Big Blue Backs Down

When IBM implemented its controversial new pension plan, many employees went into open revolt, reports CBS News Correspondent Anthony Mason.

Seven hundred workers filled a town meeting last month, announcing plans to form a union and file a lawsuit.

Friday in a letter to its employees, Big Blue backed down.

Karen Friedman of the Pension Rights Center said, "We are looking at this as a definite victory in this battle. But we are not going to stop until there are protections in the law so that every worker in this situation is protected."

From IBM to AT&T to CBS, hundreds of major companies have switched to the so-called cash balance plans. In traditional pension plans, workers earn the bulk of their retirement money toward the end of their career. But a cash balance plan sets aside the same percentage of a worker's pay every year.

Older workers caught in a pension switch can lose upwards of one-third of their retirement money.

U.S. Rep. Bernie Sanders of Vermont has called that age discrimination.

"There is no question that IBM saw the handwriting on the wall," says Sanders. "They did not want to be found guilty of age discrimination."

In its letter to employees, IBM said about 65,000 workers who were at least 40 years old on June 30 and have at least 10 years' service at IBM can choose the plan they want. Previously, only about 30,000 workers within five years of retirement had a choice.

But the heat is still on. Congress will hold hearings on cash balance plans next week.

The Equal Employment Opportunity Commission is also investigating cash balance plans. And the IRS, which must approve all pension plan changes, has issued a memo to its field offices, which many interpret as a freeze on all conversions.

"I think Congress right now is looking at what IBM did," says Friedman, "and I think they're probably saying, 'Huh, the employees are right.'"