IBM Is Changing The Terms Of Its Retirement Plan, Which Is Frustrating Some Employees

IBM CEO Ginny Rommety
IBM CEO Ginny Rommety

[credit provider=”AP”]

IBM employees were told in an email yesterday that changes were coming to their 401(k) retirement-savings plan.The tech giant was once known for having some of the most generous 401(k) benefits in the tech industry.

IBM will cease its semimonthly contribution schedule and instead make one contribution annually, at year’s end.

This change has frustrated some employees, two sources at the company say. Employees are also venting about the change on a web site run by one of IBM’s unions.

Specifically, employees are upset that IBM has enacted a new rule before it contributes its matched contributions this year. An employee must be employed on Dec. 15 in order to get the matching contribution. The only exception is for employees who retire. These employees will still get their match, calculated to their last day on the job.

Employees who are laid off won’t get matching contributions. If IBM lays off a worker prior to Dec. 15, IBM will not match the 401(k) contribution at all, spokesperson Doug Shelton told WRALTechwire.

IBM has promised investors it will deliver earnings per share of $20 by 2015, according to its Roadmap 2015 plan. And it’s fine that the company has a bold goal to make money. But some employees feel that the cost cuts IBM is making to help achieve this earnings growth have fallen most heavily on long-term workers, the people who have built a lot of value for IBM and its shareholders. 

IBMers also say the company has been reducing their pay in other ways. For instance, this summer, employees in IBM’s North American Global Technology Services were told not to expect pay raises in 2012. Some IBM salespeople have complained that the company finds ways to not pay them their commissions.

In the case of 401(k) contributions, IBM’s plan is still more generous than most. Employees hired prior to 2005 get a dollar-for-dollar match, up to IRS limits, and those hired after that date get up to a 5% match.

Still, after years of quiet layoffs, morale at the company is low, several employees told Business Insider, and this latest benefits change adds to the frustration.

Employees say that IBM has been reducing its North American workforce and replacing them with lower-cost workers overseas. While these employees recognise the need for IBM to keep its costs competitive with rivals, they question whether the replacement workers can do the job as well and whether this is the smartest way for the company to meet targets.

IBM stopped reporting its workforce numbers in 2010, but a recent report by Computerworld showed that IBM has more employees in India than it does in North America today: 92,000 workers in the U.S. and Canada compared to 112,000 workers in India. That’s a big shift in just the past three years.

We contacted IBM and IBM declined comment.

Here’s the 401(k) email that’s the talk of IBM right now:

Dear IBMer,

Beginning January 1, 2013, IBM is changing the timing of the IBM match and automatic contribution for our 401(k) Plus Plan and Excess 401(k) Plus Plan from semi-monthly to an annual contribution at the end of the year. The percentage of the IBM match and automatic contribution you receive – which makes IBM’s 401(k) plans among the best in the industry – is not changing.

You must be employed on December 15 of each year to receive your IBM contribution for that year. For eligible IBMers, the IBM match and automatic contribution will be deposited to your account on December 31, 2013 (and on the last business day of each subsequent year). Your personal contributions are not affected by these changes. IBMers who retire at any time, including those participating in the Transition to Retirement program, will receive their match and automatic contribution upon retirement, based on the eligible pay received during that calendar year.


Randy MacDonald
Senior Vice President, Human Resources