Verizon to Cut Managers' Pensions, Save $3B
NEW YORK – Verizon Communications (VZ), the second-biggest U.S. telecoms firm, said on Monday it was restructuring retirement benefits for 50,000 managers in a bid to save $3 billion over the next 10 years.
Under the plan — for which Verizon will take an estimated fourth-quarter pre-tax charge of $97 million — managers will no longer earn pension benefits or receive service credits toward healthcare benefits from next July.
Employees currently covered by a defined-benefit plan — which typically has a fixed payout at retirement based on earnings and years of service — will keep pension benefits already earned, and on June 30 will receive an 18-month enhancement to the value of their pension and retiree medical benefits.
Verizon will also increase matching dollars for its 401(k) retirement plan, to which managers contribute, Verizon said.
The company said the changes, which do not affect current retirees or union employees, will save $3 billion pre-tax over 10 years.
Verizon is acquiring long-distance phone and data company MCI Inc. (MCIP), and the combined company will also boost the401(k) matching dollars for about 30,000 MCI managers who join the company after the deal closes.
After the acquisition, which is expected to be completed later this month or in January, the changes would affect little more than one-fifth of the combined company's workforce, according to Verizon.
Verizon currently employs around 215,000 staff.
Managers at Verizon Wireless, a joint venture of Verizon and Britain's Vodafone Group Plc., and at MCI do not currently have pension or retiree medical benefits.
Companies have increasingly phased out defined pension benefit plans as they have found them too expensive.
"These changes will provide Verizon with a more affordable benefit cost structure, which enhances our ability to compete," Verizon Chairman and Chief Executive Ivan Seidenberg said in a statement.