Just in time for Christmas, IBM is making a big change in its 401(k) plan, and the decision that was disclosed in an email sent to employees on Wednesday immediately ignited a firestorm of criticism on a comments section at the website run by the union seeking to represent IBM workers.

IBM announces that it will no longer make 401(k) contributions to employees once a year rather than on a semi-monthly basis starting in 2013.

Plus, employees must be employed by Dec. 15 of each year in order to receive the company’s match.

It is not cutting company contributions.

Still, the moves angered IBM some employees, and Alliance@IBM said it wants the decision reversed.

“We are calling on IBM to reverse this decision,” Lee Conrad, the national coordinator for the union, told WRAL News.

“It hurts employees and their families who might be faced with an RA [resource action, IBM’s term for layoffs] during the year.

“As we all know IBM continues to fire workers throught the year and this just takes more money out of their pocket.”

IBM Defends Change

Doug Shelton, director of IBM Corporate Communications, defended the decision.

“IBM’s 401(k) Plans remain among the best in the industry – and the country,” he said in an email to WRAL News. IBM has long been an innovator in providing benefits that balance both employee and company needs.

“This change reflects our continuing commitment to invest in our employee 401k plans while maintaining business competitiveness in a challenging economic environment.”

IBM’s plan matches employee contributions dollar-for-dollar up to IRS limits for employees hired prior to 2005 and caps contributions at 5 percent for those hired in 2005 and later.

The fact IBM set an employment date of Dec. 15 in order to receive the annual contribution immediately set off alarm bells.

“Hi-ho the theft continues. 401(k) matches will only occur ONCE a year only if the IBMer is employed on Dec. 15th… so just lay off folks before then,” one poster wrote at the Alliance website.

Conrad made a similar point.

“Those that get terminated or RA’d before December 15th of every year do not get the match,” he said.

“So looks like IBM is setting themselves for cost savings when laying off in 2013,” added another poster.

Other comments:

“In its latest move to demoralize its employees, IBM just announced a change to how it will contribute pension amounts and matching contributions to 401K. IBm has decided it needs the cash more than employees and thus will hold onto it for the full calendar year keeping any gains for itself. IF you manage to stay employed through Dec 15, then you can have the contribution amount earned all year on the last business day of the year. But get let go on Dec 14 and IBM gets to keep it all. This time they didn’t even try to sugar coat it as if it was something good for employees.”

“Another way for IBM to save money from going into employees’ pockets was announced today by Randy MacDonald. The 401K Plus Plan matching contribution deposits are changing Jan 2013. Instead of being deposited semi-monthly it gets deposited at year end providing you are still employed on Dec 15th. This can be thousands of dollars saved per individual who gets RA’d before Dec 15th. Stockholders are surely laughing all the way to the bank over this one.”

On its website, Alliance proclaimed in a headline:

“IBM Management plays Scrooge again”

“In an email sent to IBM employees today (12/5), IBM once again short changes IBM employees, especially and specifically those who will most certainly be ‘resource actioned’ in IBM’s ‘Roadkill 2015,'” the union said, the “Roadkill” being a reference to IBM’s strategy for headcount moves.

“The Alliance@IBM calls on IBM corporate management to reverse this decision and to continue the semi-monthly plan,” the union added.

The Changes

The statement sent to IBM employees about the change follows:

“Beginning January 1, 2013, IBM is changing the timing of the IBM match
and automatic contribution for our 401(k) Plus Plan and Excess 401(k)
Plus Plan from semi-monthly to an annual contribution at the end of
the year. The percentage of the IBM match and automatic contribution
you receive – which makes IBM’s 401(k) plans among the best in the
industry – is not changing.

“You must be employed on December 15 of each year to receive your IBM
contribution for that year. For eligible IBMers, the IBM match and
automatic contribution will be deposited to your account on December
31, 2013 (and on the last business day of each subsequent year). Your
personal contributions are not affected by these changes. IBMers who
retire at any time, including those participating in the Transition to
Retirement program, will receive their match and automatic
contribution upon retirement, based on the eligible pay received
during that calendar year.

“Sincerely,

“Randy MacDonald”

MacDonald is IBM’s senior vice president for Human Resources.

What IBM Contributes

IBM provided an update on the 401(k) plan to clarify contributions:

• “If an employee contributes to the plan, IBM will match their savings dollar-for-dollar up to 6% of eligible pay for IBMers hired before 1 January 2005, and up to 5% for those hired after that date.
• “If the employee is eligible, IBM will make automatic contributions to their IBM 401(k) Plus Plan account, even if the employee doesn’t participate in the plan. The amount of automatic contribution earned — 1%, 2% or 4% of pay — depends on the pension plan formula an employee is eligible for on 31 December 2007.
• “The range of company contribution to employees can be anywhere from 6% to 10% of pay.”
 

IBM employs some 92,000 people across the U.S., according to estimates by Alliance.

Locally, the numbers are grim with under 10,000 workers across the state and just 5,500 in RTP with another 1,800 in Durham, the Alliance says.

[IBM ARCHIVE: Check out 10 years of IBM stories as reported in WRAL Tech Wire.]

(Editor’s note: This story has been updated to update IBM’s 401(k) plan details.)