Qwest to cut retirees' pension death benefits, worth $220 million
By Andy Vuong
December 29, 2009
Qwest is eliminating pension death benefits for thousands of retirees, a move that could cut the Denver-based company's liabilities by about $220 million.
As many as 27,000 retirees are eligible for the death benefit, which pays beneficiaries an amount equivalent to the retiree's last annual salary with the company. Qwest couldn't say how many are actually in line to receive the payout.
Employees who retired prior to 2004 and have "mandatory beneficiaries," such as a surviving spouse or dependent children, qualify for the benefit.
Retirees filed a lawsuit in 2005 to prevent Qwest from dropping the coverage but lost their appeal this past summer.
Qwest began notifying them Monday that the benefit will be eliminated effective March 1.
"This is a
significant takeaway," said Nelson Phelps, 70, an
Qwest has not made a cash contribution to its pension for years and projects it won't need to in 2010. Nonetheless, the company said Monday, removing the death benefit will help "protect the pension fund's ability to meet obligations of current and future retirees."
Spokesman Nick Sweers acknowledged that reducing the company's liabilities by approximately $220 million — the amount Qwest estimates it would have paid to eligible retirees and their beneficiaries — strengthens its financial standing on Wall Street.
"The decision was made . . . to ensure Qwest's continued financial and operational success," Sweers said.
The company operates a nationwide fiber-optic communications network and provides local phone service in 14 states, a business that continues to deteriorate as more customers replace land lines with cellphones or switch to Internet-based phone service.
Still, Qwest has operated profitably since 2006, thanks largely to cost cuts and growth in its high-speed Internet business.
Retirees aren't the only targets of Qwest's cost cuts. Active managers face freezes in pay and pensions next year as part of previously announced measures aimed at saving the company about $100 million.
The elimination of the pension death benefit does not affect separate life-insurance coverage available to all retirees. That coverage, however, was previously worth up to one year's salary until Qwest capped it at $10,000 in 2007 as part of the company's expense reductions.
"It's been the pattern of Qwest since (former chief executive Dick Notebaert) was with Qwest that they are taking away from retirees' promised benefits," said Phelps, executive director of the Association of U S West Retirees.
Qwest acquired U S West in June 2000 and has 50,000 retirees nationwide.
about 6,000 retirees live in
"We are anticipating that we will have some type of legal option," he said.
Andy Vuong: 303-954-1209 or email@example.com