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Technology Stocks : IBM -- Ignore unavailable to you. Want to Upgrade?

To: Arrow Hd. who wrote (5140)	5/6/1999 11:16:00 PM
From: George W Daly, Jr.	Read Replies (1) \| Respond to of 8220

Well, this will be my last post on this topic since we need to get back to making this stock go to 500 and fund my retirement <G>. Heres a USA Today article about cash balance pensions and IBM. I personally think its the way to go as the current plan is not flexible enough in todays real world of selling off divisions, hiring more older employees in services group from other companies who stand to get zero from the existing plan, layoffs, etc. search2.usatoday.com:80/plweb-cgi/fastweb?state_id=926046052&view=default&numhitsfound=1&query=cash%20balance%20pension&query_rule=%28$query%29&docid=372&docdb=news&dbname=news&operator=AND&TemplateName=predoc.tmpl&setCookie=1 For those questioning my methodology From my mailing (which by the way is not the same one that went to people who are eligible to make a choice in plans, they may have had some bonuses or something): "Your Personal Pension Account will open July 1, 1999 , with a lump-sum balance that expresses in today's dollars the benefit you've earned under the current plan. If you have been continuously employed by IBM for at least one year on June 30, 1999, your opening balance will be the greater of: The value of your benefit under the current plan, as of June 30, 1999 payable at age 65; or An estimate of what you might have earned by now had the Personal Pension Account been in effect during your entire career at IBM. This formula is: your average pensionable pay over the last five years, multiplied by 5%, multiplied by your years of service" Examples shown: Employee age 35, 10 years, current pay is 55K base, 5.5k variable. current retirement plan benefit, payable annually beginning at age 65 is $8800. Personal Pension Account opening balance on July 1, 1999 is $26,250. Employee age 45, 15 years, current pay is 64K base, 6.4K variable. current retirement plan benefit, payable annually beginning at age 65 is $14,900. Personal Pension Account opening balance on July 1, 1999 is $49,461. The examples go on to show how those amounts would build up at various ages but make some interesting assumptions of 5% annual salary raises and 7% interest rate (amusing since we will be getting 5.5 % this year). What I don't know is how the provision about "value of your benefit under the current plan" works out for the over 20 year crowd. I know it doesn't help the under 20 at all since vested rights in the current plan are peanuts until you get within a few years of retirement and then it has a very steep slope on it. As for the new plan, here is the wording in the brochure. "Pay credits:Each month that you work for IBM, your Personal Pension Account will be credited with 5% of your pensionable pay -- e.g. your base pay (or on-target earnings beginning January 1, 2000, for employees paid on commission) and variable pay. Interest credits: Your account is also credited with interest each month at an annual rate equal to the return on one-year U.S. Treasury bills, plus 1%. The interest rate changes annually. For 1999, the annual interest rate is 5.5%. " As I said, I don't plan to comment on this anymore after this note, but I think people are overreacting a little if you're sending letters to Gerstner on this. We still have TDSP, the IBM stock plan, good salaries, and now a predictable pension plan that you can take with you. Plus IBM is starting to offer stock options to the top technical people, admittedly just a few right now but hopefully this will grow over time. I don't think you're going to see a lot of people running for the exits due to this and even if they do, the facts are a lot of other people want to work here and supposedly this new plan will help in the hiring process. You can have your own opinion on that but the IBM human resources people claim it will so I'll take their word for it for now. Time to hit the hay. Hopefully we can put this behind us and keep going on whats looking like a great year... GW