The folks with pensions are the target to get off the books. Verizon does not want to continue to fund the pensions of Jose employees that are still in the company. It is a major cost cutting measure along with their salaries. I believe those employees are over 30 years service and would be in their 50s and 60s. It is cheaper for the company to give them a years pay and get their pensions off the book.
16 replies (most recent on top)
@1vof, are you saying employees have the option of taking the lump sum without retiring?
If they want to get rid of the pension liability just give me the lump todayvand I will invest it myself. It will grow and I won’t lose $1500 per month in value. Then I will continue to work for salary and medical
You do have the option for the lump sum. Call benefits.
@ori: Yeah, they do have to fund the pension coffers, but remember VZ has already sold some of their pension obligations to Prudential, thus de-risking VZ’s obligations and by-passing PBGC funding rules.
There are pension funding rules. This has nothing to do with operating costs.
and since the pension & medical benefits were froze in 2006, the amount they have to pay out for medical also takes a steep dive.
And it greatly minimizes the amount they have to fund the pension coffer by since a lot of the money will be paid out.
Pension money comes out of a separate hopper, the only thing it does is save benefit costs and salary.
Just keep in mind - In 2003, the buy out cost Verizon 3 billion dollars and the cost savings was 1 billion dollars a year so it took a long time to re-coup their money and it was considered a failure by Wall Street. Based on history, I would not expect this offer to be as generous. The 2003 offer was: 1. you must take your lump sum and forfeit the pension (the lump sum was enhanced by 5%) 2. regular severance of 35 weeks pay, but free medical for 1 year instead of the standard 35 weeks. 3.) $30,000 in cash.
At 20-plus years it's not just people with pensions. They would have had to start with 25 years I believe but it suppose itmay depend on what company you were in before. I am betting if this does go out to all 20+ year employees regardless of whether they get a pension it will be like the mass volunteer event of 2003.
@1wt, that's a very interesting option. Letting employees take their lump sum, while remaining employed. I wonder if that would be solely up to Verizon to allow this or would the gov't need to OK this also?
Is the cash balance available in lieu of pension anyway? When I do a net benefits calculation it is always offered along with the best available. I cannot predict the future so I am always more interested in the cash balance and plan to annuitize it myself. Verses having a company pension which is only available while I am alive adding the risk the monthly check not being available for my family, unless of course I reduce the monthly amount by adding survivor benefits.
If they want to get rid of the pension liability just give me the lump todayvand I will invest it myself. It will grow and I won’t lose $1500 per month in value. Then I will continue to work for salary and medical
They can also transfer pension liabilities, e.g. to Prudential in 2012
@1gh, in that case I have a suggestion for the company - they should consider throwing an extra bone, let's say $100k, to take the lump sum rather than traditional pension payout.
You are correct pension liabilty is reduced on lump sum distributions.
Your employer will want you to take that pension money as a lump sum. Many pensions are underfunded, and companies must make up any underfunded liabilities with additional contributions to their plans. “Your corporation will be very happy to get rid of that liability from their balance sheet,”
Correct me if I'm wrong but wouldn't they only be getting those pensions off the books if the employee takes the lump sum?