Mr. Parker, 

 

I am a Sprint/Embarq retiree who retired in 1999.  I was employed at the Apopka General Office in Florida at time of retirement.  I just received the annual SAR for the year ending Dec 31, 2006.

 

I have some questions>

a)  To your knowledge, has any retiree (other than officers with special packages), ever received a cost of living increase in their pensions?   Yes.  (Note:  No current or former EMBARQ officer has any special retirement package that provides a cost of living adjustment in their pension benefit!)  If not why?  I am familiar with some retirees who retired 15 or 20 so years ago and are still receiving the same pension with no increase.  That pension is now worth less than 50% of what it was when they retired.

 

b) I see from the report that Embarq contributed $75,000,000 to the fund.  It is or has been my understanding that the company(formerly Sprint) hasn't had to contribute to the fund for many years.   Not true! From July 2003 to 2005, Sprint contributed $1 Billion to the pension plan.  The interest income is greater than the pay out.  Am I right or wrong on this?   From May 17, 2006 (when the Embarq Retirement Pension Plan was established) to Dec. 31, 2006, the earnings from investments ($177.7 million) did exceed the benefits paid ($105.2 million).  The investment managers should be complimented!

 

c) Is there an audit report available, preferably one outside the company?  Yes  I see from the report that an accountant's report is available, however, I am more interested in whether or not there has been an independent audit.  If so. could I have a copy?  The accountant's report will be sent to you under separate cover.   I don't want to pay a big price for it.  The costs stated in the report, for a copy of the complete plan is $169.50 which is too high and I think may be to discourage the average retiree from requesting it.  I can make copies on my home copier for about $.03 per copy, why does Embarq have to charge $.50?   IRS regulations permit plan sponsors to charge $.25 per page ($.50 for two sided copies).   

 

d)  Who administers the plan?  Is it a independent corporation or is it a division of Embarq?  The Administration fees of  12 million, 76 thousand, 78 dollars seems like a lot of dough, over a million a month for someone to manage the assets.  What are we getting for that amount of money?  The Embarq Retirement Pension Plan is administered internally by a staff of Embarq employees.  The $12.1 million of administrative expenses for the period from May 17, 2006 to Dec. 31, 2006 consisted of $8,556,601 for investment advisory and management fees (expenses incurred by the trustee for the plan and by the various investment managers) and $3,519,477 for other administrative expenses (including but not limited to actuarial fees, licensing fees, etc. for the system used to administer the plan, audit fees, and salary and benefits expenses for the EMBARQ staff that handles the internal administration).   

 

 The report indicates that the pension fund had Three Billion, Three Hundred Nineteen Million, Two Hundred Twenty Thousand, Five hundred Seventy Six dollars in it at the end of 2006.  THREE BILLION DOLLARS +.  Invested at a 5% rate would provide $165,961,029 anually.   The plan only paid out $105,163,412 in benefits during the year.  Note: The EMBARQ plan paid benefits for 7 months in 2007 (June 1 to Dec. 31, 2006).  On an annualized basis, benefits paid would have exceeded $180 million.  A 5% cost of living increase would result in a $110,421,583. 

 

I would appreciate a response to these questions and comments. 

 

Frankly, after what Sprint/Embarq decided to do the retirees who are 65 or over, I don't trust anyone who's only interest seems to be money grubbing, to manage our account.  Note:  As previously communicated to you, EMBARQ is separate publicly traded company was no legal or corporate structure ties to Sprint.  And it is our account.  Please be assured that EMBARQ has no intension of reducing pension benefits to current retirees.  In fact, EMBARQ legally cannot do so.  In addition, most benefits under the Embarq Retirement Pension Plan are insured by the Pension Benefit Guaranty Corporation (“PBGC”), an agency of the federal government, if the Plan terminates.  Generally, the PBGC guarantees most vested retirement benefits