International Business Machines announced this week it will provide free financial planning for its U.S. workers, including more than 5,500 in Colorado.
The $50 million initiative is meant to help the company’s 127,000 U.S. workers save for retirement and better manage investments.
IBM announced last year it would shift from traditional pension benefits to employee-supervised 401(k) retirement plans. That move, along with several other pension-related changes, is expected to save the technology giant up to $3 billion between 2006 and 2010, IBM has said.
The new program, called IBM MoneySmart, combines in-person educational seminars, online tools and one-on-one planning sessions. IBM will work with Fidelity Investments and the Ayco Co., a Goldman Sachs company, to develop and deliver the services.
The seminars will begin this month; the phone-based counseling will start in April.
“This is the beginning of what hopefully will become a trend,” said Jim Pasztor, assistant professor for investments with the College for Financial Planning in Greenwood Village. “It wouldn’t surprise me if we start seeing more companies do this.”
Pasztor said companies were for years reluctant to offer employees financial-planning services, in part because of liability concerns associated with an adviser giving poor investment recommendations. But the Pension Protection Act of 2006 provided legal safeguards for companies that provide financial planning, he said.
Pasztor said he did not know of any U.S. company that had rolled out a service similar to IBM’s. He added that IBM’s service might help the company with staff recruitment and retention.
But some employees might not use the service for fear of being pitched financial products by brokers, said Don Cassidy, executive director for the nonprofit Retirement Investing Institute.
“It may turn off some employees,” said Cassidy, who is based in Lakewood. “But I think this is a good thing.”
IBM will pay for the services during at least the first two years. The company will then evaluate the program based on affordability, employee response and use.
IBM is among a growing number of companies that have recently frozen or scaled back pension plans. Others include Verizon Communications, Lockheed Martin Corp. and the Hershey Co.
Pensions, also known as defined-benefit plans, provide workers a stream of revenue during retirement. By comparison, 401(k) plans require employees to save and invest their money in tax-deferred investment accounts that are supplemented with employer contributions.
Staff writer Will Shanley can be reached at 303-954-1260 or wshanley@denverpost.com.
