IBM, which employs 291,000 people worldwide, hotly disputes contentions it was ripping off its employees. But IBM did double last month the number of workers who could opt out of the new system and stick with the old. The whole issue centers on a 10-year trend in the pension field toward the cash benefit plan. Under such an arrangement, companies that offer pensions pay a fixed percentage of an employee's salary toward retirement benefits each year. The employer guarantees that the money it contributes, plus a rate of interest, will be paid out in benefits after retirement.
Employees tend to build up money toward their pensions fairly evenly throughout their careers.
They also can take what they've built up with the company to another job, as if it were a savings account. More than 300 companies, including Eastman Kodak Co., have converted to cash balance pension plans in recent years. The plans are popular among younger workers because they often can be shifted from job to job and frequently permit lump-sum payouts. Workers under traditional pension plans, on the other hand, are rewarded for their longevity with a company and accrue most of their benefits at the end of their careers. Benefits are calculated both on a worker's number of years with a company and his or her average salary for the last few years of work.