A group of U S WEST Communications Inc. retirees is opposing the company's merger with Qwest Communications International Inc., claiming to the Minnesota Public Utilities Commission that the company plans to raid a $3.3 billion pension plan surplus.
The retirees contend Englewood, Colo.-based U S WEST accumulated the surplus in its $12.9 billion defined benefit plan by withholding pension increases and now is planning to dip into that surplus to improve the company's bottom line, said Arnie Albrecht, chair of the regulatory affairs committee of the Association of U S WEST Retirees, the group challenging the merger plans.
U S WEST also has a $5.9 billion defined contribution plan.
The retiree group filed initial comments on Jan. 11 with the Minnesota Public Utilities Commission, which must approve the takeover of Denver-based Qwest.
The association contends when the Minnesota commission approved the utility rates, a portion was earmarked to pay for retirement and post-retirement medical benefits of U S WEST employees, Mr. Albrecht explained.
Now, says the association, that money will not be used for that benefit. Instead, accounting rules allow the company to use pension fund surplus to pay other expenses such as the cost of providing retiree health care, he said. Then, the portion of the money that would have been used to pay for retiree health care, in turn, could be added to the company's coffers.
Only a small amount of money has been transferred from the surplus to pay retiree medical, said Bill Myers, a U S WEST spokesman.
In 1998, $55.8 million of the surplus was used to pay medical benefits, representing 33% of the total cost of retiree medical.
Last year, the company used $111 million of the surplus to pay for retirement health care benefits, about 59% of the total cost of those benefits, Mr. Myers said.
So far, U S WEST has not determined what it will do with the pension plans of the merged companies, he added.
Mr. Myers denied that the company has been avoiding increasing pension benefits in order to accumulate the surplus.
"Pensions have increased more than 18% since 1984," Mr. Myers said.
The retirees claims that increases in pension payments for most retired employees slowed down in the 1990s.
The company's response to the employees' petition is due to the utilities commission later this month. But in a response to the retirees' information request, U S WEST said the pension fund issues are not within the scope of the utilities commission proceedings.
Shareholders approved the merger in November and the Federal Communications Commission is expected to render its decision by the end of the first quarter, Mr. Myers said.
The companies must also obtain approval for the merger from utility commissions in Montana, Utah, Iowa and Arizona, and the retiree group has filed objections with those bodies.
Colorado approved the merger proposal in January, he said.