7 ms·
IBM cancels 401k matching, replaces with proprietary pension fund RBA
- lisplist 3y agohttps://www.reddit.com/r/IBM/comments/17lc4jz/is_ibm_replacing_401k_with_rba/ https://www.reddit.com/r/IBM/comments/17lc4jz/is_ibm_replaci... link to the thread. Not sure why the link got replaced
- HumblyTossed 3y ago> Update: > So they are not replacing 401k, they are offering RBA separately. You are still able to contribute to your 401k. However they are not contributing to the 401k anymore. They will be contributing 5% of your salary to your RBA with no employee contribution needed. After 3 years of 6% interest (starting 2027) it will equal the 10 year US treasury yield. Where IBM will guarantee it’s no lower than 3% per year. That doesn't sound like a good deal at all. Anyone know what is prompting this change?
- lisplist 3y agoSpeculation is that it’s beneficial to IBM because the money will be under their management rather than Fidelity’s. What exactly they’re allowed to do with that money, I’m unsure.
- bluGill 3y agoPension funds are carefully regulated and cannot be in risky investments. IBM cannot invest in IBM, they have to invest in various bonds. Before pension regulations a few pensions invested in the.company and employees discovered that was a bad idea when the company went bankrupt just before they were set to retire and their pension value went to zero. I'm not sure if this is legally a pension, if not assume it is worth nothing. If it is the US government backs it and so if you work for IBM for 30 it is a great deal, pensions are defined income so you don't have to worry about if you will live to 66 or 120. (If like most you switch jobs it is terrible)
- lisplist 3y agoLegally, I believe this is a pension fund. Still, they have to be pocketing the difference somewhere because why else would they make such a controversial decision that also increases administrative overhead?
- justinclift 3y agoThe current decision making ranks at IBM can do plenty of shady stuff then depart, before legal problems come home to roost. Years and years at least.
- rchaud 3y agoPension funds invest in risky assets, just at a lower percentage than say a hedge fund with accredited investor status. The Ontario Teachers Pension Plan lost $100m to the FTX bandits last year. https://www.ft.com/content/29c67711-377c-4435-9c90-280852374e93 https://www.ft.com/content/29c67711-377c-4435-9c90-280852374...
- Analemma_ 3y agoIf you manage a pension fund, especially a public pension fund, putting any of the money in crypto should be grounds for immediate termination at the very least, and possibly civil and criminal penalties. There's no excuse for touching that radioactive shitpile with other people's money after the countless demonstrations of fraud and incompetence.
- notzane 3y agoTheir statement explains it pretty reasonably: https://www.otpp.com/en-ca/about-us/news-and-insights/2022/ontario-teachers--statement-on-ftx/ https://www.otpp.com/en-ca/about-us/news-and-insights/2022/o... > Our investment represented less than 0.05% of our total net assets > Naturally, not all of the investments in this early-stage asset class perform to expectations, however, since inception, TVG has delivered solidly on intended objectives.
- 3y ago
- bb88 3y agoYeah it's not good. Once the matching contribution is vested, the money is yours to do with as you please -- including potentially loaning the money out to yourself.
- 0cf8612b2e1e 3y agoAm I reading it right that you are just getting IBM defined X% rate of return? So even if the market does gang busters, you might get none of that upside?
- lisplist 3y agoFirst 3 years, yes. After 2026 you either get 3% or whatever the 10Y is yielding, whichever is greater
- 0cf8612b2e1e 3y agoSo now they can literally make money off of this “retirement plan”. Wow
- yborg 3y agoYou can bet that some big consultancy is flogging this idea and it will be cropping up far and wide, just like "unlimited time off".
- actionablefiber 3y agoSo they're basically switching employees from an investment plan where the employees profit from falling interest rates to an investment plan where IBM profits from falling interest rates. Except IBM also takes plenty of upside if interest rates stay high too, by paying way below-market yield for the first few years.
- danielvf 3y agoYes, the RBA seems an incredibly bad long term investment strategy. You are essentially switching to your retirement strategy being loaning your money to IBM at the lowest possible interest rate, vs investing with and growing with the American economy as a whole. The difference in compound interest between the two is going to epic over twenty to forty years. The SP500 has more than 50x since 1970. If you had your money in 10 year treasury bonds, that would be less than 12x. So you'd have 1/4 as much, and IBM would have 3/4 of what you would have had.
