I.B.M., General Motors and Verizon Freeze Pension Plans 

As a New Year’s surprise to its employees IBM, which operates the third-largest corporate pension fund in the United States, said it would freeze pension benefits and only offer employees a 401(k) retirement plan in the future. In February General Motors the world’s largest automaker said it planned to freeze its retiree pension program, and introduce a defined benefit plan or cash balance plan, as well as make other changes in its retirement program for future retirees. 

These announcements came on the heels of Verizon’s December 2005 announcement that they would freeze its pension plan for management employees. The telecommunication firm said that the change is slated to take effect on June 1, 2006. 

As of the end of 2005, IBM's U.S. defined benefit qualified pension plan was fully funded with more than $48 billion in assets. I.B.M. said the freezing of its pension plan change should save the company $2.5 billion to $3 billion by 2010. The change is slated to take effect Jan. 1, 2008 and does not affect IBM’s current 125,000 U.S. retirees, those with already vested benefits or employees who retiree prior to the date of the change. IBM's U.S. defined benefit pension plans will stop accruing new benefits effective December 31, 2007. 

GM said its moves to rein in retiree benefits would save the company about $900 million a year, and reduce health-care liabilities by $4.8 billion capping contributions to salaried retirees’ health-care coverage at 2006 levels. Current GM retirees and surviving spouses will not be affected, the company said. 

For Verizon the change affects some 50,000 managers. This triple play by some of the nation’s largest employers has been called the end of the American Pension by many advocates. In a statement, the Association of BellTel Retirees Inc., which has previously been featured by the American Retiree said, “While we have heard the company explain the financial pressures the corporation faces in the global economy, we abhor the concept of solving these problems on the backs of those who have given their lives to build this company.” It continued, “Loyal workers trusted their employer that those forms of deferred compensation would be there. Had they known that the company would renege on those commitments, they surely might have found employment elsewhere.” 

The group suggests that Verizon, and the other employers may find it more difficult to attract and retain highly qualified workers in the future as a result. 

Ralph M. Casillas, a Verizon network engineering employee in California says the change will cost him dearly in the pocketbook, “I have lost $101,000 from my pension.” Casillas says this is because he just misses retirement eligibility dates set forth by the company. “I get my…retirement points as of 1/22/2008, some 22 days after the (company’s) 12/31/2007 drop-dead date. While my situation is bad, it is nothing compared to a 47-year-old, employee with 25 years of service. This employee does not reach his (retirement eligibility) points by the magical 2007 date. He is losing in excess of $400, 000.” 

Organizations like the Pension Rights Center (PRC) have taken the lead in serving as a conduit for employees to voice their concerns and seek remedies, if any exist. The PRC reports getting hundreds of emails to help promote positive action to protest the company's move and has set up a web site www.VerizonRetirementWatch.com, together with the Communication Workers of America and the BellTel Retirees.