NEW YORK -- Starting next year, International Business Machines Corp. will exclude new workers from its contested cash-balance pension plan and offer them only a 401(k) savings plan.
The decision comes 10 months after a federal judge ruled the company's cash-balance pension plan discriminated against older workers because it cut their expected pensions significantly. The company has said it will appeal, but in the meantime agreed to a settlement with some of the workers who sued.
The settlement, which is capped at $1.4 billion, is awaiting court approval.
IBM said the switch to a 401(k) plan would not affect the approximately 135,000 current employees covered by the cash-balance plan, who also have company-sponsored 401(k)s as part of their retirement investments. Workers who joined the company before 1995 also have traditional pension plans.
Employees with the new 401(k) plan will be able to put 6 percent of their pay into a 401(k), with a dollar-for-dollar company match.
The new 401(k) will also include annuity and disability options.
"IBM's new approach, which many companies have adopted, will allow IBM to continue to provide a competitive retirement benefit to new hires in an uncertain pension regulatory climate," said Kendra R. Collins, a company spokeswoman.
Collins said employees eligible for the new 401(k) will not have other company-sponsored retirement plans.
A memo about the change was posted on the company's internal website. The company did not disclose the change publicly, but did notify managers who will be making new hires.
The website PlanSponsor, a trade publication, first reported the change.