When planning for retirement, you assume your pension plan will be there for you. You do your company time, get your sendoff with the token timepiece, and then wait for your monthly pension checks to arrive. Right?
Well, for the tenured at IBM
But because real and unwittingly innocent retirees are involved here, it's nice to see that recent gains in IBM's stock has given the company the flexibility to fill what has narrowed to a $3 billion gap in its domestic pension plan.
IBM will make up the difference with a combination of cash and equity. The amount may seem beefy, but the company has generated just over $20 billion in free cash flow over the past three years. The bigger concern is that it was clinging to an ambitious 10% annualized growth rate for its stock in its growth assumptions -- a deluded premise that allowed it to post a healthier bottom line, since it hadn't contributed to its plan in seven years.
Let's hope IBM learns its lesson, or, at the very least, that Wall Street doesn't let the company forget it this time.