https://www.crainsnewyork.com/politics/verizon-offers-employees-most-lucrative-buyout-13-years
The booming stock market and Trump's economic policies have fattened the telecom giant's pension plan
Verizon Communications, the city's largest public company, with $126 billion in annual revenue, and also the nation's largest wireless provider, said today it will offer voluntary buyouts to thousands of employees across the U.S. The buyout package includes three weeks' pay for every year of service, a spokesman told The Wall Street Journal, and would be the most generous package offered by the company in 13 years.
For answers why Verizon is offering employees such a lucrative exit package, look to what the stock market, the bond market and President Donald Trump's economic policies have done to lift the fortunes of Verizon's pension plan.
Verizon, with its roots in Ma Bell, offers tens of thousands of employees a defined-benefit pension. After the financial crisis, when stocks were in the dumps and the Federal Reserve slashed interest rates to nearly zero, this kind of benefit looked like a serious albatross for companies everywhere, and pension funds of all kinds were facing questions of how they could afford to meet obligations.
But the 10-year-long rally in the stock market has helped relieve the pressure. Corporate pension plans now have 86% of all the assets they need to meet obligations to retirees, according to Wilshire Associates, up from 81% in 2016. Verizon's defined-benefit pension plan is 89% funded, so it's well positioned to handle more people drawing from it—such as those who accept the buyout.
Even more useful for pension funds has been the rise in interest rates. Like many large pension plans, Verizon's fund owns more bonds than stocks. Bonds account for a quarter of the plan's $19 billion in assets, and their rising yields, linked to rates set by the Fed, means Verizon's portfolio can generate higher returns.
In addition, Verizon was incentivized by the Trump administration to put money into its pension plan. Under last year's tax-reform law, companies that make voluntary contributions to their pension plan before the end of this month can deduct the cost at the 35% tax rate rather than the new 21% rate if they wait. Verizon kicked in $4.4 billion to its pension plan this year and last, and the company believes it won't have to make any further contributions until 2026.
A Verizon spokesman said: "While having a healthy pension fund is an enabler, the decision to make the [buyout] offer was based on plans to meet business and customer needs and better position Verizon for future growth."
The company seeks to cut $10 billion in operating costs over the next two years.