Qwest Cutting Retiree Death Benefits

December 29, 2009 (PLANSPONSOR.com) - Qwest is eliminating pension death benefits for thousands of retirees.

The Denver-based communications company estimates the move will cut its liabilities by $220 million, the Denver Post reports. Although Qwest has not made a cash contribution to its pension plan for years and projects it won’t need to in 2010, it said Monday that removing the death benefit will help “protect the pension fund’s ability to meet obligations of current and future retirees,” according to the newspaper.

As many as 27,000 retirees – those who retired before 2004 and have “mandatory beneficiaries,” such as a surviving spouse or dependent children – are eligible for the death benefit, which pays beneficiaries an amount equivalent to the retiree’s last annual salary with the company. The benefit will be eliminated effective March 1.

Retirees filed a lawsuit in 2005 to prevent Qwest from dropping the coverage but lost on appeal in July (see Elimination of Pensioner Death Benefit Did not Violate ERISA).

Last month, the company announced it is freezing as of December 31, 2009, the pensions of active management employees in the Qwest Pension Plan and Qwest Nonqualified Pension Plan (see Qwest Freezes Pension Accruals).