Tuesday, December 06, 2005

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NYT article reports that Verizon is freezing its pension for managers, in favor of sweetening its 401k. "Pension experts, however, say that Verizon, which operates in 28 states and controls about 50 million phone lines, may find it harder to recruit workers as it cuts back on benefits." My observation tells me this is wrong. My employer has both a defined-benefit pension and a 401k. Awareness and interest in the former is much higher. Few people have any idea how to quantify the expected present value (NPV) of the defined-benefit pension, whereas the 401k gives them a tangible cash value at any moment. Many people don't even know the defined-benefit pension exists. So I think it is a strategic recruiting advantage to have a better-than-average 401k, and if that comes with the tradeoff of eliminating a defined-benefit pension, that is a good tradeoff. I know there are exceptions, companies and industries where workers place a high value on a defined-benefit pension. Notably, government employees and the UAW. But I would say they are the exception that proves the rule. 10:05:12 AM    comment []