Blogging Employee Benefits

January 5, 2006

Goodbye IBM Pension Plan!

Filed under: Pensions — Fuguerre @ 10:50 pm

Throughout the development of the currently pending pension legislation and reacting to the emerging FASB re-write of its pension accounting rules, numerous wags have warned that defined benefit pension plan freezes and terminations would accelerate in response.  Policymakers who claim to be seeking to protect and preserve traditional pensions should take another look at the rush that has already headed toward the door.  Today’s snapshot of the exodus —

IBM had previously closed its pension plan to new participants beginning in 2005.  The pension, a cash balance plan, remains at the center of controversy over whether that plan design violates age discrimination law.

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5 Comments »

  1. […] I’ve seen this headline everywhere the last few days. On Thursday, I think it was, all IBM employees got an email notifying us of a change to IBM’s retirement plans effective in 2008. IBM also made a press-release, which all the of news organizations translated into the headline “IBM Freezes Pension Plan” making it sound like it is this terrible thing that is going to make a bunch of 55 year olds live a life of poverty because IBM took their pension away. And, after reading the headlines, this is exactly how most of the public seems to have interpreted the news (a number of posts from the blogosphere): From “Life’s Journey” Looking at today’s headlines about IBM freezing their pension plan sent chills up and down my spine. How can all these companies be allowed to do this? When you work for a company your whole life, they shouldn’t be allowed to tell you after the fact that your pension will stop. From “erinelisabeth’s blog” (a child of an IBMer): ibm’s freezing its pension plans in 2008. that’s where my dad works, and has worked for about 31 years. what will happen if he doesn’t retire before then? yikes. From “Meander”: IBM announced the end of its pension scheme today. IBM boasted the country’s third largest pension plan with $48 billion of assets. Most certainly another dark day in what has already been a bad winter for defined benefit plans. […]

    Pingback by Patrick’s Weblog » IBM Freezes Pension Plan. — January 7, 2006 @ 4:55 pm

  2. The complete, comprehensive, universal process that is emerging – of which this recent IBM corporate decision moves somewhat like one individual in a huge crowd with no specific orders yet with a very discernable direction – echoes through so many different levels: the individual active employee and retiree, the company, the industry in which that company competes, the economy both national and international, and the defined benefit pension system together with its coordinations with broader compensation policy and social insurance. Without speaking to each of those, from my own retired mother whose IBM pension will not be affected by this all the way through to expectations of implications this might have on the Social Security privatization debate, clearly our brief notes in a weblog comment cannot possibly convey everything we might have to say to the topic, to adequately serve it justice. In my own “Goodbye IBM Pension Plan” posting, I definitely did not mean to be joining with the common press in their tendency to focus only on the most obvious negatives. Mostly, I was still just pulling this weblog up into some forward motion, and took occasion to mirror the “Hello World” that WordPress gave me for my initial post. The complete IBM story, it definitely must be said, includes some very applaudable improvements to the company’s 401(k) plan that for many if not most active workers is likely to be an improvement over the benefits that might have accumulated under the pension plan that the company is moving to shelve. At the same time, this remains a moment of farewell, not only to a particular form of benefit for this particular company, but what is increasingly looking to be for the pension system as a whole. By the time my children are in the workforce, they’re going to be shrugging “Huh?” to any mention of traditional pensions much as they might to mention of an LP turntable. That might not necessarily be any worse than it is for those LPs (although some of us still do miss the rich sound of analog), but it’s “Goodbye” all the same.

    Comment by Fuguerre — January 8, 2006 @ 3:02 pm

  3. […] Public pensions “must be recognized as part of any employee’s total compensation program,” which in the context of Moskow’s presentation is essentially a recommendation that public employers look to IBM’s recent switch from its defined benefit pension plan to an enhanced 401(k) plan as the compensation model of the future. […]

    Pingback by Pensions & Benefits Weblog » Blog Archive » Chicago Fed Blogs Public Pensions — March 1, 2006 @ 7:48 am

  4. I joined IBM 29 1/2 years ago. At that time I was promised life-time
    medical benefits and a great retirement package. During the first few
    years the pay raises were very good, they soon slowed down as my
    pay started to approach my older peers. There were several years
    when IBM had a “Bad Year” only 4 billion, that there were no pay raises
    at all. Then came LOU! Lou Gerstner that is, he implemented the first
    lay-offs in IBM history. With the bottom line looking so bad, he laid off
    thousands and walked away with millions in his pocket. That changed
    the standard at IBM from being a special company to work for to being
    just like the rest out there. Since then good-bye life time medical, I get
    a dollar amount that won’t last and goodbye retirement, it’s greatly
    decreased. I was made a promise when I joined, I have taken the cuts
    during the lean years, but they never seem to give back for all your
    loyallty had hard work, when they have good years. It’s not the old IBM!
    I will leave in 6 months when I reach my 30 years and take the scraps they throw me……

    Comment by Charlie — March 1, 2006 @ 11:53 pm

  5. I also am a 27 year IBM employee. So many times over the course of my career I hearn from an IBM Manager “Do not leave IBM has the best benefits in the world, and a wonderful pension plan that would offset any salary increase you will find anywhere else”. When considering this statement more than once I decided to stay with IBM. Yes, those of us with 25 plus years bleed blue. Now we bleed retirement dollars. Sure a richer 401K is a way to perhaps tide the 20% of employees really hurt by this change, but once we are gone I suspect IBM will drastically cut back on the 401K matching grant for those who remain. This is not your daddy’s IBM.

    Comment by Brian — March 29, 2006 @ 1:13 pm


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