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Qwest to cut retirees' pension death benefits, worth
$220 million
By Andy Vuong
December 29, 2009
Nelson Phelps
of
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. Phelps said
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
avuong@denverpost.com
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