A positive vote at the annual shareholder’s meeting could force the corporation to offer all employees a choice in the conversion of pension benefits to the cash balance plan it instituted in July, 1999. IBM has already offered the option to about half of its workforce.
Monday, the $32 billion, 750,000 member International Brotherhood of Electrical Workers (IBEW) reiterated its support to IBM employees. “We are here today to continue our support of the employees of IBM to ensure that the promises that were made to them by the company are kept,” said Union President J.J. Barry. “It is unconscionable that any company, let alone one with the status and prestige of IBM, would seek to implement benefit changes that would discriminate in different ways against older and younger workers alike.”
Cash balance plans allow employees to accumulate benefits steadily over their careers, generally better for younger, or more mobile workers. In conventional pension plans, such as IBM’s, older workers accrued most of their benefits in the last few years before retirement. The conversion hurts them.
That’s why IBM’s cash balance plan has been controversial since its introduction. The vocal protests that the employees mounted, most prominently on several Web sites dedicated to protesting the cash balance plan, resulted in the resolution. They have succeeded in rallying the support of several large institutional investors.
In March, CalPERS, the nation’s largest pension plan, lashed out at its fellow plan sponsor. CalPERS president William Crist was quoted saying IBM’s conversion was “morally reprehensible,” “withdrawing promised benefits,” and “plain bad business.”
State Street Mum
Institutional shareholders who have said they will vote in favor of the shareholder resolution include:
- The public employee retirement systems of New York, Connecticut, Oregon and California
- The Teamsters Funds
- Marco Consulting Group
- The Longview Fund
- Proxy research firms Institutional Shareholder Services and Proxy Monitor
State Street Corp ., IBM’s largest investor, remains mum about its intentions.
IRS, SEC Next?
Even if the April 25 resolution fails, SEC rules could force the issue onto IBM’s annual meeting ballot in 2001 if the resolution receives at least 3% of shareholder votes. IBEW’s Barry vowed to support IBM employees “for as long as it takes.”
Meanwhile, a Congressional recommendation is also threatening IBM’s plan. A group of 60 US legislators, led by Vermont Rep. Bernard Sanders, recommended in February that the Internal Revenue Service disqualifies cash balance conversions which did not allow employees the right to choose between old or new pension options.