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for week ending October 5, 2002
- With the IBM Global Services acquisition of the PricewaterhouseCoopers Consulting, PwC employees have been very busy on the Vault Message boards discussing their future with IBM, and comparing benefits. The conversations are very interesting, especially for current IBM Global Services employees. The busiest message board is the new IBM Business Consulting Services message board. (IBM Business Consulting Services is the new name for the merged PwC and IBM Business Integration Services organization). Other relevant Vault message boards include:
- "Rosie the MBA" sends a letter to Working Mother magazine commenting on its selection of IBM as one of the top 100 companies for working mothers. Excerpt: "According to the Associated Press story that appeared Sept 24, 2002, they exactly state that Working Mother highlighted IBM for its policy of 'Giving women up to three years off to take care of a
child, with a right to return to their job in IBM.' I represent a group of employees who would like to point out that your assigned IBM HR spokesperson probably did not show Working Mother the fine print. On its HR web site, IBM's policy exactly
states, 'If IBM or your business unit conducts an involuntary reduction in force while you're on LOA, IBM can terminate your leave status and your employment according to the terms of the reduction in force.' This doesn't exactly sound like a guarantee that a expectant mom could return to work." ... "Please do not fall into the trap that IBM is kind to women. IBM is not kind to employees, though they do display equality--they treat women & men equally in terms of targeted termination. They have been targeting the depressed, the weak, the sick, and the hospitalized." ... "We have seen sad days at IBM as the sick, the pregnant, and the depressed have been targeted while exercising their company benefits, and we do not wish to see others suffer through misinformation."
- Business Week: Clouds over Silicon Glen. Foreigners spawned a high-tech boom. Now they're pulling out. (Free registration may be required). Excerpt: "A pall has descended over Scotland's once-vibrant Silicon Glen. On Aug. 1, Sanmina-SCI Corp., the Alabama-based maker of computer and electrical gear, announced it would lay off 750 workers at its plant in Irvine, Scotland. Sources at IBM's operation in Greenock, which employs 5,500 workers, say plans are under way to shift manufacturing out of Scotland as part of the company's recently announced restructuring. 'Five years ago, our staff spent all their time negotiating pay rises and better benefits for electronics workers,' says Danny Carrigan, the Scottish head of manufacturing trade union Amicus. 'Now they seem to spend all of their time dealing with layoffs.'"
- Los Angeles Times Commentary by Robert M. Ball. (Robert M. Ball was commissioner of Social Security under presidents Kennedy, Johnson and Nixon and served the Clinton administration in various advisory capacities.) Leave Our Pensions Alone.
Social Security privatization proposals have proved dubious. (Free registration may be required). Older working people thinking about retirement can be thankful that President Bush's plan to substitute private savings accounts for part of Social Security isn't already in effect. The stock market's gyrations would create enormous problems for anyone trying to retire and convert a private investment account into an annuity. This summer, Brookings Institution economist Gary Burtless studied how workers retiring would have fared if a Bush-type plan had been in existence. He found that a savings account built up over 40 years and invested 100% in stocks could have been converted into an annuity equal to somewhat more than recent average earnings--if it had been applied for at age 62 on Jan. 1, 2000. But the annuity would be less than half as much if applied for at age 62 on Jan. 1, 2003, assuming the same stock market averages on that date as the actual averages on July 19, 2002.
- USA Today: CEOs may be liable for losses in 401(k)s. Excerpt: "In an action that could prompt companies to beef up oversight of 401(k) plans, the federal government issued a court brief this month that sides with Enron workers. It said former chief executive officer Ken Lay and other top executives could be personally liable for millions of dollars in retirement plan losses."
- Wall Street Journal: Pension Liabilities Emerging
As the Next Investor Concern. Excerpt: "The list of investment woes includes aggressive accountants, squishy analysts and gluttonous CEOs. Get ready to add teetering pensions to the ledger. Pensions, with their guaranteed payments, are a nifty thing to have when your neighbor's once-soaring 401(k) account is in tatters. But there's no free lunch. Someone's got to pay those pension costs. And the falling stock market is making life tough on companies carrying the obligation. Despite the rise of defined contribution plans like 401(k)s, defined-benefit pension programs are still a retirement benefit of choice for most companies in the S&P 500. Indeed, 346 of the companies in the S&P 500 offer them. The rising costs of these programs (people living longer, retiring earlier), along with the poor performance of the market, are combining to create a substantial pension funding problem."
"Until recently, most concerns about pensions focused on numbers gimmickry. In this accounting-crazed time, analysts have pointed out that certain underlying assumptions about pensions have helped firms goose their numbers. For instance, questions have dogged IBM, with critics alleging that the technology giant has used rosy pension assumptions to boost its earnings figures. IBM maintains that it has handled its pension accounting appropriately."