- pinewurst 3y agoFor clarity's sake though, we're talking about yield theft on what was IBM's already evasive 401k match. One's "real" 401k contributions remain separate, portable and their yield bounded only by IBM's limited choices/fees.
- bunabhucan 3y agoHow did their 401k match work?
- lisplist 3y agoThey used to wait until end of year to match funds until recently they switched to monthly matching. So if you left before end of year, your match didn’t pay out iirc. Now they’re getting rid of 401k matching entirely so suppose it’s a moot point.
- UncleOxidant 3y agoDidn't they get to write off their contribs to the 401k? And if they're now contributing to the RBA instead would they still get to write that off?
- Rebelgecko 3y agoI think outside of a few edge cases employee compensation is always a writeoff for the employer
- rlewkov 3y agoThey are doing this because it's better financially for IBM the corporation ... period ... full stop.
- fishpen0 3y agoDo these have any tax advantages to speak of like an IRA or 401k? Are they bankruptcy shielded?
- jonfw 3y agosimilar to a 401k, tax is paid when it's time to collect. When you leave IBM, you are have the option to collect it as a lump sum or annuity (taxed as income) or to roll it into a 401K or IRA
- UncleOxidant 3y agothe 3 years of 6% interest sounds good, though. But after that it sounds like it could be a lot lower.
- swatcoder 3y ago> Anyone know what is prompting this change? A lot of the free money that was flying around has dried up and it's easier to cryptically "rework our retirement benefits program" than it is to openly cut the unsustainable salaries that were offered during flush times. It's the same reason that everything's finally being monetized, massive layoffs washed through, and prices are being increased. At best, it'll be the soft deflation of an egregious 5-10 year bubble and we'll remember that you can't get paid $300k out of college to write glue code nor expect to get all your online services for free.
- pinewurst 3y agoIBM hardly paid anyone $300k out of college. If anything they were the big pushers for “new collar” == white collar work at blue collar wages. Scumbags.
- DanielHB 3y agoHaving you private pension fund be owned by the company you work for is TERRIBLE My father had almost all of his savings in a pension fund by a bank (he worked at that bank) that was later acquired by Santander. They completely screwed him over with his pension, lawsuits are ongoing for almost 20 years now. My father passed away last year still dreaming about all the money he was "about to get" from the lawsuits
- jghn 3y agoWhen I was at IBM mumbles years ago they cancelled their pension fund in favor of a 401K program. I don't remember the specifics of the classic pension fund except that it worked like a classic pension fund. I assume this is worse than either of the two. At the time, the old timers were annoyed as the conversions did not generally work in their favor, although the old old timers were allowed to stay on the pension.
- xienze 3y agoAnd when I was at IBM (left ten years ago), they had just put in a change to the 401k match where they didn’t contribute the match every pay period but rather all at once on December 31st... assuming you were still employed on December 15th of that year. Quit or get fired before that, kiss your 6% (some of the older folks had 8% I think) goodbye!
- jonfw 3y agoThey just reverted that change last year and went to monthly matching. shame that that only lasted a year
- brocket 3y agoI was there during that time too, drove me crazy when they announced that change. Pay wasn't competitive and now you're messing with our retirement? I'm sure someone in finance got rewarded for making it sound like benefits weren't changing but actually paying out significantly less averaged over the whole work force. I ended up finding another company in the area doing my same work for double the salary, but it costs me 10 months of 401K matching!
- beckerdo 3y agoYes this is true, "the conversions did not generally work in their (employee) favor, although the old old timers were allowed to stay on the pension". Once caveat was that the IBM older pension plan was more valuable than a 401k plan because IBM investment strategy was far better than the average 401k investor options. "Conversions did not generally work in their favor" for these reasons: 1) IBM originally announced (around 1999) that all active employees were converted to the less desirable 401k plan. After a lawsuit, IBM had a formula for who got the more valuable older pension. Two people have 18 years of service for IBM. The younger one (say 45 years old) had no choice but to switch. The older one (say 50 years) was allowed a choice. 2) IBM was able to control the amount for the 401k payout. Their pension value (easily calculated future value based on salary and years of service) was converted into present value based on IBM's estimation of the amount you could make in free market investments. So essentially they said "Your $2M pension is worth $36k today because we calculated you can make 20% per year in investing. Here's your $36k for 18 years of service." (By the way, IBM salaries were usually lower than most other companies because they always touted their great pension plan that no others could match.) Both these points were argued in courts. The first point was won by some employees, not all, only IBM knows. The second point was won by IBM.
