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Join your fellow employees who are fighting for your benefits - Join the Alliance!

Retirees, Vendors, Contractors, Temps, and Active Employees are all eligible to become members of the Alliance.


    Highlights for week ending April 5, 2003
  • Money Magazine: The Changing Face Of Pensions. Excerpts: "As she moved up the ranks at AT&T, the last thing Jane Banfield worried about was her pension. She'd started out in sales in 1982, worked her way up to management and, by the late '90s, was starting to dream of early retirement. Then in 1997 AT&T changed its pension plan, and veterans like Banfield saw their benefits slashed. Now 54, she'll receive about $15,000 a year when she turns 65, instead of the $30,000 she had been expecting. 'I didn't think this could happen,' Banfield says. 'It's a benefit I always assumed would just be there.'" ... "As a result of these disadvantages for older workers, more than 800 age-discrimination claims have been filed with the Equal Employment Opportunity Commission, and several employers who've switched to cash-balance pensions--including AT&T and IBM--are embroiled in class-action lawsuits challenging the plans. But new IRS rules, expected to become final this year, clarify how employers can convert to cash-balance plans without violating age-discrimination laws. Already, 348 cash-balance switches are awaiting IRS approval." ... "Educate yourself: You'll find information on cash-balance plans, benefit calculators, and links to news and lawsuit documents at www.pensionrights.org and www.cashpensions.org."


  • Congressman George Miller (D-CA): As Deadline Nears, Members of Congress Voice Detailed Objections to President Bush's Proposed Change to Pension Plan Rules. Excerpt: "Lawmakers from the House and Senate today continued their effort to stop President Bush’s plan to alter federal pension rules that would make it easier for companies to cut older employee’s pension benefits by as much as half."


  • ABC News: Pension Problem. Some Workers Find They’re Not Getting The Retirement They Counted On. Excerpt: "'Even if you have a good pension plan now, you may find that your company is going to switch that plan or freeze that plan and in the future you may not get everything that you expected,' says Karen Friedman, director of policy strategies for the Pension Rights Center, a Washington-based consumer-rights group promoting retirement security."
  • ... "The most controversial switch under way is toward so-called cash-balance plans, which have been adopted by more than 500 companies, including IBM, Verizon and Duke Energy. Unlike traditional defined benefit plans, in cash-balance plans, the employer's contribution does not increase with a worker's seniority and salary."

  • In an historical article (December 28, 1999), Ellen Schultz of the Wall Street Journal outlines how "How a Single Sentence By the IRS Paved the Way to Cash-Balance Plans." Excerpt: "In August 1991, the Internal Revenue Service issued a long-awaited set of proposed pension regulations. In it was a single sentence, not present in a draft copy just 11 days before, that seemed to protect companies that were changing their pension plans to an ingenious new system. 'I sleep better at night' knowing the sentence is there, said an attorney with benefits consultants William M. Mercer at a conference for actuaries the following March. And so, apparently, did clients. In the years since, hundreds of companies have converted their conventional pensions to 'cash balance plans,' which save them money by reducing the pensions accrued by older workers. Specifically, the sentence said that the new kind of pension didn't violate age-discrimination laws. Employers are sleeping less soundly these days. In 1999, as millions of older workers realized exactly how cash-balance pensions work, they complained loudly enough that four federal agencies and Congress began looking into whether the plans do, in fact, illegally discriminate. Besides the IRS, the agencies are the Equal Employment Opportunity Commission, the Labor Department and the General Accounting Office."


  • CWA News: CWA Sways GE on Executive Pay Formula. Excerpt: "General Electric, in response to a shareholder proposal submitted by CWA, has agreed to exclude pension fund income from a factor used for determining executive compensation. GE's action came as the union prepared to mobilize workers and to present a range of proposals aimed at limiting executive compensation at several of its employers' annual shareholder meetings. The decision addresses a distorted - and inflated - definition of 'earnings per share,' one of the key measures GE's board of directors until now has used as a measure of top executives' performance and a factor in setting their bonus and other incentive compensation. Linking executive pay to pension income creates an incentive for companies to cut pension benefits for workers and to withhold cost-of-living increases. GE has frozen pension benefits at 2000 levels while continuing to lay off workers and increase health care co-payments for IUE-CWA members."
    • Editor's note: Donald Parry, an IBM employee, submitted a similar shareholder proposal for the 2002 IBM Shareholder's Meeting. His proposal was voted down. The April 30 issue of the Journal News (Westchester, Rockland, and Putnam counties in New York) features an article titled IBM faces shareholder dissent at meeting provides an excellent historical synopsis of Mr. Parry's and other year 2002 proposals.


