Feb. 18 (Bloomberg) -- International Business Machines Corp. unfairly changed its U.K. pension plan in an effort to reduce an 890 million-pound ($1.4 billion) deficit, according to a lawsuit by workers who claim a breach of trust.
The 2009 changes, known within IBM as “Project Waltz,” reduced retirement benefits for about 4,500 workers, lawyers for some of the employees said in court documents setting out their claim. In 2008, the pension plan went from a surplus to a deficit as a result of stock market declines, IBM said in its court papers from the trial.
“What IBM did not do, contrary to what it is accused of, is either break any ‘promises’ or renege on any ‘assurances,’” the information technology company said.
IBM’s pension plans had a deficit of about $10.4 billion at the end of 2011, according to data compiled by Bloomberg. The company altered the plans to make them more affordable and less volatile, it said in the U.K. trial documents. The employees argue in their court filings the pension losses were a result of investing in equities, “the risks of which IBM had knowingly and willingly embraced.” A trial on the group’s claim started today.
According to the workers’ lawsuit, Project Waltz closed to most employees the company’s defined benefit plan, which delivers set payments during retirement; changed early retirement terms; and stopped plan members benefitting from pay increases.
IBM said its pension trustee refused to enact the Project Waltz changes until a court ruled on their legality.
“The changes proved to be, perhaps unsurprisingly, unpopular with many of the affected members,” the company said. Its U.K. business was “uncompetitive” and the Armonk, New York-based company set a goal to increase profit margins there to 34 percent by the end of 2012.
David Young, a lawyer for the employees taking part in the trial, declined to comment. IBM’s U.K. spokesman Ken Saunders didn’t immediately respond to e-mails and phone calls seeking comment.
The case is: IBM United Kingdom Holdings Ltd., IBM United Kingdom Ltd. v Stuart Dalgleish, Lizanne Harrison, IBM United Kingdom Pensions Trust Ltd., High Court of Justice, Chancery Division, HC10C01796
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