Verizon Communications Inc., the nation's second-largest phone company, said yesterday that it would freeze the guaranteed pension plan covering 50,000 of its managers and expand their 401(k) plans instead.
In freezing the plan, the company will pay workers the benefits they have already earned but will not let them build up additional benefits.
Verizon also said it would contribute less to the health care benefits of those managers when they retire. Over all, the company hopes to save about $3 billion over the next decade by taking these steps.
The moves are part of a broader effort by Verizon, a regional Bell company, to overhaul its pension and health care plans to keep up with rival cable and technology companies that typically pay lower salaries and provide fewer benefits. "This restructuring reflects the realities of our changing world," said Verizon's chief executive, Ivan G. Seidenberg. "Companies today, including many we compete with, are not implementing defined-benefit pension plans or subsidized retiree medical benefits."
Verizon's 200,000 retirees and its 105,000 current union employees will not be affected by the change. But in cutting retirement benefits for about a quarter of its work force of 215,000, Verizon may be setting the stage for concessions it may hope to gain from its unionized workers during their next round of negotiations.
The company's decision to scale back benefits for some employees echoes similar steps taken in recent months by other big technology companies, including Hewlett-Packard, International Business Machines and Motorola. Businesses across America have been trying to find ways to reduce their pension burdens and contain health care costs that are spiraling upward.
Pension experts, however, say that Verizon, which operates in 28 states and controls about 50 million phone lines, may find it harder to recruit new workers as it cuts back on benefits. As an industry leader, Verizon's move will likely prompt other regional Bell phone companies, including AT&T Inc. (the newly merged SBC and AT&T Corp.), BellSouth and Qwest, to consider cutting the benefits of the tens of thousands of workers they employ.
Managers at those companies currently receive a combination of guaranteed pension benefits and 401(k) investments.
"If a company as large as Verizon goes in this direction, it could encourage others to do likewise to the detriment of the retirement security of millions of American workers," said Karen Ferguson, director of the Pension Rights Center, a nonprofit worker-advocacy group in Washington.