13 overseeing its benefit funds, including seven professionals, led by Richard C. McGahan, executive director-investment management and portfolio manager. SBC has a professional staff of eight, according to an SBC source.
Although some outside observers predict staff cuts could result, Mr. Wohlert isn't so sure.
"I don't think I would view them as overstaffed," he said.
He said PacTel's internal management "could account for the staffing difference."
Regarding which investment policy might prevail, Mr. Wohlert said: "I don't know that we are that much different from them." He said SBC has no bias against internally managed assets, although "we have never felt the need for that."
He said while no plans have been made regarding the disposition of employee benefit funds, "I know Dick McGahan and don't anticipate any problems in working things out."
"We have reviewed some preliminary information about their plan and noticed that the plans are probably very similar, except they have a few more money managers," said Mr. Wohlert.
Representatives of the two companies' consultants - Towers Perrin for SBC and Frank Russell Co. for PacTel - wouldn't comment.
When the $2.4 billion SBC defined contribution plan assets are combined with PacTel's $3.3 billion, total employee benefit assets of the merged company will be more than $25 million.
Participants in the PacTel defined contribution plan will experience an immediate gain of nearly $43 million as a result of the acquisition. Approximately 36% of the Pacific Telesis plan is invested in company stock - 154 million of the total 428 million shares outstanding.
The acquisition calls for an exchange of stock, with current PacTel shareholders receiving 0.733 shares of SBC common stock for each PacTel share held. Shares of SBC closed April 8 at $47.75 per share; Pacific Telesis shares were trading at $32.25.
Still, outsiders believe a merged pension plan is a given.
"It would be hard to imagine that they wouldn't combine the plans. What message would it send if the company had the same name and two different plans?" said Mark Maselli, principal and actuary at Kwasha Lipton, Fort Lee, N.J. "You also have a common employee culture and economic considerations."
"This may be a situation they might use as an opportunity to totally review what they are doing on the defined benefit and the defined contribution side, rather than the more typical situation where one company wins and merges the plans," he added.
Mr. Maselli also said there is reason to expect some reductions in the number of money managers, if only to avoid duplication.
Each has about 30 money managers.
Harold Loeb, consulting actuary at Buck Consultants, Los Angeles, said under circumstances "where the businesses are similar and the plans are similar - both coming from the same organization (AT&T Corp.) - the assets normally will be managed and administered from one office."
Indeed, the expected merger of the pension plans would lend a note of irony to a process started more than a decade ago when the two plans were split from AT&T as a result of court-ordered divestiture. The divestiture created seven regional Bell operating companies, each with its own pension plan. SBC (formerly Southwestern Bell Corp.) and PacTel are two of the baby Bells.
Mr. Loeb said the two companies first will decide on what provisions to include in the new plan, which "usually will be like one of the two companies."
Merging and managing the pension assets "will be easier" after actuarial evaluations, determination of liabilities and plan design issues are completed, he said.
While the corporate headquarters of the new company, to be known as SBC Communications Inc., will be in San Antonio, the company will maintain headquarters of Pacific Bell in San Francisco and Nevada Bell in Reno.
