IBM Cutting Major Employee 401(k) Benefit

IBM has been a leader in employee relations - not because they always do what's best for their employees but because the changes they make are copied by other companies. This technology company was one of the first to eliminate pensions in favor of 401(k) plans, effectively moving the onus for retirement saving from the employer to the employee. Whether you agree with this philosophy of the individual being responsible for his or her own retirement is irrelevant - it's a reduction in company-funded benefits, putting more risk in the hands of the employees, and helping boost the financial industry and the companies that manage funds in 401(k) and administer the plans.

The rest of the country's corporations followed IBM's plan, greatly reducing their future expenses by reducing and eventually eliminating pensions.

Because of IBM's leadership, it's important to note when they decide to make changes to their employee benefits. The company recently announced that it is making significant changes to its 401(k) plan. Through the recession, many companies cut costs and took advantage of a workforce that felt trapped in an environment of high unemployment by reducing benefits. Although the recession is technically over, workers are still concerned about their job mobility, so many companies haven't restored the removed benefits.

Usually one of the first benefits to be on the chopping block is the employer's matching contribution to employees' 401(k) plans. IBM isn't eliminating the company's matching contribution, but they're making one change that's going to save them a lot of money while still allowing them to claim they match employees' contributions. Rather than contributing a percentage of an employee's salary with each paycheck, IBM is waiting until the end of the year to match employees' full year of contributions.

With this change, IBM will join the 9 percent of companies that already match 401(k) contributions only once a year. More companies are sure to follow now that IBM has reduced this benefit.

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