WASHINGTON--IBM announced it will let more workers choose whether to move to a cash-balance pension plan, following criticism that the current plan discriminated against older workers.

IBM will let up to 65,000 workers choose between the old defined-benefit plan and its new cash-balance plan, criticized by some IBM workers and members of Congress as eroding benefits from long-time employees. The change doubles the number of workers who previously had a choice between the plans.

The company was pressured by numerous members of Congress, pension advocates, and IBM workers.

Under cash-balance plans, employees accumulate benefits steadily over their careers rather than right before they stop working. The plans can save companies millions of dollars, but they generally hurt older employees, who earn as much as half of their pension benefits in the last five years of their jobs.

The change "will have a cost to IBM, but it's too early to tell how much," Tom Bouchard, IBM's senior vice president for human resources, said in a letter to Rep. Bernard Sanders (I-Vermont). IBM spokeswoman Jana Weatherbee said the expense of the change will depend on how many workers choose to change plans.

IBM shares fell 4.63 to 125.38 in late afternoon trading, with most of the decline following news reports on the pension change.

The Internal Revenue Service is ordering an additional, detailed review before companies can convert from traditional pensions to the cash-balance plans. Weatherbee said IBM adopted the new plan as part of a broader review of employee pay and benefits, which resulted in $1 billion in salary increases to U.S. IBM workers in the last two years and stock options to 25,000 workers worldwide.

IBM adopted the new pension plan after it discovered it wasn't providing sufficient salaries and stock options to be competitive, although its traditional pension plan was more generous than the competition.

Weatherbee said IBM agreed to let more employees choose between the two plans after reviewing comments from its workforce. "We listened to our employees and having listened to them, we decided this change was what we needed to do," she said.

Copyright 1999, Bloomberg L.P. All Rights Reserved.

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