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SBC Communications Inc. is freezing newfangled retirement plans for its 55,000 managers — similar to those that have drawn criticism at a number of other companies — and will direct all new contributions to its traditional pension plan. The move by the telecommunications giant is a rare exception at a time of great uncertainty for both employers and workers with a stake in traditional pension plans. SBC, based in San Antonio, is freezing contributions to its cash balance and pension equity plans for managers, which supplemented traditional pension plans in the late 1990s, company spokeswoman Anne Vincent said. Those plans will continue to generate interest, but the company will direct its contributions to an existing traditional pension plan, she said. Participating workers will be eligible for whichever is greater — their cash balance benefit or the benefit calculated under the traditional pension benefit formula. But as a result of the change, it is likely that more senior workers would opt for the traditional pension. Most of the company’s 107,000 nonmanagement employees already are included in traditional pension plans, Vincent said Tuesday. Some have the option for a cash balance plan. Many firms have moved away from providing pensions, in favor of 401(k) plans in recent years. At the same time, a number of large employers, including SBC, flocked to adopt cash balance plans, similar in some ways to both traditional pension and 401(k) plans, but with significant differences in how benefits are calculated. Some of the largest cash balance arrangements have been the target of lawsuits by older employees who claim the newer plans discriminate by depriving them of gains they anticipated under the traditional pension plan. In a closely watched case, a federal judge ruled in 2003 that a cash balance plan adopted by IBM Corp. unfairly penalized older employees. IBM announced last month that it plans to exclude new workers from the contested plan and offer them only a 401(k) plan. That has fueled debate about whether other companies might not follow suit. Cash balance plans resemble 401(k) plans in that they allow workers to track their money growth in a hypothetical, individual “account,” but they cannot allot any of their own pay to the plan or decide how it’s invested. Also, workers can take the money with them in a lump sum if they switch jobs. Traditional pension plans benefit long-term employees, increasing their retirement benefits more rapidly during their last years with a company. “We have made the decision that we do want to structure our pension plans in a way that does reward more longer-serving employees,” Vincent said. Copyright 2005 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.

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