  • Washington Alliance of Technology Workers (WashTech): Outsourcing Presentation Makes Waves in Seattle. Excerpt: "While union activists handed out fliers and carried signs reading “Where do you want your job to go today?” on a sidewalk in downtown Seattle yesterday, two British executives extolled the virtues of outsourcing tech jobs to India in the offices of the Seattle Chamber of Commerce, 24 floors above. 'Our local economy is in crisis, and that crisis is partly being caused by corporations sending good living wage jobs to other parts of the world, where workers will do them for a quarter of the cost,' said Jake Carton, an organizer for Jobs With Justice who was among those who demonstrated outside the building on Wednesday."


  • CWA News: CWA Wants Government Action on Tech Outsourcing. Excerpts: "CWA is pressing Congress to authorize an investigation by the General Accounting Office into the growing number of U.S. information and technology companies that are shifting U.S. technology jobs overseas. Numerous tech and information companies have been involved in the transfer of U.S. work overseas, including AT&T, Microsoft, Bank of America, Dell, Eastman Kodak, IBM Corp. General Electric Co.'s medical services division and Hewlett Packard, Bahr told members of Congress." ... "'The American public was told not to worry about the loss of manufacturing jobs as they would be replaced with high-tech service jobs' he said. 'Not only was this flawed logic at the time, but now that very premise is challenged. If high-tech jobs are moving overseas, what will sustain the American economy?'"


  • Business Week: Still Waiting for Corporate Reform. The lessons of Enron-esque scandals haven't sunk in yet. Just look at the eye-popping new allegations of executive-suite malfeasance.


  • Business Week: Options: "Probably the Worst Incentive". Compensation pro Matt Ward on why this popular benefit is so bad -- and what would work much better.


  • Wall Street Journal: As Workers Face Pension Cuts, Executives Get Rescued. Excerpt: "At a time when pension plans at many companies are increasingly in peril, employers have been taking steps to protect the jumbo pensions promised to top executives. Delta Air Lines disclosed in filings last week that it had set up special retirement trusts last year to ensure pension payments to 33 of its executives in the face of severe turbulence for the industry. The disclosure angered Delta employees, who face pension cuts as the carrier seeks to lower its costs."
  • If link is broken, view Adobe Acrobat version [PDF--29 KB].

  • Wall Street Journal: More Companiess Seen Cutting Contributions To Retirement Acccounts. Excerpt: "A growing number of companies, searching for ways to cut costs, are suspending their matching contributions to workers' 401(k) retirement accounts. Such a move by broker Charles Schwab & Co. won wide attention in March because the company has been outspoken in its support of the investment vehicle. But Schwab is not alone." ... "'Many people didn't realize they were dealing with a profit-sharing plan instead of a conventional pension plan where contributions are set,' she (Alicia Munnell, director of the Center for Retirement Research at Boston College) said. '"They are tough retirement vehicles in my view and this idea that employer can match one year and not match another, I think is another factor that makes them less than perfect vehicles for people to do their retirement savings.'"
  • If link is broken, view Adobe Acrobat version [PDF--25 KB].

  • Midrange Server: Gartner Forecasts Thaw in IT Ice Age, Sunny Days for IBM. Excerpt: "Looking beyond the current economic uncertainty and global unrest, Gartner analysts are forecasting a general upturn for the technology sector. Gartner also believes IBM is the company best positioned to take advantage of the pending turnaround. Polishing his crystal ball at the Gartner symposium in San Diego last week, Gartner CEO Michael Fleisher explained why the IT sector is on the verge of rejuvenation, which will likely take shape late this year and blossom in 2004."


  • Dow Jones Business News: Indian Software Firms Face Threat From Foreign Invaders. Excerpts: "Indian software companies, which have flourished by tapping local low-cost technology workers, face a new threat as global competitors aim to derive similar cost advantages by setting up units within the country. Some of the world's biggest technology services companies, including Accenture Ltd. , Electronic Data Systems Corp. and International Business Machines Corp., have all recently announced plans to expand their operations in India." ... "India's English-speaking technology workers tend to earn much less than their Western counterparts because of the country's lower cost of living. That has enabled Indian firms to charge customers in the range of $15-30 per hour - far below what the same work would cost in the West. Firms like Accenture and IBM, for instance, charge about $60-70 per hour in the U.S. For high-end work, their charges can go up to $150-200 per hour."


