Kerber Vs. Qwest

In March 2011 oral arguments were made on behalf of Edward Kerber, et al. appealing the ruling that Qwest was within its rights to discontinue the "Death Benefit" portion of its employee pension program. Attorneys for Kerber et al. argued that the "Death Benefit" was, in fact, a life insurance benefit promised as part of the employees' pensions. As such, they argue, it should be protected under ERISA Section 404, which prevents the reduction of a retirees' minimum life insurance benefit below a certain level. They claim that the elimination of the "Death Benefit" caused the employees' Life Coverage to drop to $10,000, which is below the minimum level set by ERISA and their contracts. Kerber et al contend that they did not purchase additional life insurance prior to retirement because they thought that they had coverage through AT&T.; They allege that the withdrawal of that coverage amounts to breach of contract.

AT&T; rewarded long-term employees with a generous pension plan. When AT&T; split into two companies in 1984, U.S. West continued the pension plan. In 1993, U.S. West amended the plan so that they could modify the contract for existing employees if needed, as long as accrued benefits remained in place. The pension plan included a "Death Benefit" that granted a lump sum payment equal to the employee's final twelve months of salary, paid to a single approved beneficiary upon the employee's death. In 2000, Qwest acquired U.S. West, and continued the plan but added the provision that they could amend and/or eliminate the "Death Benefit" at any time. In 2003 Qwest eliminated the "Death Benefit" for employees retiring after 1/1/2004. Qwest has argued that modifications to the pension plan are necessary to the economic viability of the company and do not violate ERISA provisions.

In 2005 Edward Kerber of Oregon, plus several other retired employees of AT&T; sued Qwest for breach of contract. They argued that the "Death Benefit" had been a stable feature of their pension plans for the duration of their employment, and that they had an expectation to be able to promise it to their beneficiaries. In addition, they argued that it was protected under the federal ERISA anti-cutback provision protecting employees from a sudden reduction in expected pension benefits.

Qwest argued that their elimination of the "Death Benefit" was not a breach of contract because the amendment stating that they could eliminate it at will for current employees had been accepted by everyone eligible to receive a pension. They also argued that the "Death Benefit" was not covered under ERISA because ERISA protected only accrued benefits. The "Death Benefit" was not an accrued benefit, Qwest argued, since it did not change value over time. The courts upheld this position and found in favor of Qwest.

Kerber et al appealed the court's position in 2009, stating that the removal of the "Death Benefit" was a breach of contract because employees whose initial contract went into effect prior to 1991 had an expectation that their benefits would remain intact. However, the court upheld that Qwest had given sufficient notice of the change so that no employee could have reasonably counted on the "Death Benefit".