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Embarq retirees feel pinch, fight back: Health benefits cut provokes lawsuit
(News & Observer, The (Raleigh, NC) (KRT) Via Thomson Dialog NewsEdge) Jan. 1--William Games, a 67-year old retiree in Camden, enters the new year expecting to pay about $2,000 more for health care.
As of today, the company where Games worked for 42 years has stopped providing supplemental Medicare coverage. The company, Embarq, also eliminated a $500 annual cash subsidy that had helped pay for medications.
Now Games and nine other retirees in North Carolina and Florida are suing Embarq to get their health benefits back. The phone company, formerly known as Sprint, eliminated free life insurance for retirees in September and is implementing the other cuts today to save about $30 million a year in operating expenses.
The retirees, who filed a lawsuit Friday seeking class action status on behalf of about 14,000 Embarq retirees in 18 states, say they were misled into believing they had benefits guaranteed for life.
"It sure is a lot of money for all the retirees," said Games, a former lineman and construction foreman. "You were promised all this stuff after 40-some years with the company, and all of a sudden -- bam! -- you don't have it any more."
Embarq is among a growing roster of companies cutting retiree benefits. Large employers with local operations that have made the unpopular cuts include Nortel Networks, Goodyear and Caterpillar.
Company policies usually include small print reserving the right to change benefits, said Raleigh employee benefits lawyer Steven Long.
But Stewart Fisher, a Durham labor lawyer who is representing the Embarq retirees, says the phone workers have a strong case because the company systematically misled its workers into believing the retiree benefits were permanent. As a result, Fisher said, some workers took early retirement to lock in benefits, and many accepted lower salaries in exchange for lifetime benefits.
Claims of deceit
Embarq officials in Wake Forest, the headquarters for North Carolina operations, declined to comment about the allegation that the company deceived its retirees.
The company issued a statement saying that the most recent changes are merely following other cutbacks in retiree benefits over the years.
The retirees' suit was filed in federal court in Kansas, where Embarq is based.
"In 2003 they told us we would be the last ones to receive these benefits," said Sue Barnes, 66, a retired operator in Wilson who started at the company in 1959. "I would not have retired early if they hadn't told us that."
Barnes has signed up for supplemental Medicare insurance at a cost of $235 a month for herself and her husband, a dependent on her retirement plan.
Embarq's retiree ranks include about 3,200 former workers in North Carolina, where the company has a storied past.
The phone company served small towns and rural areas as the Tarboro Telephone Co., later Carolina Telephone & Telegraph and then Sprint. It was renamed Embarq last year when the phone company was spun off from Sprint Nextel. Embarq has 1.2 million landline phone customers, mostly in the eastern half of the state.
The retirees will still have basic Medicare coverage from the federal government. But they will have to pay for supplemental coverage, known as Medigap, and will also pay their own deductibles, co-payments and other services not covered by Medicare.
To see more of The News & Observer, or to subscribe to the newspaper, go to http://www.newsobserver.com.
Copyright (c) 2008, The News & Observer, Raleigh, N.C.
Distributed by McClatchy-Tribune Information Services.
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