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> Update: > So they are not replacing 401k, they are offering RBA separately. You are still able to contribute to your 401k. However they are not contributing
by HumblyTossed 3y ago
> Update:
> So they are not replacing 401k, they are offering RBA separately. You are still able to contribute to your 401k. However they are not contributing to the 401k anymore. They will be contributing 5% of your salary to your RBA with no employee contribution needed. After 3 years of 6% interest (starting 2027) it will equal the 10 year US treasury yield. Where IBM will guarantee it’s no lower than 3% per year.
That doesn't sound like a good deal at all.
Anyone know what is prompting this change?
- lisplist 3y agoSpeculation is that it’s beneficial to IBM because the money will be under their management rather than Fidelity’s. What exactly they’re allowed to do with that money, I’m unsure.
- bluGill 3y agoPension funds are carefully regulated and cannot be in risky investments. IBM cannot invest in IBM, they have to invest in various bonds. Before pension regulations a few pensions invested in the.company and employees discovered that was a bad idea when the company went bankrupt just before they were set to retire and their pension value went to zero. I'm not sure if this is legally a pension, if not assume it is worth nothing. If it is the US government backs it and so if you work for IBM for 30 it is a great deal, pensions are defined income so you don't have to worry about if you will live to 66 or 120. (If like most you switch jobs it is terrible)
- lisplist 3y agoLegally, I believe this is a pension fund. Still, they have to be pocketing the difference somewhere because why else would they make such a controversial decision that also increases administrative overhead?
- justinclift 3y agoThe current decision making ranks at IBM can do plenty of shady stuff then depart, before legal problems come home to roost. Years and years at least.
- rchaud 3y agoPension funds invest in risky assets, just at a lower percentage than say a hedge fund with accredited investor status. The Ontario Teachers Pension Plan lost $100m to the FTX bandits last year. https://www.ft.com/content/29c67711-377c-4435-9c90-280852374e93 https://www.ft.com/content/29c67711-377c-4435-9c90-280852374...
- Analemma_ 3y agoIf you manage a pension fund, especially a public pension fund, putting any of the money in crypto should be grounds for immediate termination at the very least, and possibly civil and criminal penalties. There's no excuse for touching that radioactive shitpile with other people's money after the countless demonstrations of fraud and incompetence.
- notzane 3y agoTheir statement explains it pretty reasonably: https://www.otpp.com/en-ca/about-us/news-and-insights/2022/ontario-teachers--statement-on-ftx/ https://www.otpp.com/en-ca/about-us/news-and-insights/2022/o... > Our investment represented less than 0.05% of our total net assets > Naturally, not all of the investments in this early-stage asset class perform to expectations, however, since inception, TVG has delivered solidly on intended objectives.
- onlyrealcuzzo 3y agoIs there a rule to prevent them from investing in a fund that invests primarily in IBM?
- bluGill 3y agoFederal pension law put into place since (because) the events I mentioned.
- pyuser583 3y agoIt’s not a pension at all. 401ks are a separate thing entirely. Generally they don’t let you invest in individual stocks at all.
- bb88 3y agoYeah it's not good. Once the matching contribution is vested, the money is yours to do with as you please -- including potentially loaning the money out to yourself.
- 0cf8612b2e1e 3y agoAm I reading it right that you are just getting IBM defined X% rate of return? So even if the market does gang busters, you might get none of that upside?
- lisplist 3y agoFirst 3 years, yes. After 2026 you either get 3% or whatever the 10Y is yielding, whichever is greater
- 0cf8612b2e1e 3y agoSo now they can literally make money off of this “retirement plan”. Wow
- yborg 3y agoYou can bet that some big consultancy is flogging this idea and it will be cropping up far and wide, just like "unlimited time off".
- actionablefiber 3y agoSo they're basically switching employees from an investment plan where the employees profit from falling interest rates to an investment plan where IBM profits from falling interest rates. Except IBM also takes plenty of upside if interest rates stay high too, by paying way below-market yield for the first few years.
- danielvf 3y agoYes, the RBA seems an incredibly bad long term investment strategy. You are essentially switching to your retirement strategy being loaning your money to IBM at the lowest possible interest rate, vs investing with and growing with the American economy as a whole. The difference in compound interest between the two is going to epic over twenty to forty years. The SP500 has more than 50x since 1970. If you had your money in 10 year treasury bonds, that would be less than 12x. So you'd have 1/4 as much, and IBM would have 3/4 of what you would have had.
- pinewurst 3y agoFor clarity's sake though, we're talking about yield theft on what was IBM's already evasive 401k match. One's "real" 401k contributions remain separate, portable and their yield bounded only by IBM's limited choices/fees.
- bunabhucan 3y agoHow did their 401k match work?
- rlewkov 3y agoThey are doing this because it's better financially for IBM the corporation ... period ... full stop.
- fishpen0 3y agoDo these have any tax advantages to speak of like an IRA or 401k? Are they bankruptcy shielded?
- jonfw 3y agosimilar to a 401k, tax is paid when it's time to collect. When you leave IBM, you are have the option to collect it as a lump sum or annuity (taxed as income) or to roll it into a 401K or IRA
- UncleOxidant 3y agothe 3 years of 6% interest sounds good, though. But after that it sounds like it could be a lot lower.
- swatcoder 3y ago> Anyone know what is prompting this change? A lot of the free money that was flying around has dried up and it's easier to cryptically "rework our retirement benefits program" than it is to openly cut the unsustainable salaries that were offered during flush times. It's the same reason that everything's finally being monetized, massive layoffs washed through, and prices are being increased. At best, it'll be the soft deflation of an egregious 5-10 year bubble and we'll remember that you can't get paid $300k out of college to write glue code nor expect to get all your online services for free.
- pinewurst 3y agoIBM hardly paid anyone $300k out of college. If anything they were the big pushers for “new collar” == white collar work at blue collar wages. Scumbags.
- DanielHB 3y agoHaving you private pension fund be owned by the company you work for is TERRIBLE My father had almost all of his savings in a pension fund by a bank (he worked at that bank) that was later acquired by Santander. They completely screwed him over with his pension, lawsuits are ongoing for almost 20 years now. My father passed away last year still dreaming about all the money he was "about to get" from the lawsuits