- pinewurst 3y agoDoes anyone know if Red Hat employees are equally screwed? They were exempt from the IBM 401k-match-only-at-end-of-year game.
- dralley 3y agoOur 401k (and health insurance, etc.) is completely separate from IBM so I doubt it.
- wredue 3y agoThat’ll change, although IBMs playbook is usually to grandfather people. The reason they do this is to create divides between employees. At some point, if you’re a late retiree, you’ll be one of that last on the better plan, and all the younger guys will actively support measures to get rid of you, cause of course your more expensive pension is totally the reason why raises cannot go out.
- linuxftw 3y agoPersonally, I applaud this decision. It should be illegal only offer a fund-based retirement account. Company provided 401k funds are nothing but kickbacks to Wall Street.
- lisplist 3y agoThe fund is based on 10Y treasury bonds which have significantly underperformed the S&P historically. First 3 years, you get a 6% guaranteed return. The remainder, you get only 3% guaranteed. For reference, my HYSA yields 4% a year.
- cool_dude85 3y agoPresumably IBM invests this money and pockets the difference. What a scheme - your employee retirement plan is actually a profit center. Fucked up that this could be allowed to happen.
- sidewndr46 3y agoThe financialization of IBM is now complete, as they attempt to make as money off their own employees as possible.
- naikrovek 3y agoGotta keep those profits going up, no matter what. Eventually everything gets liquidated for the sake of the shareholders, exactly as the shareholders intend.
- deleted 3y ago[deleted]
- paulddraper 3y agoAre you a shareholder?
- lisplist 3y agohttps://news.ycombinator.com/item?id=38101464 https://news.ycombinator.com/item?id=38101464 additional thread/Boggleheads Forum
- tivert 3y agoThis is wonderful. Workers have it too easy. Think of the poor shareholders. They need money too!
- UberFly 3y agoDon't forget your </sarcasm> tag. A percent will always think this is serious. :)
- cheriot 3y agoThe shareholders are poorer than they were 10 years ago. This company is an employment program for incompetent executives.
- wredue 3y agoThat talk Jobs did about businesses that fail because they promote sales and incompetence (because promoting competence leads to needing to fill roles). IBM is a case study for that. Also being a top heavy business with managers that protect their jobs through incredibly massive process (forget node_modules, IBM process is the only thing heavier than a black hole, in fact). There was a time when we were 18 managers for 24 employees.
- gustavus 3y agoExactly finally someone thinking of the poor executives and shareholders. These lazy workers I remember back in the days of my youth when a man would work for 23 hours a day with the only break being the 3 minutes you'd have to fish the bodies out of the molten steel before it set. Those were the days. remembers in Mr. Burns
- deleted 3y ago[deleted]
- catchnear4321 3y ago[flagged]
- neilv 3y agoURL looks wrong: https://old.reddit.com/r/IBM/login/ https://old.reddit.com/r/IBM/login/ Correct URL might be one of: https://old.reddit.com/r/IBM/comments/17lcfxe/401k_is_being_replaced_by_a_proprietary/ https://old.reddit.com/r/IBM/comments/17lcfxe/401k_is_being_... https://old.reddit.com/r/IBM/comments/17lc4jz/is_ibm_replacing_401k_with_rba/ https://old.reddit.com/r/IBM/comments/17lc4jz/is_ibm_replaci...
- lisplist 3y agoYes, I’m not sure why but the link got swapped out when I posted the story
- dang 3y agoIt's because our software uses the canonical URL when it finds one, and the link you posted lists https://old.reddit.com/r/IBM/login/ https://old.reddit.com/r/IBM/login/ as its canonical URL. I've changed it back now.
- winterqt 3y agoThe link was replaced again.
- dang 3y agoAhh - I misread the log - the problem is that the submitted URL redirects to a login page. Let's use https://old.reddit.com/r/IBM/comments/17lcfxe/401k_is_being_replaced_by_a_proprietary/ https://old.reddit.com/r/IBM/comments/17lcfxe/401k_is_being_... as suggested by neilv above.
- Yhippa 3y agoDoes this impact Red Hat as well?
- dralley 3y agoUnlikely. I haven't head anything about it and our 401k plan, health insurance and so forth has remained separate from IBM with no (public, at least) plan for that to change.
