When IBM altered its pension plan July 1, tempers of some workers flared at the company.
"It's a total ripoff for mid- to late-life employees," charges Lynda French, an IBM employee in Austin, Tex.
Now disgruntled workers at IBM - mostly veterans and many Republicans - have organized and conducted such a smart lobbying campaign in Congress that it's making an impact.
As a result, a change in pension law appears likely.
IBM's action last month turned a bunch of "sophisticated computer nerds" almost overnight into activists, says Karen Friedman, with the Pension Rights Center in Washington.
When IBM's CEO visited Austin, a plane flew overhead dragging a banner: "IBM Stole My Pension."
What the world's largest computermaker did was switch from a traditional "defined-benefit" pension plan to a "cash-balance" plan.
These relatively new plans have some attributes of a 401(k) plan, but remain a pension plan. An employer creates hypothetical employee accounts to which the employer contributes a percentage of the employee's pay each month, as well as interest.
For younger employees, benefits build up steadily over time. Many will be better off, especially since they can take the cash balance with them when they change jobs.
For IBM, the new plan was regarded as essential for competitive reasons in a fast-changing, youthful industry.
In a statement to employees, IBM noted that 3 out of 4 competitors do not provide pensions, though they do have 401(k) savings plans. These include Compaq and Dell. Even fewer provide retirees with health benefits, which IBM just shrank.
Saving $200 million this year alone with the new pension plan, IBM will use the money to boost regular pay. "We needed to be more competitive in cash compensation," says spokeswoman Jana Weatherbee.
But that doesn't cut it with some mid-career employees. "A lot of families are devastated," says Mrs. French.
Here's the hitch: While all accrued benefits from traditional plans must be deposited in a new cash-balance account, employers have some leeway in estimating that amount.
Further, under traditional plans, pension benefits build faster in the years just before an individual retires. And any plan for early retirement may be shot.
That's what's happened to Mrs. French's husband, Tom. Now 49 years old, he had planned to retire at 55. Mrs. French claims that the switch led to Tom losing nearly 40 percent of what his pension would have been worth under the old plan. As a result, Mr. French will have to work until at least age 65 to make up the difference.
Mrs. French has taken action. In June she set up a Web site (www.cashpensions.com) where she posts her research on cash-balance pensions not only for co-workers at IBM but also for anyone who has had to deal with such a switch.
"Got the 'Cash Pension Blues'?" the site asks. "Welcome Boomers." It's a fancy enough site to depict a couple jiving on the home page.
It's also had almost 42,000 hits.
That's a small number compared to the millions of corporate employees that have faced similar pension switches, many in the past several years.
The trade publication Pensions & Investments last May listed 325 companies now providing cash-balance plans, and estimated that as many as 800 or so have switched, including such companies as AT&T and Chase Manhattan.
But when IBM announced its switch, the prospect for new regulatory legislation suddenly improved.
"It's the IBM version driving this whole thing," says a Capitol Hill source.
Hundreds of IBM workers are expected to show up for a "town meeting" tomorrow in Winooski, Vt., organized by Rep. Bernie Sanders, an independent. Some 7,500 of his constituents work for IBM.
An employment-law attorney is scheduled to talk about whether IBM's plan amounts to illegal age discrimination.
Mr. Sanders and 19 other members of Congress last week asked the Internal Revenue Service to see if cash-balance plans violate age-discrimination laws.
Tort lawyers are bringing class-action suits against firms with cash-balance plans that, they charge, discriminate. Not all do. They say companies are trying to save money at the expense of older workers.
The Republican tax-cutting bill just passed by Congress includes a provision requiring companies to disclose to employees significant losses in benefits. It has bipartisan support. It could even be toughened if the White House and Congress reach agreement on a tax-cutting bill this fall.
Sanders also plans to introduce a bill requiring companies to let workers select the old plan if their employer switches to a cash-balance plan.
Norman Stein, a law professor at the University of Alabama, Tuscaloosa, describes the pension trend as "pretty frightening." It hits workers when it may be "too late" to seek a new employer or save much more for retirement, he says.
(c) Copyright 1999. The Christian Science Publishing Society