IBM Deutschland Postpones Move from DB to DC

July 11, 2006 (PLANSPONSOR.com) - At least one prominent international firm appears to be temporarily backing away from plans to move workers from a defined benefit to a defined contribution pension plan.

IPE.com reported that IBM has, at least for now, called off plans to make the move for its German employees because worker representatives opposed it.

According to the IPE.com report, the giant computer and technology services firm wanted to move its German employees not already in a DC plan  –  who make up half of the 22,000 total German employees – to such a program. That would complete a trend dating back to mid-2000 when half of IBM’s workers first made the DB to DC move.

Officials said moving all workers to the DC program would save the company “several hundred million euros.”  

But worker representatives at IBM Deutschland, who must agree to pension plan changes, turned them down, according to IPE. They said the changes meant significant benefit cuts, particularly for 4,000 employees who were newer members of the DB scheme.

“IBM’s workers’ council has since obtained expert opinion that reflects that it is in a very good legal position to fight the proposed changes to pension plans,” said Rolf Schmidt, an official from the Verdi services union that is advising worker representatives at IBM, according to the report.

The move mirrors a trend affecting scores of US companies. In efforts to control costs, Canada-based Nortel and US-based Stride Rite announced plans last month to move employees from defined benefit pension plans to defined contribution plans (See  Nortel and Stride Rite Announce Move to DC Plans ). Also last month, G&K Services, Inc., provider of branded identity apparel programs and facility services in the US and Canada, announced that it plans to enhance its defined contribution plans and freeze its defined benefit plans, effective January 2007 (See  Apparel Company Joins Line of Cos. Freezing DB Plans ).

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