- neilv 3y ago> By introducing this retirement benefit within IBM’s Personal Pension Plan, which is stable and well-funded, This corporate communication sounds slimy, but I'm wondering about the "stable and well-funded" part: is this new infusion of money propping up the pension plan?
- kradroy 3y agoPropping up, probably not. Enriching IBM directly and indirectly, probably yes.
- johnbellone 3y agoCrypto.
- neilv 3y ago> IBM is able to provide a benefit to IBMers that also helps diversify their retirement portfolios. How is this helping diversify a retirement portfolio? (Compared to the usual advice of total-market stock and bond index funds.)
- Sylamore 3y agoIBM (and spinoff Kyndryl's) 401k Match only at the end of the year and only if you are still an active employee (or retired) was already bad enough. At least Kyndryl increased the match to 6% instead of only 3%. I left in 2023 from Kyndryl and due to the match only at end of year will not receive 401k matching contributions for 2023. This just makes their 401k even shittier than it already was.
- DueDilligence 3y ago[dead]
- bane 3y agoI can't wait until IBM eventually declares that the RBA, as a pension fund, is unsustainable for them and that they're going to move to a 401k or look at cash outs.
- renewiltord 3y agoSo those who want pensions can get pensions and those who want a 401k can get that. Seems fine.
- robotburrito 3y agoWhy did pensions go away? Is the dynamic nature of 401ks that much better? I always found it quite strange that not only am I expected to be an expert in my field, but also must be a near expert in financial investing to not end up being homeless in my old age.
- dfxm12 3y agoThe American experience is not designed for people like us, workers, to succeed. It is designed for a capitalist to extract more capital from us.
- bluGill 3y agoPensions went away because for most they were worse. If you stay at the same company from 25 to 65 and live to 105 they are better than a 401k. However if you found a different job (including because you got laid off) the amount you got was severely reduced (not to zero, but my dad could have got $.75 month starting at 65, if he had joined a pension at 22 when he started in 1975 until 1985 when the nearly bankrupt company finally laid him off. In 1985 he got a job with a company that instead offered a 401k, and there got a small nest egg. If he had stayed at that company until 65 he would have got something like 1000/month, which sounded great in 1973, but there was a lot of inflation in the next decade. I don't remember exact years or numbers above, but they are close enough for discussion.
- mhewett 3y agoMy wife worked at Boeing for seven years in the 1980s, in management. We tracked down her pension recently, hoping for a huge payout after it had been invested for 35 years. It turns out that she will get $96/month. We are very disappointed in the Boeing pension managers.
- Rebelgecko 3y agoPensions are expensive and susceptible to interest rate swings. Defined contribution plans like 401ks are easier (for companies) to budget for.
- pixelmonkey 3y agoThis was covered well in a PBS Frontline documentary, "The Pension Gamble": https://www.pbs.org/wgbh/frontline/documentary/the-pension-gamble/ https://www.pbs.org/wgbh/frontline/documentary/the-pension-g... And also in their followup, "The Retirement Gamble": https://www.pbs.org/wgbh/frontline/documentary/retirement-gamble/ https://www.pbs.org/wgbh/frontline/documentary/retirement-ga... Both can also be found on YouTube. I rewatched both just a few months ago, to understand the history a bit better. The short answer is that eliminating pensions was part of a larger restructuring in corporate America, wherein major companies that became megacaps in the 20th century used the Chapter 11 bankruptcy rules as a shield to eliminate employee pensions, while the burgeoning consumer finance industry of the 1980s and 1990s was all too eager to create a new fee-generating monster in the form of 401ks. These days, employer-matched 401ks with low-fee index funds are the only sane retirement tool available to middle-class workers, but much like US employer-sponsored healthcare, the system is about 10x more complex and 10x more precarious than it otherwise could be, and it benefits all sorts of ridiculous middleman paper-pushing rent-seeking corporations along the way. The news from IBM is ironic because employees will rightly revolt against this "pension" because now that Vanguard-style low fee funds have become ascendant in 401k accounts, a number of new unscrupulous financial actors are pitching "pension plans" to companies which are really opaque fee- and cash-grabs for employee retirement accounts.
- DesiLurker 3y agoIBM is zombie that needs to just die.
- altdataseller 3y agoDoes anyone really consider how much 401K matching an employer does when considering a job?
- willio58 3y agoWhy any single person would choose at this time to still work at IBM is beyond me. Talk about a company that saw its best days half a century or more ago