Qwest to save about $220 million by cutting retiree death benefits

DENVER — 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 in line to receive the payout.

Employees who retired before 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 on appeal last summer. Qwest began notifying retirees Monday that the benefit will be eliminated effective March 1.

"This is a significant take-away," said Nelson Phelps, 70, an Aurora, Colo., resident who retired in 1990. "If I died today, my wife would receive $117,000. If I die March 2, she would receive nothing from that."

Qwest has not made a cash contribution to its pension plan for years and projects it won't need to in 2010. Nonetheless, it said Monday that 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.

Qwest operates a nationwide fiber-optic communications network and provides local phone service in Washington and 13 other states, a business that is deteriorating as customers replace landlines with cellphones or 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 pay and pension freezes next year as part of previously announced measures aimed at saving the company about $100 million.