Nearly all IBM's U.S. employees -- everyone hired before Jan. 1, 2005 -- have pension benefits accruing under a traditional annuity-like plan or a cash-balance plan, which gives workers interest-bearing funds that they can take with them if they leave the company.
But these "defined-benefit" plans are becoming rarer. Companies say the plans carry too many uncertainties, largely because swings in interest rates and investment performances change accounting considerations and the amounts businesses must contribute to their pension funds in a given year.
Industrial giants such as IBM and airlines that still carry pension obligations say the costs and complexities hamper their ability to compete with younger, more nimble rivals that aren't saddled with pension obligations.
Beginning in 2008, then, IBM workers' pension benefits will be locked in place, based on salary and length of service. The accrual of benefits will stop, meaning future raises or additional years with the company will not signify bigger pension checks upon retirement.
Instead, IBM will increase its contribution to its 401(k) plans, in which workers get a defined, predictable amount from the company that they're responsible for investing. IBM will double the percentage of employees' contributions that it matches, to 6 percent of salary; certain employees will be eligible to receive more. Current retirees will see no changes.
IBM executives said that by no longer having to account for pension accruals that would have mounted after 2008, the Armonk, N.Y.-based technology giant will save between $450 million and $500 million this year alone and up to $3 billion from 2006 through 2010.
However, the change will result in a $270 million charge in the just-completed fourth quarter of 2005.
The action mirrors steps IBM has already taken in other countries, and follows IBM's decision to offer 401(k) plans only -- no pensions -- to workers hired after Jan. 1, 2005. Similarly, rival Hewlett-Packard Co. decided last year to offer only a 401(k) plan to U.S. workers hired this year and beyond.
Patrick Kendall, a pension expert at Diversified Investment Advisors, a consulting firm specializing in retirement plans, said the "hard freeze" IBM announced Thursday was almost inevitable considering the company's earlier "soft freeze" of closing the plan to new employees.
"I think a lot of these sponsors would like to get out of (defined-benefit plans) entirely, just terminate the plan," he said. But many companies find that termination fees and other complications negate that strategy, he said.
Pensions have been a touchy subject for IBM, which was hit with a federal lawsuit -- settled for up to $1.4 billion -- filed by employees who contended that IBM committed age discrimination when it shifted to a cash-balance plan.
Randy MacDonald, IBM's head of human resources, said the decision was unrelated to the lawsuit.
"It's all about cost-competitiveness, so that we could continue to be the financially viable company that we are," he said.
HP Strike on French TV :
RépondreSupprimerhttp://videojts.francetv.fr/regions/popup.php?id=b92a_1214part1&video_number=0
starts at 10:55
Analyst Steven Fortuna raised his rating on H-P(HPQ)to overweight from neutral, citing the combination of cost cuts and earnings growth prospects in the new year.
RépondreSupprimerhttp://www.thebusinessonline.com/DJStory.aspx?DJStoryID=20060111DN009827
Who cares about the employees ?
Not Mark Hurd
Upgrade lifts H-P to nearly 5-year high
RépondreSupprimerBy Michael Baron, MarketWatch
Last Update: 10:37 AM ET Jan. 13, 2006
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NEW YORK (MarketWatch) -- Shares of Hewlett-Packard reached nearly a five-year high early Friday after Goldman Sachs raised its rating on the PC and printer giant to outperform, citing broad business improvement.
http://www.marketwatch.com/news/yhoo/story.asp?source=blq/yhoo&siteid=yhoo&dist=yhoo&guid=%7B97A2E6DF%2D9DBC%2D4A26%2D9A0C%2D6B3C71037696%7D
HP has got plenty of money. It must give a decent retirement plan
and vastly improve the current proposal for the French retirement plan (PDA) which is a joke
which is a joke
IBM PENSION FREEZE 'OUTRAGEOUS' by CWA
RépondreSupprimerThe announcement by IBM Corp. that it is freezing the pensions of some 120,000 employees is outrageous, even by the "Gilded Age" standard of today's corporate executives, CWA President Larry Cohen declared in a statement Jan. 6.
"Just over the past few weeks, we've seen some of the richest corporations eliminating pension benefits wherever they can, just because they can," he noted. "Verizon recently froze pensions for tens of thousands of management and unrepresented workers. IBM's action sends an equally chilling signal," he said.
In other corporate pension raiding news, Verizon has anounced a drastic reductions to it's manager pension plans. While we shed no tears for management, we know that it's only a matter of time before the other shoe drops and union members are targeted.
The Communications Workers of America and the Pension Rights Center have created a new website to give management and non-represented workers at Verizon Communications a way to voice their outrage about Verizon's assault on their retirement security, and to keep public attention focused on this disastrous decision.
Through the site, www.verizonretirementwatch.com, Verizon employees and their supporters will be able to tell the world how the company's action threatens their future by betraying the promises Verizon made to thousands of employees.