Verizon to Halt Pension Outlay for Managers - New York Times:
This is a big deal for Verizon. This fundamental change in the way pension benefits are provided to managers at Verizon signals a tough union bargaining road ahead for the core wireline business. When a company as large as Verizon takes this step, we can expect to see other companies do the same because healthy companies see the handwriting on the wall. 1./ they cannot afford to be out of step with their competitors regarding labor costs. 2./ As other company pension plans fail and are taken over by the federal government's PBGC, the premiums paid by healthy companies to support failed plans are likely to increase.
Kudos to Ivan Seidenberg for taking this important step yet extraordinarily difficult and unpopular step while Verizon remains healthy.
USAToday has a good analysis of the defined benefit pension problem.
"With the changes announced yesterday, Verizon's managers will receive pension benefits more in line with those given to the 53,000 workers at Verizon Wireless, the company's mobile phone subsidiary, which is not unionized. Only a tiny portion of MCI's workers are unionized and employees there are offered only 401(k) retirement plans.
Verizon said that it would freeze the defined benefit plans of its managers after June 30, 2006. Managers will also receive an additional one-time contribution to their pension plans equal to the amount Verizon would have contributed during an 18-month period.
The money already set aside for retirement will continue to accrue interest for workers with certain plans.
After July 1, Verizon will match every dollar managers contribute to their 401(k) up to 6 percent of their salary. Verizon may raise its match to $1.50 for every $1 contributed by the employee if the company reaches certain financial targets.
Verizon currently matches up to the first 5 percent of an employee's salary. Many other companies do not match employees' contributions dollar-for-dollar."
6 comments:
Verizon again is looking to management to fund their abitious FTTP project. First is the 200% increase in management health care co pays. Nows its a complete elimination of our pensions. The only question left of most managers minds at Verizon is what will be taken away next. Verizon's pension plans are known to be overfunded, and this is just an attempt to grab the money now to pay for a rebuild of their network.
You do realize, that in most cases, union employees make more money and have better benefits than first and second level managers, don't you?
It may appear as though this cut makes Verizon healthier, but with an over-worked and unfairly compensated workforce, Verizon will not remain healthy. Verizon's managers are not even entitled to comp time. How can Verizon expect to retain or attract new youn talent, when they have publicly let down loyal employees?
This news leaves its 50K (managers) wide workforce in complete and utter disappointment to say the least. They ask us to work 70 hours/week, pay for our medical, cut our educations benefits and now cut out our pensions, while the unionized work force that we are asked to manage still retain all of these benefits. Oh .... and we are expected to work 15 hour days / 7 day a week .. in a hostile work environment with NO SECURITY, when the union is striking. We are constantly being told by upper mgmnt that we are the ones that make things happen at verizon however, they treat us like dirt and have been taking and taking more every year from us... not them... not the union. Im sure ivan is hopeing the analyst see this as a good thing and affects stock price positively since it hasnt been above $40 or $35 dollars in quite some time. Maybe then he can earn another 7 million in options. Sure he and his family are financially secure while the 50K managers have been running this race of financial independance only met by the reward of the pension plan.. now removed. Imagine dedicating yourself to a 30 year race and being told after the half way mark that first/second and third prizes have been removed.
The immediate and current pain is real for Verizon employees and management, no doubt about that, but how else to maintain a viable company in the future? Retirement benefits are not disappearing completely, only the defined benefit portion going forward. The 401(k) portion (defined contribution)of retirement benefits is still available and enhanced.
In the bigger picture, all of us should take a greater hand in our retirement and health care futures. Becuase of the mega-changes going on in our world, the once expected 'lifetime security' aspect of living in America is diminshing. Verizon isn't to blame for that. We should be thankful that Verizon has overfunded its pension plans so that its employees are not facing the terrible pain of the airlines and the American auto industry.
Here's another huge issue:
http://davidusher.blogspot.com/2005/12/next-retirement-time-bomb-new-york.html
that we have to face as citizens and taxpayers.
The future is not bright if we go merrily along our way expecting government and large companies to pay for our future security. It can't happen given current deficits and our national debt. While it may be painful and difficult, we need to take responsibility for our own security as best we can.
The politics of all this will be intense in the 2006 and 2008 elections. Democrats will likely promise a rosy future from government. Republicans will promise less from government and urge citizens who can to prepare themselves financially and have government be in the'safety net' business for those who can't.
The next big step that Verizon will have to take so as not to aggravate the divide existing between unionized and management employees is to address the pension issue in contract negotiations.
Investments in transmission capacity like FIOS and the purchase of MCI are necessary if Verizon is to remain a world class player as a telecommunications company. Of course, there are risks in all this. One risk is the alienation of management. Another is that wireless broadband will compete with fiber/FIOS in addition to the broadband competition on the wireline side from cable companies.
Verizon must position itself in both wireline and wireless broadband in order to be a viable and profitable company.
Verizon cannot be out of step with its competitors in salary, wages and benefits. That's where the real pain is in terms of morale, expectations and equity for employees.
I believe you are correct when you said,
“That’s where the real pain is in terms of morale, expectations and equity for employees”
Verizon is in the midst of culture warfare that is crippling productivity due to the erroneous decision to slash front line management benefits, while their union subordinates remained untouched.
Moreover, union employees receive 100% tuition reimbursement to any accredited learning facility, (ex. Harvard, Nursing School,) 100% paid up-front on the companies dime. The curriculum does not have to be business related.
Front line managers are not so fortunate. In addition to benefit reductions, Tuition reimbursement was also cut for front line managers. Managers are only entitled to a small amount of tuition reimbursement, and the curriculum has to be business related.
(It is logical to require employees to take courses that pertain to the industry) However, it is silly to reduce educational benefits for managers. This is a time when Verizon is trying to transform the business. The pursuit of education should be encouraged to front-line management. Clearly, the benefit disparages between line management, and union employees do not give Verizon a competitive edge.
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