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  • cd_iso cd_iso Dec 9, 2012 10:16 PM Flag

    IBM's 401k change.. Big blue, now do others follow?. . .

    From: latimes

    IBM is making changes to its employee benefits that other large companies may imitate.

    The technology firm will begin making contributions to employees' 401(k) accounts in lump-sum annual payments, rather than at the time of each paycheck. It's a move that will help IBM cut retirement plan expenses.

    Employees were notified this week that matching contributions would be made just once annually, on Dec. 31, beginning next year.

    "This change reflects our continuing commitment to invest in our employee 401(k) plans while maintaining business competitiveness in a challenging economic environment," IBM spokesman Doug Shelton said.

    The end-of-the-year 401(k) match won't be unique to IBM, but experts say the Armonk, N.Y., company's move could lead other major employers to consider making less frequent contributions.

    "IBM is one of the world's most influential plan sponsors," said Mike Alfred, chief executive of BrightScope Inc., which rates corporate 401(k) plans. It places IBM's among the top 30 plans at large employers. "Everyone in the benefits industry will pay close attention to whatever IBM does."

    Across the country, some 60 million workers participate in 401(k)s, which have become a key source of retirement savings. Most companies match from 3% to 6% of the amount that the employee contributes to the account. Contributions are exempt from income tax, and investment earnings grow tax-free until withdrawal.

    Although the amount that employees will receive won't change, those who leave IBM before Dec. 15 won't receive that year's 401(k) matching contribution, unless they're retiring. That's a disincentive for those considering jobs outside IBM.

    IBM matches employees' 401(k) contributions dollar for dollar up to 6% of eligible pay for those hired before 2005. Those hired later are eligible to receive up to 5% of pay. IBM also makes automatic contributions, ranging from 1% to 4% of pay, even if the employee doesn't contribute to the account.

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