IBM changes pension plan
The company says it will shift pension plans to a 401(k) structure, saving up to $3B over 5 years.
January 5, 2006: 6:46 PM EST
SAN FRANCISCO (Reuters) - IBM said Thursday it would shift its pension plans to a 401(k) structure to benefit from more predictable retirement plan costs, saving up to $3 billion over five years.
The current pension, worth $48 billion, will be frozen in 2008.
International Business Machines Corp. (Research) said in a statement the changes would affect existing employees and new hires, but would not affect 125,000 current U.S. retirees, former employees with vested benefits or employees who retire before January 1, 2008.
The company -- along with many others in the United States -- is moving away from more traditional defined benefit pension equity and cash balance plans.
IBM said it would record a one-time pretax charge related to these changes of $270 million in the fourth quarter of 2005.
The company said changes to the U.S. plans and changes being considered in other countries would save $450 million to $500 million worldwide for 2006 and between $2.5 billion to $3 billion for 2006 through 2010, based on year-end 2005 pension assumptions. IBM has more than 329,000 employees worldwide.
IBM said it would stop the accrual of future benefits in its defined benefit pension plans and fully preserve all retirement benefits that employees will have earned as of Dec. 31, 2007.
The information and technology company said it would redesign its 401(k) savings plan to give current participants an annual company-funded contribution of as much as 10 percent of their pay. IBM plans to double the current company match to dollar-for-dollar on up to 6 percent of salary deferrals, and to make additional automatic contributions of 1 percent to 4 percent of workers' pay into their 401(k) account.
The changes do not affect IBM's current 125,000 U.S. retirees, former employees with vested benefits, or employees who retire before Jan. 1, 2008.
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