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IBM is planning to upgrade executive remuneration packages to compensate for freezing their pensions.

Details of executive pension arrangements are still being worked out, said a Big Blue spokesman. One idea being discussed was a supplemental programme.

"We believe that executives should be impacted to the same degree as [other] employees," he said.

Under IRC rules, any income above $220,000 cannot be counted in contributions to an individual's pension, said Brian Foley, managing director of Brian Foley & Co, compensation consultants.

Without a supplemental scheme, executives may not be able to make the fullest possible contributions under IBM's new scheme.

According to a source, IBM executives are being told that a non-tax qualified excess plan would be used to ensure they could still base their pension contributions on their whole income.

An IBM spokesman said this plan did not imply that, under the new pension arrangement as it currently exists, executives would be under-compensated or able to put less of their incomes, proportionally, into their pensions than less well paid staff.

Expressed as the sort of conundrum that is often necessary in order to have a conversation with a PR representative, IBM also denied the plan implied that executives' current arrangement had an absence of the supplemental arrangement they are now considering.

"No, it just means you are looking at the situation. It doesn't mean one thing or the other," he said.

In another twist of language, IBM is keen to point out that "80 per cent of employees would have an economic neutral effect" from the replacement of their company pension with the 401(K) scheme in two years time.

At face value, that says everyone is as well-off under a 401(k) as they would be under a company pension scheme. So what's all the fuss about?

What IBM actually means is that it will be making the same contributions to the 401(K) scheme as to company pension arrangements for most employees. What IBM does not mean is that employees will have an "economic neutral effect" at retirement. That's the whole point of the scheme.

However, observers have remarked on the generosity of IBM's intended 401(K) contributions, as have a number of Register readers. ®

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