IBM shatters the American dream
Golden Pond drained
IBM, the bastion of capitalist surety, has downgraded its employee pension plan again.
The last Big Blue pension retreat applied only to new employees and employees below a certain age, as though recognizing that though society is in a state of flux, only the younger generation need get used to the idea of an uncertain future.
Many existing IBM employees kept their fixed guarantee of a nest egg when they retired - until now, that is.
Two thirds already had their pensions switched from defined benefit (guaranteed pension income) to defined contribution (income guaranteed only for the pension company).
Now everyone, including executives, will have their IBM pension plans frozen in January 2008. IBM will thereafter only contribute to their own private 401(K) pension plans.
Even those blue fools who spent decades expectantly slogging themselves half to death in the pay of the man have to swallow the new terms.
This means that if the pensions funds get caught with all their eggs in one basket by another red herring boom, their wards can help them carry the loss.
IBM is understandably taking a lot of flak over this, not the least from the 6,000 unrecognized union members among its US staff, most of whom where recruited the last time the firm reduced its pension, in 1999.
It would be unfair, however, to pour too much scorn on Big Blue for caving in to what it says is economic reality: "Look at IBM and other companies in the industry," said a spokesman.
"We have to do something to maintain our competitive balance because many IT companies don't have a pension scheme," he said.
If enough IBMers join the union they might be able to reverse the slide. But what good would that do employees in the long run if IBM cannot compete with its Usonian rivals, let alone less regulated competitors emerging in China and India?
The Communications Workers of America Union won changes to IBM's 1999 pension scheme in favour of some employees who, nearing retirement, faced having their pensions halved. But that battle is still being contested by IBM's lawyers in an appeal court.
That contest looks irrelevant now that IBM has frozen its pension plan altogether - unless the union can use this latest news to galvanize its members and gain enough support in IBM to win a vote of recognition.
Perhaps also, next time industry finds its pension funds find awash in a bubble of cash, it might prudently decide to keep up their payments and not - as so many companies did in the late 90s - snatch the excuse to take a pension holiday.®