Though recent bankruptcies in the troubled airline and auto industries have shown that pensions are prime targets for cuts when companies are in decline, not all retirement cutbacks have been in response to the threat of financial collapse. Increasingly, healthy companies, including information-industry giants like Verizon, Sprint and IBM, are restructuring the retirement plans of salaried workers just to buoy profits.
For IBM, which once touted some of the most generous benefits in corporate America, dismantling its multi-billion-dollar pension system is more a matter of growth strategy than economic survival.
The company plans to shift its US-based employees entirely onto 401(k) individual savings accounts by 2008. IBM recently reported to shareholders that planned pension changes in its domestic and international branches â€“ which employ roughly 329,000 people worldwide â€“ will save an estimated $2.5 to $3 billion over five years. The move caps the companyâ€™s effort since the 1990s to systematically scale back pensions to reduce costs.
IBM spokesperson Jon Bukovinsky cited "the rising costs" and "volatility and unpredictability" of the pension program as a threat to the companyâ€™s global competitiveness. He added that the restructuring is designed to phase in gradually to prevent people from losing anticipated benefits.
But those who have watched their earned benefits evaporate over the years express little sympathy for the financial concerns of the corporation, which posted a net income of $7.9 billion at the end of 2005.
"If they hadnâ€™t have robbed us of everything we thought weâ€™d planned for, Iâ€™d still be there," said Lynda French, a 55-year-old former IBM software analyst in Austin, Texas. She said the companyâ€™s overhaul of its retirement programs forced her to rearrange her life in ways she never imagined when she joined IBM in 1977 â€“ lured by the generous benefits offered at the time.
French said she "was forced to retire early," because in addition to scaling back pension earnings, IBM was converting its retiree health plan from a long-term coverage program to a lump-sum account. The new plan, she calculated, would cost her and her husband, also an IBM employee, several hundred dollars more in monthly insurance costs. She worried that if she did not pull out before the new plan kicked in, she would be unable to afford adequate medical care for her family.
French noted that the company is rolling back benefits while its executives enjoy compensation packages in the millions. "If they really cared about cutting costs," she said, "I think they should be cutting theirs a tad. â€¦ They leave with a golden parachute, you know, and the employees donâ€™t."
In the late 1990s, IBM drew the ire of older employees by moving pensions onto a so-called "cash-balance" plan. By eliminating the progressive structure of the old plan, which pegged benefits to seniority, the company in effect gutted the benefits that senior workers had anticipated throughout their careers. While employees litigate a class-action suit charging that the scheme was age-discriminatory, Congress is poised to pass legislation that would legitimize future cash-balance conversions under certain conditions, shielding corporations from employee lawsuits.
Bill McGreevy, a 49-year-old information-technology specialist in Wingdale, New York who caught the tail end of the cash-balance switch, estimates that when he retires, he will be supporting his two children on a pension worth $15,000 a year, or about half of his entitlements under the old plan. Compounding the loss is the soaring cost of IBMâ€™s healthcare coverage, which McGreevy predicts will pose an even heavier burden in retirement.
"I might have a white-collar job because Iâ€™m salaried," he said, "but I consider myself gray-collar now. â€™Cause I ainâ€™t getting ahead. Iâ€™m just falling behind."
Joining industrial workers who have long leveraged union influence to protect pensions, IBM employees have formed Alliance@IBM, an affiliate of Communications Workers of America, to defend their benefits and develop collective bargaining power.
The Allianceâ€™s advocacy mission is the main reason McGreevy has not yet left the company; he is sticking around to help organize other workers, especially the younger hires now replacing the last generation of IBM pensioners.
"You should protect yourself, you know," he said. "â€™Cause everybodyâ€™s going to be a retiree someday... If they donâ€™t join in the fight, itâ€™s all going to be taken away from us, eventually."