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Friday, December 28, 2012
by David B. Brandolph
IBM's recent announcement that, starting in 2013, it will make
matching and automatic nonelective contributions to its employees' Section 401(k)
plan accounts only once annually at the end of each year—and only for those
employed as of Dec. 15 each year—has attracted much attention and is likely to
prompt other employers to think about making such a change.
However, benefit plan professionals told BNA in recent interviews
that it is too early to predict whether IBM's move will lead to a wave of plan
sponsors following the technology industry giant's lead.
Several industry consultants said they thought IBM's primary motive
for the change was to reduce its costs by freeing itself from contributions for
employees who leave the company during the year, a move that would help the
company remain competitive. This, they said, would likely be the goal of most
other plan sponsors that might follow in IBM's footsteps.
IBM declined to discuss the move with BNA.
Representatives of plan sponsor advocacy organizations disagreed,
saying the primary driver for IBM was to retain existing employees and to use
the funds that would otherwise need to be contributed earlier in the year.
This, they said, would help the company maintain its competitiveness.
The move did, however, anger at least some current IBM employees and
provide fuel to union-sponsored groups trying to organize these employees.
Specifically, employees expressed concern on a union website that IBM's action
foreshadowed additional layoffs and would reduce retirement savings even for
those who stayed with the company.
In addition, a union organizer said, employees were troubled by the
fact that IBM's move might increase their investment risk, because putting the
full amount of the employer's contributions into the market at one time could
leave the investment more vulnerable to a steep market decline, because they
would now need to invest a more significant amount all at the same time.
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