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January 06, 2006 at 04:41 AM
One of the biggest private U.S. employers is backing away from the defined benefit pension plan concept.
The employer, International Business Machines Corp., Armonk, N.Y., says it will be freezing its defined benefit pension plan and beefing up its 401(k) retirement savings plan in 2008.
IBM is making the retirement plan changes in part to give the company more predictable retirement plan costs, the company says.
But “we also believe these are prudent and balanced steps at a time of uncertainty and conflicting legislative and regulatory directions about defined benefit retirement plans in the United States,” Randy MacDonald, an IBM senior vice president, says in a statement.
The White House and Congress have been struggling in recent years to pass a defined benefit pension system reform bill. IBM has been one of the leaders in efforts to persuade officials to come out with laws that encourage employers to stay in the defined benefit plan system.
The changes in IBM’s plans, scheduled to take effect Dec. 31, 2007, will not affect current U.S. retirees, former employees with vested benefits or current employees who retire before Jan. 1, 2008, the company says.
IBM says it will be compensating for the defined benefit plan freeze by increasing 401(k) plan match contributions to as much as 15% of employees’ pay.
