International Business Machines has provided details to employees of the company’s scrapping its 401(k) corporate match and replacing it with a cash balance component called a retirement benefit account, which is part of the IBM Personal Pension Plan, a defined benefit plan.

The company confirmed earlier this month that the RBA would replace the 5% match for the 401(k) plan on Jan. 1, but didn’t discuss details.

The IBM Personal Pension Plan — closed to new participants since 2005 and frozen since 2008 — had a funding ratio of 116.8% and a pension surplus of $3.6 billion last year, according to the latest 10-K statement. The pension plan had $25.1 billion in assets last year.

The IBM 401(k) Plus Plan had $53.2 billion in assets as of Dec. 31, according to the latest 11-K statement. The company contributed $490 million to the DC plan in 2022 and $488 million in 2021.

“All regular employees begin participating in the RBA after one year of service,” the benefits document said. “You will receive a monthly pay credit that is 5% of your eligible pay, and your balance will grow with interest, which is applied monthly.”

The interest rate will be 6% per year through 2026. Starting in 2027, “the RBA will earn the 10-year U.S. Treasury yield, with a 3% per year minimum through 2033,” the document said.

“You do not need to do anything to earn an RBA pay credit from IBM,” the document said. “This means, unlike a matching contribution plan, you are not required to contribute your own money to receive the RBA credit.”

Once eligible, participants are fully vested in the RBA. So, you have a permanent right to the RBA as soon as you begin to earn benefits and can take it with you if you leave IBM,” the document said.

“When you choose to collect your RBA benefit, you can generally elect to have your RBA paid as a lump sum, take it as an annuity, or you can roll it over into another qualified plan (including the IBM 401(k) Plan), another employer plan or an Individual Retirement Account,” the document said.

“The RBA adds a stable and predictable benefit that diversifies a retirement portfolio and provides employees greater flexibility and option,” a spokesman wrote in a Nov. 8 email. “Employees can continue to contribute to their 401(k) plan as they do today.”

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