"According to the Merrill study, the Standard & Poor's 500 companies, on average, assume 9.3% annualized investment returns for pension purposes. But that optimistic outlook is already fraying. IBM, for instance, this year reduced its actuarial rate of return to 9.5% from 10%. Given the current market mood, investors would crawl all over themselves to find an 8% return, let alone the 9.5% IBM apparently expects." ... "At the company level, IBM has gone from the 8th-best funded pension at the end of 2000 to an estimated 344 out of the 346 pension-paying firms in the S&P 500 for year-ended 2002. Verizon, number 3 at the end of 2000, is expected to fall to 339." If link is broken, view Adobe Acrobat version [PDF--143 KB].
- Janet Krueger comments (with sarcasm): Excerpt: "I'm not worried; IBM has implemented a new strategy that the analysts
don't seem to have factored in... By laying off hundreds of older
employees just short of qualifying for full retirement, and laying off hundreds of younger employees whose cash balances weren't quite vested, IBM is reducing their employee obligations faster than the market is falling. Would anyone like to lay side bets on whether IBM will avoid making any cash contributions to the pension fund at year end 2002? I'm betting will see another year of vapor profits!!! After all, we wouldn't want the executives, whose bonuses are based on keeping that bottom line propped up, to suffer!"
warns that it might be "time to make some IBM@Work runs." Excerpt: "We want to state up front that we have no accurate information yet of any impending pension related actions. This post is based on gut feel and the fact that the PWCC acquisition has been completed in record time, in contrast to the Hitachi and Endicott deals. We highly recommend that active US IBM employees should plan on making all the IBM@Work retirement estimator runs they feel they need to do before November 1. If the employee uses a desktop or laptop, they should consider saving them on their machine and back them up on a media they can take off-site."
- CFO Magazine: Profiting from Health-Care Cuts? Critics accuse companies of managing earnings through FAS 106 rules for treatment of retiree medical benefits. Excerpt: "Increasing attention to the use of accounting gimmicks to boost profits has rekindled a nine-year-old controversy involving Financial Accounting Standards Board Statement No. 106. In recent months, critics have renewed charges that some companies are using FAS 106--the standard that since 1993 has governed accounting for postretirement health-care benefits--as part of a strategy to reduce retiree medical coverage, then reflect the lower reserve amounts in operating earnings. While there is evidence to support the suggestion in some cases, the issue is far more complex. The FAS 106 issue mirrors criticism of FAS 87, which funnels surplus pension assets through corporate income statements as a credit to pension expenses. Some companies, critics charge, then slash their pension benefits to help keep the surpluses pumped up."
- The following is a list of articles in the Poughkeepsie Journal on age discrimination charges against IBM:
- 15 ex-local workers allege IBM age bias. September 21, 2002. Excerpt: "A group of ex-IBMers in the mid-Hudson area says IBM Corp.'s recent
layoffs show age discrimination and has complained to state Attorney
General Eliot Spitzer. 'We believe that the IBM Corporation has
consistently and methodically perpetrated age discrimination against
its older employees,' said Antonio Rivera, a Poughquag man who
worked in Armonk and is the lead complainant. Rivera also presented the names of 14 others who joined in the complaint."
- 15 more file age-bias claims against IBM.
August 8, 2002. Excerpt: "A Vermont investigation into allegations against IBM Corp. claiming age bias in layoffs picked up 15 more complaints Wednesday. Kate Hayes, the Vermont Attorney General's assistant for civil rights, began an investigation Tuesday when three complaints arrived from people who had been dropped at IBM's microchip complex in Essex Junction."
- Ex-IBMers solicit age bias complaints at Vermont plant. August 6, 2002. Excerpt: "IBM Corp. officials Monday stuck by their position that the job cuts being made are free of age bias. Meanwhile, a number of ex-employees in the Burlington, Vt., area followed through on their plan, announced late Friday, to solicit complaints to forward to the Vermont Attorney General's Civil Rights Unit."
- IBM workers aim to protest Vermont cuts.
August 3, 2002. Excerpt: "A group of ex-IBMers claims IBM Corp.'s recent layoffs at its Burlington, Vt., plant fall too heavily upon older workers. Organizers say they've made contact with the Vermont attorney general's office and will complain."
- Wall Street Journal: Foreign Workers Continue To Join the U.S. Work Force. Excerpt: "Despite a slack labor market, filings suggest that Microsoft Corp., Oracle Corp., International Business Machines Corp., KPMG LLP and dozens of other big technology and consulting concerns are still searching for talent overseas and are sponsoring workers on temporary H-1B visas. Universities and medical centers also top the list. Most companies won't confirm an actual number sponsored. Of course, the vast majority of the nation's 8.1 million job seekers don't have the skills for most of those positions. But the hard times have emboldened longtime critics. 'The number of H-1Bs being brought in is very high,' says LeEarl Bryant, president of the U.S. chapter of the Institute of Electrical and Electronic Engineers. Ms. Bryant says overseas workers are taking jobs that can be filled by her members. The H-1B status allows foreign professionals to work here for up to six years." ... "Microsoft, Oracle and IBM top the list of LCA filers, but they won't say how many workers are involved or what they believe are the skills lacking in the U.S. Baylor College of Medicine in Houston says it sponsors 150 H-1B holders among faculty, scientists in training and research technicians."
