posted 01-06-2006 03:27 PM         

IBM to freeze its $48-bn pension plan in '08

AP[ SATURDAY, JANUARY 07, 2006 12:57:53 AM]
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BOSTON: Furthering corporate America’s move away from pensions, International Business Machines (IBM) said on Thursday it will freeze its $48bn pension plan in ‘08 and instead enhance its company-sponsored retirement benefits plan for its 1,25,000 US workers.

Nearly all IBM’s US employees — everyone hired before January 1, ‘05 — 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 ‘08, 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 company-sponsored 401(k) benefits 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% of salary; certain employees will be eligible to receive more.

posted 01-09-2006 01:52 PM         

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Originally posted by cstall:
American companies have been moving away from company funded pensions for 10 years.
Personally, I feel my finacial future is my responsibility, not my employer's.
BTW - KlasKat - thanks for the stroy - it's a good story of what's wrong with unions.

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I couldn't agree more....

posted 01-09-2006 04:45 PM         

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Originally posted by Bcoffman Gray Ghost:
No taxes have been paid, by you, on the money in a pension plan. It isn't any money that has been made. Pension money is just a promise that they will pay you more money at some point in the future. If you never get the money or paid any income taxes on it, is it really your money? You haven't really lost any money. If it is a choice of giving up any future claim on these monies and to be able to keep a job, which would you take? What I'm trying to say, it never was your money. Please understand that there is a lot of disappointment in not getting that money later. But, it never really was yours. JMO (Let the hate begin)

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Using this logic,
1) Companies get to deduct monies contributed to pension plans on your behalf from their tax liabilities. If they never paid taxes on this money, is it theirs?
2) When you are employed you sign a contract. Part of the contract is that you will be paid an salary for hours worked. If the company fails to pay the salary you have earned (you have not paid taxes) is it your money? If you haven't been paid you have lost (money) earned income. Pension plans contributions are likewise part of the signed contract and are earned based on the terms of that contract. Just because you have not been paid it yet does not mean it has not been earned. And the corporations would not make the money without the employees.

This is why IBM didn't say that the earned to date pensions would not be paid. Only that they would no longer continue to make contributions after Jan 1 2008. They tried that once before and were sued and lost in court. Not to mention the retroactive tax and penalty implications.

Also keep in mind the Pension plans are Federally guaranteed. If a company defaults on the pension plan through bankruptcy the government covers them. Where does the government get the money to guarantee the pension plans? From YOU the taxpayer by taxing you higher on the money you have earned. The corporations hadn't paid any taxes on the pension money.