The announcement last week by Verizon Communications that it was freezing (a kinder word for terminating) the defined benefit plans of 50,000 of its managers was yet another grim reminder that good old-fashioned retirement security is becoming as outdated as a telephone with a dial.
The company also said it would trim back the amount it would contribute to these employees’ health benefits when they retire.
The reason for these cutback moves is one that is becoming depressingly familiar in corporate America and goes something like this–”we can’t compete with companies that don’t offer these benefits packages.”
And since Verizon is the second largest telephone company in the country, where it goes, others in telecommunications are pretty sure to follow.
It makes you wonder how long it will be before the defined benefit pension plan gets its own exhibition niche at the Smithsonian Institute as a once-dominant factor in American business that has faded away under pressure.
Pretty much taking the place of these soon-to-be-defunct defined benefit plans at Verizon is the current embodiment of retirement salvation for millions and millions of Americans–the 401(k) plan. And, indeed, Verizon said it intends to strengthen to a degree the 401(k)s of these managers and, presumably, others going forward.
In freezing these defined benefit plans Verizon is being pretty up and up–all the benefits that have accrued to the managers will be theirs, but the company will make no further contributions to the plans after a certain date. This is an entirely different story than those companies (usually in bankruptcy) that have terminated their pension plans (and the employees’ retirement dreams with them).
Pretty soon, when the defined benefit plan disappears entirely, it won’t be a question any longer that employees are not going to get what they were promised. There simply won’t be any promises.