When Southern New England Telephone Co. (now SBC) changed its pension plan ten years ago, it unlawfully cheated workers out of thousands of dollars in retirement benefits, according to allegations in a class action suit filed against the company.

To understand how SNET did it, strap on your accountant caps and concentrate real hard on next few paragraphs.For years, SNET offered its workers a traditional, defined-benefit pension plan. Meaning the company promised workers a specific, monthly benefit check when they retired. SNET calculated each worker’s amount through a formula based on the person’s years of service, along with their highest earned salary. That all changed in 1995. SNET moved to what’s called a “cash balance” plan, according to the lawsuit filed in U.S. District Court in Hartford. A cash balance setup is still a defined-benefit plan, because the employer is still obligated to pay a specific monthly amount [unlike a 401(k), or defined contribution plan, where the employer has no such obligation].Here’s where it gets complicated: Instead of calculating that monthly paycheck based of years of service and highest salary, a cash balance plan sets up a hypothetical “account” for each worker. SNET then pays a percentage of each year’s salary into the account, plus an interest credit. When SNET switched to this approach, it gave workers an opening “balance,” consisting of all the pension money they had earned until the 1995 switch. In theory, a cash balance plan is supposed to be beneficial for workers, because they can withdraw all of their pension money in one lump sum, if they so choose.But here’s how SNET cheated worker plaintiff Barbara Custer, according to allegations in the lawsuit: Even though Custer kept receiving account “statements” showing more money being added to her opening “balance” after 1995, the company actually considered it to be two pots of dough. “Under the SNET Pension Plan’s cash balance terms, Custer and other plan participants can only receive the cash balance benefits that accrue after [1995] if Custer gives up the benefits she accrued prior to [1995],” the lawsuit states (emphasis added).Because the plan specifies an employee’s benefits are the greater of the two pots of money- not the two pots added together- plan participants “cannot take their previously accrued benefits and add the new cash balance benefits to them.“That means Custer has been effectively earning zero pension dollars since 1995, despite receiving statements purportedly showing a growing account “balance,” the lawsuit contends.“The day they adopted cash balance is the day their pension ended,” said Thomas Moukawsher of Hartford-based firm Moukawsher & Walsh, Custer’s attorney. Moukawsher believes “hundreds” of SBC employees could be in the same situation as his client.SBC spokesman Seth Bloom declined comment, citing pending litigation.