Will IBM’s 401(k) Change Spur Others to Follow?

Employers are always on the lookout to save money, especially in uncertain times like these. So it’s probably not a huge surprise to see a story titled “Benefits Leader Reins in 401(k)s” on the front page of today’s Wall Street Journal detailing IBM’s decision to institute an annual lump-sum match for the company’s 401(k) plan participants. (As someone reminded me, it’s not every day a 401(k) story makes page 1 in the Journal.)

The WJS reports that IBM, starting in 2013, will make a lump-sum contribution to employees’ 401(k)s each year on December 30, instead of contributing on a semi-monthly basis. (The news was reportedly delivered to IBMers via an email on Wednesday from IBM  Senior Vice President of HR Randy MacDonald.)  If plan participants leave the company before that date, they won’t receive the match.

No doubt  that change should net IBM some significant savings in terms of cash flow and (especially) expenses.  (It also should give talent thinking of leaving before year-end reason to reconsider.)

In a statement, IBM said that the change “reflects our continuing commitment to invest in our employee 401(k) plans while maintaining business competitiveness in a challenging economic environment.”

But as you might imagine, not everyone sees it as a good thing. On its website, Alliance@IBM (CWA Local 1701) promptly posted a petition titled “IBM must REVERSE the decision changing the IBM match 401(k) contribution.”

True, lump-sum matches are rare.  According to a study released two weeks ago  by the Chicago-based Plan Sponsor Council of America,  just under 14 percent of employers match on an annual basis. Just under 5 percent do so quarterly.

PSCA Interim President and Executive Director Robert A. Benish told me earlier today that the number of companies that have taken this route over the years has held pretty steady.

But will having IBM, a company that’s viewed as a “benefits leader,” change that? Is the IBM name enough to give other Fortune 500 companies reason to take a closer look at this approach?

Martin Schmidt, an advisor with the Institutional Retirement Income Council in Chicago, told me he believes that’s a real possibility. “Many will look at IBM and say, ‘If they’re doing it, then we can too,’ ” he says. (He adds that the approach makes a lot of sense for companies with high turnover.)

In this particular case, Schmidt explains, you have a clear benefits leader that’s taking the lead. Guess time will tell if that’s enough to spur others to follow.

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