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Comment by HumblyTossed | Hacker News Reader

> 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?

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Yes, 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.

For 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.

How did their 401k match work?

You had to be there on 12/15 of each year to get it, else zip.

last year they started monthly matching, of course they ruin everything a year later

Almost certainly they reverted to monthly to clear any hypothetical carried balances that could interfere with their new scheme.

They used to wait until end of year to match funds until recently they switched to monthly matching. So if you left before end of year, your match didn’t pay out iirc. Now they’re getting rid of 401k matching entirely so suppose it’s a moot point.

Didn't they get to write off their contribs to the 401k? And if they're now contributing to the RBA instead would they still get to write that off?

I think outside of a few edge cases employee compensation is always a writeoff for the employer

If an IBM employee asked me for investment advice, I'd suggest they loan money to short sellers of IBM. That's the only people IBM makes money for.

they made money for me when I was overemployed with them + 2 other companies.

That sounds like a violation of pretty much any well-developed corporate conflict of interest policy, at least assuming they remain employed at the short-sold company during the loan.

>investing with and growing with the American economy as a whole.

A very important nuance (not disagreeing with you, just sharing my pet thing), is that the stock market outgrows GDP because you aren't investing in the economy as a whole. You are investing in the good parts of the economy that people are excited about (i.e. When you invest in Amazon, you assume that they will continue to take share from mom and pop retailers, even in a flat-GDP scenario). You are also generally assuming that US-HQ companies will gain share globally, not just in the US.

That's why the Internet has been so positively impactful to the S&P 500 - it has really accelerated share shift to large companies (even if it hasn't accelerated GDP) and it has increased the global share of US-based companies.

on the downside, those billionaires are leveraging that value to make your overall tax burden higher and quality of life lower along with ignorant externalities which will wipe it all out if you have any number of health issues or hurricanes.

so, you know, might need to longer term forecast here.

So how are the billionaires making your life worse?

Socializing the losses and privatizing the profits comes to mind.

Leveraging their wealth to pass laws that are to their benefit at the cost of the "lower classes" is the next.

I'm sure this is a fun game for someone who thinks it's useful to retread it.

they bankrolled Trump, bankroll science denialism, deadlock against universal health care, homeless increases.

if you're ignorant of billionaires buying political policies, I doubt you see these things.

That wasn’t the billionaires. That was straight out of the conservatives playbook.

Trump didn’t get bankrolled by billionaires. Trump won because both parties and the media ignored the needs of mostly the White working class and “evangelical conservatives” always vote Republicans.

I’m saying this as decently well off Black guy.

> billionaires buying political policies

Soros donated 140m in the 2022 mid-term to democrats. So you're against that?

Is that 50x inflation/printing adjusted?

No, it’s not relevant when comparing ratios between stocks and bonds.

They are doing this because it's better financially for IBM the corporation ... period ... full stop.

Speculation 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.

Pension 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)

Legally, 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?

The 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.

Pension 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-4435-9c90-280852374...

If 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.

Their statement explains it pretty reasonably: 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.

Is there a rule to prevent them from investing in a fund that invests primarily in IBM?

Federal pension law put into place since (because) the events I mentioned.

It’s not a pension at all.

401ks are a separate thing entirely. Generally they don’t let you invest in individual stocks at all.

> 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.

IBM 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.

Am 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?

First 3 years, yes. After 2026 you either get 3% or whatever the 10Y is yielding, whichever is greater

So now they can literally make money off of this “retirement plan”. Wow

You can bet that some big consultancy is flogging this idea and it will be cropping up far and wide, just like "unlimited time off".

So 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.

Do these have any tax advantages to speak of like an IRA or 401k? Are they bankruptcy shielded?

similar 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

Yeah 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.

Having 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

the 3 years of 6% interest sounds good, though. But after that it sounds like it could be a lot lower.

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