The Washington Post reports that the company said those employees will retain pension benefits they have already earned, and on June 30, 2006, receive an 18-month enhancement to the value of their pension and retiree medical benefits.
The New York Times reports that the move affects about 50,000 managers and that Verizon also said it would contribute less to the health care benefits of those managers when they retire. The company is hoping to save around $3 billion over the next decade, according to news reports.
In addition, management employees hired after January 1, 2006 will not earn pension benefits, the Post reports.
The move follows current trends of companies to freeze or close pension plans in an effort to cut costs. PriceWaterhouseCoopers found that 67% of employers have reported closing pension plans to new hires and 63% have reported freezing their plans (See Expense and Funding Volatility Lead Co.’s to Ax Pension Plans).
Companies such as IBM, Sears (See Sears Cuts Off DB Accruals) and Motorola (See Motorola Alters Pension Benefits for New Employees ) have already switched from defined benefit to defined contribution plans for their employees.