IBM Pension Plan

Two components within the same plan: (1) Legacy frozen benefit, the original IBM Personal Pension Plan accrued benefits (both traditional defined-benefit and prior cash-balance credits) were frozen effective January 1, 2008; no new accruals under the original formula since that date. (2) Retirement Benefit Account (RBA, effective January 1, 2024), a new cash-balance layer within the same plan: a monthly credit of 5% of eligible base pay is posted to each participant's notional RBA account. Interest is credited at 6% annually for 2024-2026; at the 10-year U.S. Treasury yield with a 3% minimum floor for 2027-2033; and at the prevailing 10-year Treasury yield (no floor) beginning in 2034. RBA balances are distributable at separation or retirement as a lump sum or converted to a lifetime annuity.

This is general educational information about how the plan's formula works, not a calculation of your individual benefit. Your actual benefit depends on your service, pay history, and the plan terms in effect during your employment.

The IBM Personal Pension Plan was closed to new participants effective January 1, 2005 and all benefit accruals under the original formula were frozen effective January 1, 2008. The Form 5500 frozen flag reflects this original 2008 freeze of the legacy benefit. HOWEVER, effective January 1, 2024, IBM amended the plan to add the Retirement Benefit Account (RBA), a new cash-balance credit layer within the same IBM Personal Pension Plan, available to ALL current U.S. IBM employees with at least one year of service, including employees hired after the original 2005 plan closure, effectively reopening accruals and new-entrant eligibility. As of 2024 the plan is no longer frozen to new accruals (RBA credits are actively accumulating) and is no longer frozen to new entrants. The pre-2008 legacy frozen accrued benefits remain unchanged.

A frozen pension does not disappear. Benefits already earned are generally protected and continue to be paid under the plan's terms. A freeze changes whether new benefits accrue going forward, not whether existing benefits are honored.

The IBM Personal Pension Plan has executed two major pension risk transfers: (1) September 2022 (payments transferred effective January 1, 2023), $16 billion in DB pension obligations transferred equally (50/50) to The Prudential Insurance Company of America and Metropolitan Life Insurance Company, covering approximately 100,000 IBM plan participants and beneficiaries; Prudential serves as lead payment administrator. IBM recognized a $5.9 billion pre-tax settlement charge in 2022. (2) September 2024, approximately $6 billion transferred to The Prudential Insurance Company of America from the U.S. Qualified IBM Personal Pension Plan, with a $2.7 billion pre-tax settlement charge in Q3 2024. The Qualified plan remained 136% funded as of December 31, 2024.

In a pension risk transfer (PRT), an employer transfers some or all of its pension obligations to an insurance company through a group annuity contract. If your benefit was transferred, your monthly payment generally stays the same, but the company paying it changes, and PBGC insurance is replaced by state insurance guaranty association coverage. For this plan, the counterparty was Prudential Financial / MetLife (2024).

Did IBM reopen its pension plan in 2024, and who qualifies for the Retirement Benefit Account (RBA)?

Yes. Effective January 1, 2024, IBM amended the IBM Personal Pension Plan to include a Retirement Benefit Account (RBA), a cash-balance component that automatically credits 5% of eligible monthly base pay to a notional account for each qualifying U.S. IBM employee. The RBA is available to all current U.S. employees with at least one year of service, including employees hired after the original 2005 plan closure. No employee contribution is required, and employees are 100% vested immediately upon meeting the one-year service requirement. IBM simultaneously eliminated its 5% 401(k) match and 1% automatic 401(k) contribution.

What interest rate does the IBM Retirement Benefit Account earn, and can I take a lump sum at retirement?

IBM guarantees a 6% annual interest credit on RBA balances for 2024, 2025, and 2026. From 2027 through 2033 the rate equals the 10-year U.S. Treasury yield with a 3% minimum floor, and beginning in 2034 it equals the prevailing 10-year Treasury yield with no floor. Upon separation or retirement you may take your RBA balance as a lump sum or convert it to a lifetime annuity. Your separately accrued pre-2008 legacy pension benefit may have its own distribution terms.

What happened with IBM's $16 billion pension transfer to Prudential and MetLife?

In September 2022, IBM transferred $16 billion in IBM Personal Pension Plan obligations equally to Prudential and MetLife, covering approximately 100,000 participants and beneficiaries; affected participants began receiving payments from these insurers on January 1, 2023. In September 2024, IBM transferred an additional $6 billion to Prudential. If your legacy pension benefit was included, you now receive monthly payments from Prudential or MetLife rather than IBM, but your benefit amount and schedule are unchanged. State insurance guaranty protections apply within applicable limits.

Is my IBM pension protected by the PBGC?

Most single-employer defined benefit pensions are insured by the Pension Benefit Guaranty Corporation (PBGC), a federal agency. If a covered plan terminates without enough money to pay promised benefits, the PBGC pays benefits up to a legal maximum that varies by age. Benefits that have been transferred to an insurance company through a pension risk transfer are no longer PBGC insured and are instead backed by state guaranty associations.

Should I take my IBM pension as a lump sum or an annuity?

There is no single right answer. The decision depends on your health and life expectancy, your other retirement assets, whether you need to provide for a survivor, and the interest rate environment that sets the lump sum value. Our lump sum versus annuity guide walks through the trade-offs in detail.