Qwest Blackout Questioned
Although Qwest’s share price drop was a comparatively small 7%, participant transaction blackouts in 401(k) plans have been coming under increasing scrutiny in the months since the Enron collapse, where a similar transaction blackout was a major issue.
Qwest officials told the Journal that employees were warned about the blackout in June – months before Enron suffered its financial collapse late in the year.
From December 21 through January 21, about 8,000 of Qwest’s 63,000 employees were affected by the lockdown, which the company says it couldn’t avoid imposing since it was switching recordkeepers. The group was merging 401(k) plans covering US West employees with its own retirement programs. Qwest bought regional Bell US West in 1999.
During the blackout, Qwest was downsizing jobs as credit-review agencies were studying whether to downgrade the company’s debt.
The company has also admitted being the target of a Securities and Exchange Commission inquiry about how it recorded revenue for 2000 and 2001.
In a letter sent February 21 to the Communications Workers of America, Qwest’s vice president of compensation and benefits acknowledges that the blackout came at a bad time but said the company had no choice.
“Unfortunately, in light of ongoing headcount reductions, there was no ‘good time’ for this transfer of services to occur,” the letter states.
About 31% of Qwest’s 401(k) plan’s assets were in company stock, the paper reported, citing company sources. The Qwest 401(k) plan is now managed by MetLife.
Read more about the Enron debacle and the ongoing regulatory and legislative reform efforts for corporate pensions and benefits at our exclusive Company Stock Index page.
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