  • "flatsflyer" comments on the lack of cost of living adjustments in IBM's pension plan. Full excerpt: "From 1959 through 1990 the annualized rate of COLA's for IBM Retiree's was 3.7% A COLA was not granted each and every year but was usually granted within 18 months from the previous one. Since Three Finger Lou took over there was one COLA and for most people it was
    less than 1%, nothing if you retired after 1995. To make headlines the company stated the COLA's were up to 20%. That applied to only those retired prior to 1975 and I've yet to hear of any one collecting it as the average retiree still only collects 87 checks. The reason that COLAs are not granted is because IBM Management is corrupt, greedy and cannot run the core business on a profitable basis. Since they need to feed their greed they take the money from employees, stockholders and retirees."


  • "gonein92" lists "recent" cost of living adjustments in IBM's pension. His table is repeated here in its entirety:
    Effective Date of Increase Maximum Increase
    May 1, 1969 7%
    November 1, 1974 10%
    November 1, 1976 15%
    December 1, 1978 12%
    December 1, 1980 10%
    January 1, 1983 8%
    October 1, 1986 6%
    August 1, 1990 7%
    January 1, 2001 2.5 to 25%

    Note: As "flatsflyer" stated, only employees who retired prior to 1975 received a 2001 COLA of 20% or higher.


  • "justa_bean_counter" provides a list of 42 persons that have requested the opportunity to speak on April 9th at a Treasury Department hearing on proposed regulations that would legalize cash balance pension plans. Several IBM pension activists, familiar to readers of these summaries, will be speaking.

Call to Action (courtesy of Janet Krueger)

Please call your congress critters, both in the House and in the Senate and ask them to cosponsor the new Pension Benefits Protection Act of 2003 that will be introduced on April 8. Below is a letter being sent around the hill by Warren Gunnells in Representative Sanders' office that you can refer to. They currently have 108 co-sponsors, but more would be better!

This legislation would both cancel the proposed Treasury regulations, and reduce the risk that Treasury would modify them slightly and reissue them. Plus it provides a new set of protections for workers when their pension plans are changed.

Note that employers have always had the right to change their pension plan formulas at any time -- that is not what we are objecting to. This legislation would prohibit employers from putting older workers into long periods of wearaway when conversions are done.

Further, it addresses the problem of how to ensure employees are disclosed enough real information when they are offered a choice between pension plans by requiring that choice be delayed until the employee retires or leaves the company for some other reason.

Warren Gunnells letter follows:

Dear Colleague:

Please join with over 100 Members of Congress in becoming an original co-sponsor of the Pension Benefits Protection Act of 2003.

This legislation:

  1. Requires companies converting to cash balance plans to allow workers who are either at least 40 years old or have at least 10 years of service the choice to remain in their traditional defined benefit pension plan.
  2. Requires the Department of Treasury to withdraw proposed cash balance conversion regulations that would give companies the green light to violate the pension age discrimination laws that are on the books.

This legislation has been endorsed by the AFL-CIO, the Pension Rights Center and the Communication Workers of America.

The attached article from Money Magazine shows how necessary this legislation is for older workers. (Editor's note: The Money Magazine article is available through a link at the top of this page). This month, the Treasury Department will hold hearings on its proposed rule that would give companies the green light to slash the pension benefits of older workers through cash balance conversions. Ms. Banfield, a loyal AT&T employee, found her pension cut in half by the company's cash-balance conversion. The proposed Bush Administration rule would make this type of pension cut commonplace, potentially costing older workers billions in anticipated retirement pension benefits.

We must stop this assault on the hard-earned nest-egg of millions of older Americans. To co-sponsor this legislation, please contact Warren Gunnels in Rep. Sanders' office at 5-4115.

Sincerely,
Bernard Sanders, Member of Congress
George Miller, Member of Congress
Virgil Goode, Member of Congress
Maurice Hinchey, Member of Congress
Sherwood Boehlert, Member of Congress

 

Political Commentary

  • New York Times editorial by Paul Krugman: Channels of Influence. Excerpt: "There's something happening here. What it is ain't exactly clear, but a good guess is that we're now seeing the next stage in the evolution of a new American oligarchy. As Jonathan Chait has written in The New Republic, in the Bush administration 'government and business have melded into one big "us." ' On almost every aspect of domestic policy, business interests rule: 'Scores of midlevel appointees ... now oversee industries for which they once worked.' We should have realized that this is a two-way street: if politicians are busy doing favors for businesses that support them, why shouldn't we expect businesses to reciprocate by doing favors for those politicians — by, for example, organizing 'grass roots' rallies on their behalf?"

 

 

 

"The test of our progress is not whether we add more to the abundance of those who have too much; it is whether we provide enough for those who have too little." — Franklin D. Roosevelt
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