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IBM remakes its match

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If your company matches your retirement savings, that payment probably shows up on your pay stub every other week or so. This week IBM notified employees it’s changing its 401(k) match. The company will make one lump-sum payment per year. What’s the difference? Potentially, a lot of money.

Nancy Hwa with the Pension Rights Center has been keeping lists of companies that have frozen their pension plans or cut their 401(k) matches. When she heard about IBM’s latest move?

“My first thought was, am I going to have to start another list?” she says. “It seems like it’s just another step in this trend of employers moving away from helping their employees…save for retirement.”

Here’s one way employees stand to lose. If they leave the company before December 15, they won’t get that year’s contribution, unless they retire. That could amount to several thousands of dollars lost.

Like so many businesses in a lagging economy, IBM is under pressure to cut costs, says Alison Borland, vice president of retirement solutions and strategies at benefits consulting firm Aon Hewitt.                     

“This is a way to do it without significantly impacting those employees who stick with the company for the full year,” she says.

Even those workers could still take a hit. The match money won’t be working for them throughout the year. It’ll be working for IBM.

“So any gains in the marketplace from this investment money will not be anything in my benefit,” says Earl Mongeon, an IBM worker for 34 years.

Mongeon, a senior process operator in Burlington, Vermont, says the 401(k) change is another blow to workers. Four years ago, IBM froze its traditional pension benefits. The company has cut thousands of jobs in recent years.

Aon Hewitt’s Alison Borland says only about 9 percent of employers pay their 401(k) matches at the end of the year, but she says more may follow IBM’s lead to save money.

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