IBM to freeze pensions at end of next year

WASHINGTON -- International Business Machines Corp. said yesterday it will freeze the pension plans of some 120,000 employees in the United States, at the end of next year, and will offer instead a more generous 401(k) plan.

IBM's move is part of a corporate stampede away from traditional pension plans. IBM officials called the change essential to remain competitive with foreign and domestic rivals.

The freeze means that benefits earned by current workers up to Jan. 1, 2008 will be preserved, but after that date they will not increase. The company already had eliminated traditional pensions for new hires starting last year.

The company said it expects the changes, along with changes it expects to make this year for workers in other countries, to cut worldwide retirement-related expenses by $450 million to $500 million this year and by $2.5 billion to $3 billion through 2010.

The action adds IBM to a growing list of American employers that have frozen or terminated pension plans to cut costs or, in some cases, to emerge from bankruptcy. Such changes are especially common in industries where foreign competition is tough, such as steel, or where new domestic competitors have arisen -- such as airlines and high-tech.

Traditional pensions, which typically promise a specific benefit based on pay and years of service, cover some 34 million workers and retirees. Roughly 29,000 of these plans remain today, down from 112,000 in 1985.