November 9, 2004
(Via Email and First Class Mail
QWEST HEALTH CARE PLAN ADMINISTRATOR
c/o Erik Ammidown, Director, Employee Benefits
1801 California St., Suite 900
Denver, CO 80202
Tele: 303-992-6154
Fax: 303-992-3379
Erik.Ammidown@qwest.com
Re: QWEST HEALTH CARE / Request for Disclosures
Mr. Ammidown,
and Qwest Health Care Plan Administrator:
I received your November 5, 2004, invoice together with
the 1,000 pages of Qwest Health Care Plan annual reports for years 1998,
1999 and 2000. Therefore, my check No. 4161 in the amount of $100.00 is
enclosed.
As you know, employer securities ordinarily may not
comprise more than ten percent of the aggregate fair market value of
plan assets. ERISA Section 407(a)(3)(A), 29 U.S.C. § 1107(a)(3)(A).
The annual reports you have provided prove that for a prolong time
period the health care plan/trust has been heavily invested in U S
WEST/Qwest common stock. It appears that both U S WEST and Qwest have
been careful not to report this investment as 'employer securities.'
Instead, the investment has been reported as a 'partnership,' not a
direct investment in employer securities. The form 5500 reports this
sometimes as "the Internal Equity investment account" and sometimes as
"the QWEST Benefit Plan Investment Partnership." The 'partners' in the
'partnership' were the health care trust and the life insurance trust.
Eventually, the life insurance trust stopped being a participating
'partner.' Therefore, all of this 'partnership' is now owned by the
health care trust. Please see the chart which is attached hereto. This
is a request for further information made on behalf of Qwest Health Care
Plan participants Nelson B. Phelps and Mary M. ("Mimi") Hull and
numerous other unnamed plan participants who are members of the
Association of U S WEST Retirees.
The federal regulations concerning this ERISA employee
benefit plan requires that in order for employee benefit trusts to have
over 10% of total assets invested in employer securities, the sponsoring
company (i.e., U S WEST/Qwest) must apply for and receive permission or
an "exemption" granted by the United States Department of Labor.
We understand that U S WEST previously made a request for
retroactive exemption for having violated the 10% limitation of ERISA
Section 407(a)(2). In a filing with the Department of Labor ("DOL")
(Application No. L-09583), U S WEST sought retroactive exemption for
having made the two separate U S WEST stock contributions to the Health
Care Trusts during 1994. U S WEST requested exemptive relief from the
provisions of ERISA section 406(a)(1)(E) and ERISA 407(a)(2), because
immediately after the first in-kind contribution of stock to the Health
Plan Trust on March 31, 1994, the fair market value of such stock
constituted more than 10 percent (10%) of the aggregate assets of the
Health Plan Trust. U S WEST requested retroactive exemptive relief,
effective as of March 31, 1994.
U S WEST represented in its filing to the DOL that the
otherwise prohibited transactions were "in the interest of the Plans, as
growth in the telecommunications industry will cause any stock
contributed to the Trusts to appreciate in value. For this reason, U S
WEST believes the Stock to be a highly desirable investment. Further, U
S WEST represents that the exemption is protective of the participants
and beneficiaries, in that the transactions also provide security
regarding the continuation of benefits to current and former employees
of U S WEST." Furthermore, U S WEST represented that there would be an
independent financial investor, "State Street" and that entity would
identify the other holdings in the Health Plan Trust and review asset
allocation for the trust, monitor the overall investment mix, and the
impact such contributions have on the volatility of the portfolio and
make any necessary adjustments. U S WEST represented that State Street
would monitor the holding of the stock in the Health Plan Trust and
would continue to hold the stock only if such holding continued to be in
the best interest of the Health Plan Trust. Essentially, U S WEST
represented and agreed that State Street would take whatever action is
necessary to protect the rights of the Plans which are funded by such
Trusts holding U S WEST stock. But, U S WEST stated that it had an
investment policy which contemplated the stock would be held for a long
term.
Therefore, based upon the representations made by U S
WEST, the DOL granted U S WEST retroactive exemptions. In November
1998, the DOL agreed to grant U S WEST retroactive exemptions
conditioned upon the adherence by U S WEST to its representations and
certain requirements. One requirement is that no future contributions
in- kind of stock by U S WEST to any Trust, any replacement publicly
traded shares of such stock, or any purchases of stock in connection
with rebalancing of any Trust's holding of stock cause immediately after
such transactions the aggregate fair market value of such stock, plus
the fair market value of all other qualified employer real property or
stock held by such Trust to exceed 25 percent (25%) of the fair market
value of the assets of such Trust on the date of such transaction.
When the DOL agreed to grant U S WEST the requested
retroactive exemption and allow future transactions of this nature, the
DOL stated that it expects [the independent fiduciary] will use its
authority to dispose of as much of the Stock as is necessary to comply
with its fiduciary responsibilities at the appropriate time regardless
of the policy that the assets of the Accounts be held for long term
appreciation."
U S WEST represented to the DOL that as of March 9, 1998,
the Health Plan Trust no longer held any of shares of U S WEST stock
contributed by the corporation to the Health Plan Trust. Therefore, it
is unclear to Plan participants Mr. Phelps and Ms. Hull how the health
care trust, once again, became so heavily invested in U S WEST/Qwest
stock.
Presumably, since 1998, no further ERISA exemption was
requested by either U S WEST or Qwest, because the DOL tells us, in
response to our Freedom of Information Act request, that there is no
record of any exemption requested or granted. Therefore, please
disclose whether or not the DOL has provided us erroneous information.
Did either U S WEST or Qwest apply for and receive an exemption? If so,
when was the application made and what was the disposition? Please
provide copies of all correspondence and filings associated with an
exemption request.
Is there a governing partnership agreement, statement of
by-laws and any other instrument memorializing the health care
plan/trust investment in the so-called QWEST Benefit Plan Investment
Partnership? If so, please send the requesting Plan participants a copy
of each document and the records of the underlying investment. What is
the total dollar amount of health care plan/trust assets invested in U S
WEST/Qwest stock which comprises the QWEST Benefit Plans Investment
Partnership? Finally, since this fairly huge investment has gone sour
and there has been a significant unrealized loss, please advise whether
there are any plans for disposition of the partnership assets.
Curtis
3030-770-0440
c: Nelson Phelps
Mimi Hull
Association of U S WEST Retirees