Sun 22 Jan 2006
A positive view on IBM’s pension changes
Posted by Sim' under Performance
James K. Glassman from TCS Daily writes a well considered article about his take on the announced changes to IBM US pension plans.
IBM announced last week that it would freeze the old-style pension plans it provides to more than 100,000 employees and instead offer an improved version of its 401(k) plan. This is no run-of-the-mill accounting change or cut-costing measure. It is a major philosophical and economic shift for a bellwether corporation.
James points out that this removes the potential liability from taxpayers if IBM were to overextend and have difficulty meeting its pension obligations, and it also provides IBM’s employees with much greater control and choice in their investments.
Fortunately for me, James does a pretty good job of summarising the current systems, and how IBM’s new 401(k) system will work.
James also points out that studies show a good track record for employees managing their own 401(k) plans - and seem to be making good progress towards adequate funding for retirement.
Interestingly, James also mentions some of the less obvious benefits of a good 401(k) system:
Tags:401 k, ibm, pension plans, social securityIBM’s decision offers a good model for reforming Social Security. Let new workers waive Social Security taxes and benefits and choose a 401(k); let current workers freeze their benefits and pay lower payroll taxes while boosting their 401(k) as a substitute. The U.S. government will have a sounder fiscal future when, like IBM, it stops treating adult American workers like children.