By CP Staff
By Olivia LaVecchia
By Chris Parker
By Jesse Marx
By John Baichtal
By Olivia LaVecchia
By Jesse Marx
By Olivia LaVecchia
In the aftermath of mergers, Signorille notes, it's not uncommon for companies to reconfigure their pension plans, trading monthly payments for cash balances, stock options, and 401(k) benefits. She has seen the questions the Qwest retirees pose pop up repeatedly at many older blue-chip companies, such as GTE and Lockheed. "ERISA has not afforded the type of protection that people thought it would afford to individuals," Signorille concludes. Which is especially troubling, because no one else--not the court system, not the local regulators who oversee companies like Qwest--has been willing to interfere with the pensions of private companies: "It becomes an issue of a private employer with a private pension."
Shortly after the U S West-Qwest merger was announced in November 1999, the chairman of the U S West Retiree Association, 72-year-old Jim Norby, wrote a letter to Joe Nacchio, who would be chairman and CEO of Qwest should the merger go through. Leaders of the retirees' association had already been talking to U S West officials about the pension; Norby began inviting Qwest managers to the meetings.
The merger needed to gain approval from Minnesota's Public Utilities Commission, the state agency that oversees telephone, electric, and gas service. The five-member board of gubernatorial appointees has the power to bar a company from operating in Minnesota, to set its rates, and to order certain changes in company policy. The panel had the authority to stop the merger, or--at least by the retirees' lights--to order Qwest to make promises concerning its pension fund. The members of the retirees' association saw the process as an opportunity to push the new conglomerate to accede to some of their demands.
"We were afraid that if the merger were approved, this treatment of the pension would continue," explains Norby. "Our position was that there is an obligation for the company--whatever company--to pay us our pension first, take care of our health benefits, and give us a cost-of-living increase out of our pension fund, and not to use it for anything else."
Weeks before the merger was to be approved in Minnesota, Qwest abruptly cut off all contact with the retirees. Greg Merz, an attorney with the Minneapolis law firm Gray Plant Mooty who represents the association, believes Qwest was focused only on getting permission to take over U S West. "I think they were just interested in looking good for merger approval," Merz charges. "Once it looked like they could make concessions elsewhere to get merger approval, they left us in the cold."
In June the Minnesota Public Utilities Commission held its second series of hearings on the merger. The experience was frustrating for Merz, who had gone into the process with a simple mission. "We wanted to investigate the issue: What would Qwest do with all this pension money?" he says. "True, Qwest hasn't changed anything with the pensions yet. But they have yet to tell us they won't." Commission members brushed the issue aside. They said that although they'd like to see Qwest make some concessions to the retirees, such issues were outside their purview. When the merger was approved on June 6 of last year, all Merz and his clients emerged with was a promise from Qwest to report on its plans every 90 days and not to eliminate or reduce any pension payments until 2004--something that's already guaranteed under ERISA.
"During the commission hearings, this got painted as the retirees just wanting more pension money," says John O'Brien, a St. Paul native who lobbied on behalf of Northwestern Bell and U S West from the late 1970s until 1998 but who now works as a spokesman for the retirees' association.
O'Brien disputes the notion that the state regulators' hands were tied when it came to protecting the retirement plan. "This was a regulated monopoly for years, and [the PUC] controlled what went into the pension funds based on rate increases they approved," he argues. "When there was not an increase, we took pay cuts. When there was, we put even more money into the pension fund. We had to keep employees because we were the only phone company. And now they are saying they don't have jurisdiction over the pension? They have a good history of regulating this company fairly. Their hands are all over this money already."
Ed Garvey has been a member of the commission since 1997. He remembers hearing Merz out at the hearings. "In the context of those meetings, they sought commission input about fears about the use of the pension," Garvey recalls. "We felt this was not really the jurisdiction of the commission. We didn't want to get involved, because of ERISA."
Garvey, who once headed the commission, says the debate about the pension fund was irreparably complicated by the AT&T breakup and the mergers and spin-offs thereof. "There were promises on that pension that U S West ultimately didn't want to keep," he says. "The question is now, six months after the Qwest merger: What's the fate of the pension right now?"
The pension is intact and being administered fairly and legally, replies Qwest spokesman Bryce Hallowell. "Our general feeling is that the PUC heard all of the facts and approved the merger," says Hallowell. "People have looked at this numerous times and found no problem. We have an ample body of law that we have to comply with, and that does not leave anybody out in the cold. Qwest is living up to every aspect of the pension agreement, and that means the spirit of the law as well as the letter. To suggest otherwise is irresponsible."