IBM's middle-age loyalists caught between old, new

Emory Keller's birthday came just 10 days too late last year, and it will cost him many thousands of dollars in annual retirement benefits.

An engineer who had seldom before complained in more than 20 years with IBM, Keller turned 40 on July 10. To be excluded from a hotly debated company pension plan change, Keller had to have been 40 by June 30.

Those 10 days will mean a loss of $30,817 in annual retirement benefits, or $2,568 a month. Based on his calculations, Keller would have received $76,076 annually if he retired on his 60th birthday under IBM's traditional pension plan. With the new one, he said he will get $45,259 yearly at age 60.

"I'm still can't get over it," said Keller, who works at IBM's computer processor manufacturing complex in Burlington, Vt. "I've been a good, loyal IBM worker for so many years, and this is no way to treat me."

Keller was not sure last week if he would head to IBM's annual meeting in Cleveland tomorrow, where the pension issue faces a vote of stockholders. But several dozen other veteran workers from around the country, as well as dissident employee leaders, union activists, politicians, stockholder groups and individual shareholders have vowed to converge on the meeting to furiously oppose the pension plan change.

They know well that the bid to reverse IBM's pension system from a traditional plan to one geared to younger, more transient employees faces almost certain defeat. But before it does, they want to get their message across to the company's top brass and directors.

Their point is not that IBM, once the gleaming symbol of corporate benevolence, has become an evil giant. But they do argue that the world's largest, richest technology company is now turning unnecessarily mean. Among the victims, they maintain, are the dedicated, longtime employees who helped the company rebound from debilitating losses in the early 1990s.

Keller, for example, joined IBM in 1979, when he was only 19. "IBM was considered a jewel of an employer and landing a job there was a real achievement," he said. While working at IBM, he attended school to get an advanced education. He said he has received excellent job performance evaluations from bosses over the years.

"I always put in longer hours and extra effort," he said. With the changes to his pension plan, those days are over.

"I no longer have any feelings of being especially dedicated to IBM," he said. "I look at IBM now without any semblance of loyalty. I now look at IBM and its competitors on a daily basis and see who will be better for me and whether I should stay at IBM or go elsewhere."

Since his pension package was reduced, he has worked less extra hours than in any of the previous 21 years at the company. "I do my job and nothing more," Keller said.

IBM, based in Armonk, N.Y., implemented the changes to its pension system for its 145,000 U.S. employees last July.

The company said workers who had been covered by traditional pension plans, under which employees accrue most of their retirement benefits later in their careers, would now be covered by new cash-balance systems. With the new plans, companies annually contribute money to an employee's pension fund, significantly sweetening retirement benefits for younger workers.

IBM first permitted 30,000 senior workers to remain with traditional plans. After furious criticism, the company expanded the waiver to 35,000 more workers. IBM insists, and independent compensation analysts and consultants agree, that its actions were neither extraordinary nor particularly anti-worker.

As one of the country's closest-watched companies, IBM has become somewhat of a bellwether of corporate America. But the controversy is not likely to have major ramifications through other companies, nor induce major legislation reining in pension systems, experts said.

At the most, the furor may slow plans at other companies to initiate their own pension changes. But the trend to switch from traditional to cash-balance systems is in full swing. It does benefit many younger employees and is not likely to be stopped, experts said.

The die is cast

In switching to a cash-balance plan, IBM joined more than 300 other companies. IBM's nearly disastrous $16 billion in losses in 1991, 1992 and 1993 should also serve as a reminder that the company must watch its spending in every area, including pension payouts, analysts said.

At the same time, IBM is consistently ranked as a top company for which to work. It gives workers annual bonuses that are considered good and has increased the number of nonexecutive workers receiving stock options from 3,500 three years ago, to 26,000 today.

The company ended its no-layoff policy in 1993, but also adopted medical coverage for same-sex couples. Only IBM has been named three times among American corporations as doing the most to advance women in business by Catalyst, a leading activist group. And "Business Ethics," a Minneapolis-based magazine that weighs the social performance of companies, last month named IBM as the top "corporate citizen."

"The bottom line is that workers at IBM may have reasons to complain, but they're still treated very well in comparison to many other employees," said Richard Blum, a pension consultant in Ormond Beach, Fla.

For its part, IBM said it treats employees in a fair, understanding fashion.

"When we changed the pension program, we gave it a great deal of thought, and our benefits package clearly remains at the top of corporate America," said John Bukovinsky, a company spokesman.

A midcareer crisis

These are people who joined IBM during a mini-hiring binge in the early to mid-1980s. They went to work for IBM straight out of college and today are approaching 40, with 15 to 20 years of experience with the company.

"We worked hard, we didn't look elsewhere and this is the kind of thanks we get," said Phil Nigh, a 39-year-old test engineer at IBM's Burlington plant, which has become a central activist site.

With the help of a Web site established by the Employee Benefits Action Committee, a national group of IBM activists, Nigh recently calculated the typical losses veteran workers would suffer under the new plan.

A manufacturing line worker who joined IBM in 1983, when he was 22, and earns $28,000 a year today would have received $24,000 in annual pension benefits with the traditional plan upon retirement at 60. With the new plan, he'll receive $15,000 a year, or $9,000 less, according to Nigh's calculations.

A typical engineer who started with IBM in 1983, when she was 22, would earn $76,000 annually today. If she retired when she turned 60, she would have received $110,000 in annual retirement benefits under the old plan. Under the new plan, she'll get $47,000 a year, a loss of $63,000 under Nigh's figures.

Like many of his colleagues, John Goetz, 39, is bitter, but not furious. He joined IBM in 1983. The pension plan, among other things, kept him there.

"IBM is still a pretty good place to work and still consists of many good people," he said. When IBM was in its bleak period and raises were small, management suggested that workers look more to a generous pension plan down the line, Goetz said.

"Now when times are good, they pull the rug from under us," he said. "They've alienated a large and devoted segment of workers."