Retirees sue Embarq over loss of health benefits

Retired Embarq Corp. workers filed a would-be class-action lawsuit Friday challenging the company’s elimination of their health insurance benefits.

William Douglas Fulghum, a Fayetteville, N.C., resident who retired in 1996 from a local telephone company that later became part of Embarq, and nine other retirees are plaintiffs in the lawsuit filed in U.S. District Court in Kansas City, Kan. The lawsuit indicates that thousands of other retirees eventually could be included.

In addition to Overland Park-based Embarq and various administrative arms that oversee the company’s benefits programs, Sprint Nextel Corp. is named as a defendant. Embarq previously was Sprint’s local telephone unit and was spun off as a stand-alone company in 2006.

Embarq informed retired workers earlier this year that if they were eligible for Medicare, they no longer would receive health insurance through the company starting in January. The company also stated that it would no longer provide subsidies for Medicare premiums.

Citing intense competitive pressures within the local telephone industry, Embarq executives said at the time that they were resorting to these and other actions with hopes of saving about $300 million, or about $30 million a year starting in 2008.

About 10,000 of the company’s 14,500 retirees were expected to be affected immediately by the changes.

Charles Fleckenstein, an Embarq spokesman, said Friday that the company had not yet been served with the lawsuit.

He said, however, that the changes Embarq made were part of periodic adjustments to the company’s retiree plans.

“We gave careful consideration before making changes to our retiree benefit plans,” Fleckenstein said. “The company made changes to its retiree plans in order to remain competitive within its industry and the markets where it operates.”

A Sprint spokesman did not immediately return messages left late Friday.

The plaintiffs contend that Embarq is reneging on important promises that many factored into planning their financial futures. The insurance benefits were specifically cited by company officials when encouraging workers over the years to consider retiring early, the lawsuit states.

“Due to the financial importance of these benefits to retirees and their spouses over the anticipated years of retirement, the opportunity to secure these benefits was a powerful motivator for employees to accept early retirement,” the lawsuit states.

Plus, throughout their careers, many of the workers accepted lower levels of pay because they understood that the retiree benefits would be so valuable later, the lawsuit states.

Four of the plaintiffs also have filed age-discrimination charges over the matter with the Equal Employment Opportunity Commission.

The dispute between Embarq and its retirees is yet another illustration of the growing strain the nation’s corporations are facing as they attempt to manage expenses and the rising costs of health care.

The federal equal employment commission weighed in just this week on the issue. The commission ruled that employers can reduce or eliminate health benefits for retirees when they turn 65 and become eligible for Medicare. The new policy exempts employers that roll back benefits from legal exposure under age-discrimination laws.

 

The Star’s Dan Margolies contributed to this report.