IBM makes concession on pension
jon_flanders at SPAMcompuserve.com
Sat Sep 18 20:43:11 MDT 1999
Note the comments in this article on using the Internet to organize.
September 18, 1999
Under Fire, IBM Alters Pension Plan
By RICHARD A. OPPEL Jr.
In a major victory for opponents of a controversial type of new pension,
IBM said Friday that it would allow 35,000 additional employees to retain
their old pension benefits, backing down from an earlier move forcing them
to accept what for many would be far lower benefits from a new "cash
The company has been under pressure since it announced earlier this year
that it was switching to a cash-balance plan, prompting lawmakers to demand
age-discrimination investigations and IBM workers to seek to organize a
The International Business Machines Corporation, based in Armonk, N.Y., is
one of hundreds of large companies that have switched from traditional
pension plans to cash-balance pensions. In the old plans, employees earned
most of their retirement benefits toward the end of their careers, but
under cash-balance plans, employees accrue benefits equally over their
career. As a result, younger workers see their pensions grow faster, but
older workers can lose a significant amount of benefits.
That has prompted protests by middle-aged workers at a number of companies,
but most notably IBM, where furious employees used Internet sites to
organize rallies against the changes.
But with the about-face, any employee at least 40 years old and with a
decade of service -- as of June 30 -- will be allowed to opt for either
Tom Bouchard, IBM's senior vice president for human resources, said in an
e-mail to employees Friday: "We've heard from thousands of IBMers, many of
whom expressed deep concerns about how the changes would affect their
families and their long-term financial planning. While some of what was
expressed was not very productive, most of the comments we received were
thoughtful, professional and very insightful."
He continued: "We looked at whether we could extend the choice of which
plan to select to more people, without compromising IBM's competitive
position. We've decided that we can."
Lawmakers and others involved in the fight said the reversal, along with
other developments this week favorable to cash-balance opponents, would
embolden workers elsewhere to fight similar changes.
The Equal Employment Opportunity Commission said it would investigate
whether conversions to cash-balance plans discriminate illegally against
The Internal Revenue Service also said it was examining the issue and had
delayed approvals of pension conversions.
Representative Bernard Sanders, an Independent from Vermont and opponent of
cash-balance conversions, said the reversal "shows when workers stand
together, they can have a major impact, even against institutions as
powerful as IBM"
He added, "What IBM has essentially said is that we do not want to be
accused of being in violation of age-discrimination laws, and I think that
should send a very clear signal to other companies interested in doing what
Senator James M. Jeffords, Republican of Vermont, whose committee will hold
a hearing on the issue Tuesday, said the chief executive of IBM, Louis V.
Gerstner Jr., telephoned him with the news Friday morning. "He recognized
he had a problem, obviously, from the employees' reaction, and he listened
to his employees," Jeffords said.
IBM has maintained that the conversion is legal and does not discriminate
against any workers. Jana Weatherbee, a spokeswoman, denied that pressure
by any outside forces -- union organizers, lawmakers, Federal agencies or
anyone else -- prompted the move.
"We rethought what we had done because of what our employees were telling
us," Ms. Weatherbee said. "This is a question of balance, the need to
balance the needs of employees with what we can afford from a competitive
point of view. This strikes the right balance."
IBM had previously said the switch would save $200 million a year, which
would go to other employee compensation. "We never did this to save money,"
she said. "The change will have a cost to IBM, but the exact amount will
depend on how many people choose the new plan versus stay in the old one."
While many IBM employees rejoiced over the news, some want to see the fine
print. "I trust what they said. I just want to see details of the plan,"
said Bill Syverson, an IBM engineer in Essex Junction, Vt. "They're still
missing people under 40. IBM finally showed some positive movement, but I
remain skeptical until I hear the full story."
Phil Nigh, a 38-year-old worker at the Essex Junction plant, said he was
happy for his older colleagues but that he estimated that he would lose
about one-quarter of his pension because he did not make the new cutoff.
"What happened was this went from being really, really unfair to just
unfair," said Nigh, who has spent 16 years at IBM "It's a relative thing,"
The reversal also showed the new power that the Internet has brought to
As anger over the pension changes mounted, employees across the country
plotted strategy and organized rallies and other protests using the
Lynda French, an IBM employee in Austin, Tex., whose husband, also an IBM
employee, had just missed qualifying for the old pension under the prior
cutoff, started a Web site at www.cashpensions.com.
"The power of the Internet is just phenomenal," Ms. French said. "This was
the only way employees could get educated on the subject."
She added that before Friday's announcement her husband stood to lose 37
percent of his pension. "We were frantic," she said.
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