Verizon to End Traditional Pensions For Managers

This could prompt some older employees to decide to take early retirement, which they may do if they have worked at least 15 years and if their years of service and age add up to 75.

After June 30, 2006, Verizon said, its affected managers will stop earning pension benefits, shifting instead to the 401(k) plan, and they will not receive any additional credit toward the company's subsidy of retiree medical benefits.

Employees who do not have 15 years of service, including the extra 18 months, will not receive any company subsidy for retiree medical benefits. They remain eligible to buy such coverage if they pay the full premium themselves.

Verizon will benefit by eliminating some of the uncertainty associated with defined-benefit pension plans. Under federal rules, companies can be required to make contributions to their pension plans if their liabilities increase or asset values fall, making their costs unpredictable.

Once the merger with MCI goes through, which is expected by early next year, Verizon will have about 240,000 employees. Of those, about 135,000 will be management employees and about 105,000 will be unionized workers.

Over the past 20 years, thousands of U.S. companies have shed their defined-benefit pension plans to cut costs.

As of last year, there were 29,600 single-employer defined-benefit plans, down from 112,000 in 1985. However, last year there were 34 million participants -- meaning active workers and retirees -- in such plans, up 26 percent from 1980.

The increase in the number of participants reflects the fact that many of the pension plans eliminated were run by relatively small companies.

Staff writer Albert B. Crenshaw contributed to this report.