Sprint Nextel Freezes Pension Plans

Competition in Wireless Drives Effort to Cut Labor Costs

Reston-based Sprint Nextel Corp. froze pension plans for almost half of its 80,000 employees and won't offer a fixed retirement benefit to new workers as the company cuts labor costs to compete with other wireless carriers.

Workers vested in Sprint Corp.'s pension plan prior to the Aug. 12 purchase of Nextel Communications Inc. stopped earning credits on Dec. 31, spokesman David Gunasegaram said Sunday in a telephone interview. Unvested employees who contributed to the plan will receive benefits earned once they qualify. The 39,000 affected workers were notified in November.

Chief executive Gary D. Forsee, 55, who orchestrated the $36 billion merger of Sprint and Nextel, is revamping the retirement plans as he shifts the company's focus to the wireless business. Cingular Wireless LLC, the largest U.S. mobile-phone services company, and No. 2 Verizon Wireless, don't offer defined-benefit plans. Sprint Nextel is No. 3.

Sprint, which gets 72 percent of sales from the wireless business, plans to spin off its local telephone division in the second quarter. The pension program will continue for the 20,000 employees at the local division, Gunasegaram said. Workers who were at Nextel before the merger didn't have a pension plan.

Sprint also bolstered its 401(k) retirement plan for all employees, Gunasegaram said. The company will match employee contributions dollar for dollar up to 5 percent of income.

Verizon Communications Inc., which owns 55 percent of Verizon Wireless, announced a plan to cut its pension benefits in December.