Samantha PrinceNovember 2023 — Professor Samantha Prince was recently quoted in the MarketWatch article titled IBM’s new 401(k) strategy could threaten retirement plans for its workers. The article was written by well-known financial writer, Brett Arends.

As the article explains, IBM will be changing how it contributes retirement money for its workers. IBM was a front-runner in 401(k) plan innovation and like many companies offered a matching contribution. In addition, it offered an additional guaranteed contribution even for those workers who did not participate with their own contributions. As part of this plan, workers could invest the funds to earn more robust retirement savings.

Starting in 2024, though, IBM will no longer make such contributions and instead will put retirement funds into a different type of plan, one that has a guaranteed return of a only 6% for each of three years. (After three years the number will equal the Treasury Bond rate.) Workers’ retirement savings will diminish because the stock market historically outperforms a flat rate such as the 6% IBM is guaranteeing.

Professor Prince is quoted, “This move will save IBM lots of money because it won’t have to make 401(k) contributions anymore.” Those contributions amounted to $489 million in 2022. On top of that, IBM isn’t really putting money in but rather guaranteeing the money with a credit system. IBM benefits from a boost in cash flow. The inability of workers to invest the entirety of their retirement plan savings creates a new kind of retirement insecurity, one that is hiding behind the guise of a guaranteed payout. This type of retirement plan benefits shift is exactly what motivates Professor Prince to write and research in the retirement inequity space.

Professor Prince has written and spoken on retirement insecurity partly blaming 401(k) vesting schedules. Her article entitled, Megacompany Employee Churn Meets 401(k) Vesting Schedules: A Sabotage on Workers' Retirement Wealth was published in the Yale Law & Policy Review in 2022. It provided a detailed look at vesting schedule issues with a focus on high turnover businesses.

Professor Samantha Prince is an Assistant Professor of Law and Director of Legal Analysis & Writing at Dickinson Law. She has a Master of Laws in Taxation from Georgetown University Law Center and was a partner in a regional law firm where she handled transactional matters that ranged from an initial public offering to regular representation of a publicly-traded company. Most of her clients were small to medium sized businesses and entrepreneurs, including start-ups. A significant part of her practice was in employee benefits including retirement plan design and operation. An expert in entrepreneurship law, she established the Dickinson Law entrepreneurship program, is an advisor for the Entrepreneurship Law Certificate that is available to students, and is the founder and moderator of the Inside Entrepreneurship Law blog. Her research mainly comprises the changing world of work.