San Francisco: Becoming yet another U.S. company to move away from a traditional pension plan, IBM said on Thursday that it intends to save billions of dollars by freezing its current retirement policies and will instead boost its 401(k) savings offering for employees.
International Business Machines Corp. said the changes would affect existing employees and fresh recruits but not the 125,000 current US retirees, former employees with vested benefits or employees who retire before January 1, 2008.
In freezing its $48 billion pension plan, IBM has said it could save up to $3 billion over five years. IBM rival Hewlett-Packard Co. decided in 2004 to offer only a 401(k) to US employees hired from 2006.
IBM said changes to the US plans and changes under consideration in other countries would save $450 million to $500 million for 2006 and between $2.5 billion to $ 3 billion for 2006 through 2010, based on year-end 2005 pension assumptions. IBM has more than 329,000 employees worldwide.
The information and technology company said it would redesign its 401(k) savings plan to give current participants an annual company-funded contribution of as much as 10 per cent of their pay.