Verizon Communications Inc. announced Monday it would stop contributing to pension plans for managers, a move that would save about $3 billion over the next 10 years.
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. Verizon did not specify how many employees were effected, but The New York Times and Wall Street Journal said the restructuring involved 50,000 managers.
Verizon said it would increase matching dollars for its 401(k) plan for those employees, as well as for MCI managers who join Verizon after Verizon's purchase of MCI Inc.
Neither Verizon Wireless nor MCI management employees currently have pension or retiree medical benefits.
"These changes will provide Verizon with a more affordable benefit cost structure, which enhances our ability to compete," said Verizon Chairman and CEO Ivan Seidenberg said. "The changes will also provide employees a transition to a retirement plan more in line with current trends, allowing employees to have greater accountability in managing their own finances and for companies to offer greater portability through personal savings accounts."
The changes will not affect current retirees. Management employees hired after Jan. 1, 2006, will not earn pension benefits.
Late Sunday, Verizon said it may sell or spin off its phone book and online directories business to raise cash as it nears completion of its purchase of MCI and invests billions in rewiring its telephone network to deliver cable TV and speedier Internet access.
The company, laden with long-term debts of $34.4 billion, disclosed late Sunday it was reviewing alternatives for Verizon Information Services. The unit provides sales, publishing and other services for 1,750 directory books, including 1,200 Verizon-branded publications with a circulation of 121 million copies.
While Verizon did not say how much VIS might be worth, published reports said the business could be valued at more than $17 billion. The company said VIS had operating revenue of $3.6 billion in 2004, operates from Texas and employs 7,300 people. Analysts estimated the unit will show an operating profit of $1.8 billion for 2005.
Shares of Verizon, down more than 20 percent in the year, fell 16 cents to close at $31.71 Monday on the New York Stock Exchange. The pension plan announcement was made after the market's close.