Information Week: Prospects Dim For Future Tech Pros Prepping For Spring Job Scramble. Excerpts: "Patricia Chu earned a bachelor's degree in computer sciences from Stanford University last spring, but instead of looking for a job, she returned to campus to work on a graduate degree."
- Dallas Morning News: Tech firms want more for less. Excerpt: "Technology workers are fast becoming the factory workers of the 21st century hired when needed and cast off in a blink when business is down. Not only are technology jobs shipped overseas as commonly as manufacturing work is, but domestic programmers also are losing ground to cheaper H-1B immigrants with visas that normally last six years. American companies are allowed to bring in skilled foreigners on H-1B visas to fill vacant positions for which there are no qualified American workers. At least, that's how it was supposed to work. In reality, American programmers are available for the jobs, but companies prefer to hire foreign workers because of their willingness to work for lower wages and fewer benefits."
- ComputerWorld: Panelists: Jobless IT workers should reinvent themselves. Excerpt: "Out-of-work IT workers in the U.S. upset about lower-cost H-1B and L-1 workers and offshore outsourcing firms wresting away their jobs should accept that highly skilled, cheap foreign labor is here to stay and instead broaden their own talents beyond programming acumen." ... ""Programming is becoming commoditized. If you can do programming for $20, $25 an hour, why would you pay $150 an hour?" said Amit Govil, managing director and CEO of Sapient India in New Delhi."
- San Jose Mercury News: U.S. workers taking H-1B issues to court. Excerpt: "For years U.S. engineers have grumbled that foreign engineers on work visas were getting their jobs. Now, for the first time, U.S. workers are filing formal complaints with the government and in court, charging that foreign guest workers are replacing them during the downturn. The complaints contend that citizens were either laid off or not hired in favor of foreign workers on temporary H-1B visas. H-1B workers are supposed to fill only those jobs left vacant by a shortage of skilled U.S. workers." ... "'Betrayal is the word that would come to mind,' said Allan Masri, a 52-year-old San Jose engineer who was laid off from his quality assurance engineering job at Netscape a year ago. His colleague, an H-1B worker with the same job title, stayed on. Masri said he spent weeks training him on things such as the XML programming language. Masri said he feels he was replaced; Netscape said he was not."
- ComputerWorld: Mapping IT's Future. Excerpt: "We received a letter last week from a dispirited worker with 15 years of IT experience. He's been laid off, can't find a job and expects to leave the profession. He
says the influx of cheap labor that cost him his job is 'the beginning of the dismantling of the American technology worker'."
- Poughkeepsie Journal: IBM finishes deal for consulting unit. Excerpt: "IBM Corp. Wednesday said it completed its acquisition of PricewaterhouseCoopers' PwC Consulting business for about $3.5 billion in cash and stock.
IBM dismissed about 200 of PwC's 1,200 consulting partners, and the average partner will see a pay cut of 20 percent or more if he or she doesn't meet performance targets, The Wall Street Journal reported."
Deferring Retirement May Pay. Excerpt: "If you've been putting off the retirement you've been planning for decades, it might pay to wait just a little longer if you have an old-style pension fund. The reason: The tables and formulas used to calculate lump-sum payouts are set to change Jan. 1, and it may mean tens of thousands of dollars more for retirees."
- Wall Street Journal: Beyond the Nest Egg. How much do you know about the various pieces that make up your retirement plan? Probably less than you think. Excerpts: "Most Americans know their nest eggs have taken a beating in recent months. Beyond that, though, knowledge about the rudiments of retirement plans and finances -- about corporate rules governing matching contributions and early retirement, about pensions and vesting, about health benefits in later life, rollovers of savings plans, annuities and even one's own Social Security payments -- appears to be in remarkably short supply." ... "Perhaps the most important reason to be familiar with the mechanics of your retirement plan is the fact that your benefits aren't set in stone. Although your employer can't take away retirement benefits you've earned already, it can reduce them going forward." ... "Many people think health benefits for retirees are an absolute. A survey by the National Council on the Aging, a Washington advocacy group, found that 49% of adults believe employers who provide pension plans are also required to provide health insurance to their retirees. That's simply not the case." ... "Although federal law protects pension benefits, it provides no guarantee for medical insurance. That appears unlikely to change anytime soon. Retired workers from such corporate heavyweights as General Electric Co. and the Baby Bells banded together last year to push for congressional action to stop large employers from canceling or reducing an individual's health benefits after that person has retired. Their bill, however, is stuck in committee with little Republican support. Meanwhile, many companies are phasing out health benefits for retirees, no matter their age." If link is broken, view Adobe Acrobat version [PDF--64 KB].
- Wall Street Journal: Xerox Pension Plan
To Pay $284 Million. Judge Orders Troubled Copier Company
To Rectify Underpayment to Retirees.