Bloomberg BNA's Pension & Benefits Blog is a special resource offered by Bloomberg BNA to provide commentary and insight on news and trends reported in our publications: Pension & Benefits Daily, Pension & Benefits Reporter, and the Benefits Practice Resource Center. The authors of the blog are members of our Benefits Practice Resource Advisory Board and members of staff (who contribute summaries of some of their recent stories).
The ideas presented here are those of individuals, and Bloomberg BNA bears no responsibility for the appropriateness or accuracy of the communications between group members. We reserve the right not to post comments that are abusive or otherwise objectionable.
Communications regarding the Pension & Benefits Blog may be directed to Dana Domone via e-mail to firstname.lastname@example.org.
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.
to post a comment.
Church Plan Challengers Win 3rd Victory; Magistrate Agrees With Majority Position
Treasury, IRS Modify Tax Code Rules To Expand Access to Retirement Annuities
Recent SCOTUS Benefit Decisions Pose New Questions for Litigation, Panelists Say
High Court Kills Presumption of Prudence, Gives Some Hope to ESOP Fiduciaries
Overview of U.S. v. Windsor and its Effect on Employee Benefits