IBM Pension Calculator: Lump Sum vs Monthly Annuity
Enter the monthly amount from your IBM pension statement. The calculator values it at the IRS 417(e) minimum rates, checks the PBGC guarantee if the IBM plan still pays you, and shows how a lump sum would hold up if you invested it.
Get retirement alerts
We track IRS rule changes, rate updates, and retirement law changes. One email when something moves enough to affect your math.
How the 417(e) minimum works
A plan doesn't have to offer a lump sum. If it does, IRC 417(e) sets the least it can pay. Each expected monthly payment is weighted by the chance you're alive to get it, using the IRS mortality table, and discounted at one of three segment rates: one for payments under 5 years away, one for 5 to 20 years, and one beyond 20 years. Higher rates mean smaller lump sums.
Each plan picks which month's rates to use. The calculator defaults to the November 2025 rates, which many calendar-year plans use for 2026, but your IBM election packet lists the rates your plan actually used. If you're years from your start date, the value today is lower than the value at the start date because you're also discounting the wait and the chance of not reaching it.
Comparing an offer to this number tells you whether the plan is paying at least the legal minimum. It doesn't tell you whether the lump sum is the right choice for you.
The frozen plan and the Retirement Benefit Account
IBM stopped U.S. defined benefit accruals on December 31, 2007. Depending on the participant, the frozen benefit comes from a formula based on average earnings, service and age, or from a cash balance account with interest credits.
On January 1, 2024 IBM added the Retirement Benefit Account to the IBM Personal Pension Plan, replacing its 401(k) contributions. Each month it credits 5% of eligible pay for U.S. regular employees with at least a year of service. The account earns 6% interest through 2026, then the 10-year Treasury yield with a 3% minimum through 2033.
For a cash balance account, including the RBA, the plan's lump sum is tied to the account balance. The 417(e) value of a monthly amount is a cross-check, not the plan's formula.
The 2022 and 2024 transfers to insurers
In September 2022 the plan bought group annuities from Prudential and MetLife, moving about $16 billion of obligations for about 100,000 participants and beneficiaries whose benefits began before 2016. Each insurer pays half of each person's benefit, starting January 1, 2023.
In September 2024 the plan moved about $6 billion more for about 32,000 participants and beneficiaries, again with benefits that began before 2016, to Prudential alone. Prudential pays them from January 1, 2025.
PBGC doesn't guarantee an annuity once an insurer has taken it over. Your state's life and health insurance guaranty association backs it instead. In most states that limit is $250,000 in present value for annuities, and some states set it higher.
PBGC protection
For 2026, PBGC guarantees a straight-life annuity starting at 65 up to $7,789.77 a month. The cap is lower if payments start earlier ($6,153.92 at 62, $3,505.40 at 55) and lower again for a joint and 50% survivor annuity ($7,010.79 at 65). The calculator checks your amount against the row for your start age and form.
Sources
For high-stakes decisions
Running six-figure numbers? Get a second opinion.
A fee-only fiduciary can model your specific situation. No products sold. No commissions. Most charge $200-500 for a one-time analysis.
Find a fee-only advisorPensionMath earns no referral fee from NAPFA. We link there because it is the most trusted source for fee-only advisors.
Frequently asked questions
Did IBM transfer its pension to Prudential?
Twice. In September 2022 about $16 billion for about 100,000 participants and beneficiaries went to Prudential and MetLife, each paying half from January 1, 2023. In September 2024 about $6 billion for about 32,000 more went to Prudential, which pays them from January 1, 2025. Both covered benefits that began before 2016.
When did IBM freeze its pension?
U.S. defined benefit accruals stopped December 31, 2007. Since January 1, 2024, the Retirement Benefit Account inside the IBM Personal Pension Plan has credited 5% of eligible pay to eligible U.S. employees.
What interest does the IBM Retirement Benefit Account earn?
6% a year through 2026. From 2027 it earns the 10-year Treasury yield, with a 3% minimum through 2033.
Is my IBM pension PBGC-insured?
If the IBM Personal Pension Plan still pays you, yes, up to PBGC's limit. If Prudential or MetLife took over your annuity in 2022 or 2024, PBGC no longer covers it and your state guaranty association does.