After Verizon, Are Pension Freezes on the Way?

Dec. 6, 2005 — -- The latest battle in the heated telecom wars has claimed some significant new casualties -- the pension and retirement health benefits for 50,000 Verizon management employees -- and analysts say more such moves may be coming.

Verizon announced Monday it would stop making contributions to the pension plans of non-unionized managers and would instead offer them 401(k) plans, beginning in 2006.

Other big telecommunications companies are likely to make similar cost-cutting measures, said analysts familiar with the economics behind Verizon's decision.

The move raised the ire of worker advocates, but the company said its future economic picture made it necessary.

"This restructuring reflects the realities of our changing world," Verizon chairman and CEO Ivan Seidenberg said in a statement announcing the change. "Companies today, including many we compete with, are not adopting defined benefit pension plans or subsidized retiree medical benefits."

Though Verizon currently has enough money to fund its pension obligations, the company is wary of rising health care costs and competition from companies that don't offer similar defined benefit plans, which are more expensive for companies than 401(k) plans. The pension freeze is an attempt to lower labor costs and bring them in line with those of cable television companies, analysts said.

"Verizon had no choice," said Robert Rosenberg, president of Insight Research Corp., a telecommunications industry analysis firm. "It's not the type of thing a company with great corporate values would do if it didn't have to."

But what the company called corporate realities offered little consolation to angry Verizon employees.

"You're just constantly giving back. And I realize that's how corporate America is going, but that still doesn't make it right," one Verizon employee said today outside the company's corporate headquarters in New York.

The telecommunications sector has been hit particularly hard over the past five years, losing workers and seeing company values drop at a disproportionate rate to other industries, Rosenberg said. The need to cut costs is a response to the leaner financial times, he said.