TYPE OF PLAN: Cash Balance 50,000 participants affected (managers)
DATE ANNOUNCED: Dec. 5, 2005
DATE EFFECTIVE: June 30, 2006
DESCRIPTION OF FREEZE: Partial Freeze. Managers at Verizon Communications covered by the defined benefit plan will stop accruing benefits on June 30, at which point they will receive an 18-month enhancement to the value of their pensions. Managers hired after Jan. 1 are not eligible to earn defined benefit pension benefits.
PLAN SOLVENCY: As of year-end 2005, the defined benefit plan assets were enough to cover its $4 billion pension liability.
REPORTED FINANCIAL IMPLICATION: As a result of the freeze, Verizon Communications incurred a charge of about $97 million (pretax) and about $60 million (after tax) in the fourth quarter of 2005. The company expects savings of roughly $3 billion over the period from 2006 to 2016.
NEW ARRANGEMENTS FOR EMPLOYEES: Verizon will raise its match threshold for 401(k) plans to 6% from 5% of salary and increase its match amount to $1.50 for every dollar.
BACKGROUND: Verizon Communications is the country's second largest telephone company. Verizon recently purchased MCI, and the freeze brings its plan in line with the managerial pension plans at MCI and Verizon Wireless.
All "Pension Freeze Fact Sheets" posted were created by the Center for Retirement Research at Boston College, which is solely responsible for the research, findings and all materials contained therein. Pensions & Investments has not verified or edited the materials (other than for length and style) and does not necessarily agree or disagree with the analysis and positions expressed by the authors. Reference to any company, product or service does not imply recommendation or sponsorship by Pensions & Investments.