Chump Changed

The pay was low, but working for Ma Bell meant a worry-free retirement. Now Qwest is sending out the pension checks, and local retirees say they're getting the wrong number.

In September, three months after the merger was approved, Qwest CEO Joe Nacchio finally provided the retirees with some clues to the future of the pension. "Qwest has no plans to terminate the U S West pension plan," Nacchio wrote in a letter to U S West Retiree Association chairman Jim Norby. "Qwest will continue to provide employee and retiree benefits from the plan as permitted by law." Payments would never be decreased, he promised, but "the U S West pension plan does not call for and the company does not plan to provide a cost-of-living adjustment for participants."


A stout man with a gray buzz cut, Joe Pugaczewski probably knows the phone company as well as anyone. In 1951, after graduating from Johnson High School on St. Paul's East Side, he went to work for a subsidiary of AT&T for $1.12 an hour. He installed telephone switchboards for big businesses like Northern States Power, and he repaired switches and circuit boards in "central offices"--little buildings filled with circuitry and cords that are still found scattered around the Twin Cities. During the Korean War he did a stint in the navy repairing airplane cockpits, then went back to work for Northwestern Bell. He remembers hearing the pops and crackles caused by the electrical impulses that carried conversations from rotary-dial phones to switchboards. He probably handled--literally--some of the same calls as retired operator Shirley Zach.

Craig Lassig

And just like Zach, Pugaczewski remembers that people went to work for the phone company for one primary reason: security. "In those days you'd work and pay for exactly what you needed," he says. "There was no big income. We had to work for every little benefit; we had to fight to make sure our benefits and our pension were in place."

Having logged 48 years on the job, Pugaczewski will probably retire on a pension that's more comfortable than Zach's. Nonetheless, he plans to work for as long as he can. If Qwest suddenly decides to treat its pensioners better than its predecessor did, "I'll retire," he jokes. "But if they treat me bad, I'll stick around."

Pugaczewski is already active in the retirees' association. "I can take care of myself, as long as I'm healthy," he explains. "But I've got to remember the people who can't, the people who are living on $500 a month."

Turned away by the court system and state policymakers and left in the cold by the federal law that was supposed to protect their rights, the association earlier this month took one last shot at persuading local officials to remedy their situation. On January 4 Pugaczewski and some 80 other association members crammed into the PUC's hearing room at the Metro Square Building in downtown St. Paul for yet another hearing. Commissioner Garvey wasn't there, a fact that upset the retirees, who had perceived him to be sympathetic during their talks over the years.

The association's attorney, Greg Merz, spoke first. The PUC should reconsider its decision not to put restrictions on what Qwest can do with the pension fund, he argued. "We want to point out that we didn't know the future [when the merger was approved], Merz said. "We know the future now, and the concerns we expressed were dead-on."

Commissioner Greg Scott was unmoved. "What difference does that make to me?" he asked sternly. "Is it illegal, what Qwest is doing?"

How much of a surplus was in the pension fund? the commissioners asked. At the time of the merger, the figure was $5.7 billion, a Qwest attorney replied. At the start of 2001 the number hovered around $4.5 billion. Where had the $1.2 billion gone? the retirees demanded to know. Qwest's response: They'd have to wait for the release of the 2000 annual report in order to find out. (Hallowell says the money was lost in the recent stock-market decline.)

A few minutes later, Joe Pugaczewski lost patience with the process. He strode to a microphone at the front of the room. "After all the mergers and pension transfers we've gone through," he addressed Greg Scott, "I have to ask you, Commissioner: Would you want to be in business with a company like this? Can you see why we are worried?

"Look, you can put fertilizer in the garden and call it scent," Pugaczewski concluded, "but to me it's still manure."

In the end, the commissioners agreed that the retirees had a valid point. But as one of them put it, "What can we do about it now?" The regulators voted 3-1 to leave the merger exactly as it stands.

The only place left to take the fight, Norby says now, is Congress. Of course, he notes, U S West has expended a lot of energy in recent years lobbying that august body to ensure that the climate remains favorable to large employers.

Last year a "senior senator" from the Midwest told Norby exactly how high the stakes were from U S West's perspective. "The halls of Congress were stacked like cordwood with lobbyists prepared to take on anyone who tried to tamper with the current ERISA law," he says the lawmaker told him.

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