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IBM goes to lump-sum 401(k) plan

Under the plan, employees who leave IBM prior to Dec. 15 won’t receive that year’s 401(k) matching contribution, unless they’re retiring.

Seth Wenig/Associated Press/file

Under the plan, employees who leave IBM prior to Dec. 15 won’t receive that year’s 401(k) matching contribution, unless they’re retiring.

IBM is making changes to its employee benefits that may cause other large corporations to follow suit. The technology company will begin making contributions to employees’ 401(k) accounts in lump-sum annual payments, rather than at the time of each paycheck. It’s a move that will help the company cut retirement plan expenses.

Employees were notified this week that matching contributions will be made just once annually, on Dec. 31, beginning next year. ‘‘This change reflects our continuing commitment to invest in our employee 401(k) plans while maintaining business competitiveness,’’ IBM spokesman Doug Shelton said.

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The end-of-the-year 401(k) match won’t be unique to IBM, but experts say the company’s move could lead other major employers to consider making less frequent contributions.

‘‘IBM is one of the world’s most influential plan sponsors,’’ said Mike Alfred, chief executive of BrightScope Inc., which rates corporate 401(k) plans. It places IBM’s among the top 30 plans at large employers. ‘‘Everyone in the benefits industry will pay close attention to whatever IBM does.’’

Across the country, some 60 million workers participate in 401(k)s, which have become a key source of retirement savings. Most companies match from 3 to 6 percent of the amount the employee contributes to the account. Contributions are exempt from income tax, and investment earnings grow tax-free until withdrawal.

Although the amount employees will receive won’t change, those who leave IBM prior to Dec. 15 won’t receive that year’s 401(k) matching contribution, unless they’re retiring.

Bloomberg News reported that a worker organization, Alliance@IBM, said on its website that the change ‘‘shortchanges IBM employees.’’ Alliance@IBM, which is affiliated with the Communications Workers of America, has asked IBM management to reinstate the semimonthly plan. The group is trying to organize workers at the company with the goal of forcing IBM to engage in collective bargaining.

IBM matches an employee’s 401(k) contribution dollar-for-dollar up to 6 percent of eligible pay, for those hired before 2005. Those hired later are eligible to receive up to 5 percent of pay. IBM also makes automatic contributions, ranging from 1 to 4 percent of pay, even if the employee doesn’t contribute to the account on their own behalf.

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