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    Highlights for week ending October 4, 2003
  • CNET News: IBM lays off 700 in services. Excerpt: The job cuts come after the elimination of about 380 jobs last week in the company's Software Group, as part of a similar review process. Earlier this year, IBM cut about 600 jobs in its Microelectronics division. Those cuts came as part of an effort to return the chip unit to profitability, the company said at the time. But IBM eliminated far fewer jobs in 2003 than it did in 2002, when it cut more than 15,000 jobs in an effort to cut costs.


  • Motley Fool: Big Blue, Pink Slips. Excerpt: It's a steely pin poked deep into the gut of tech's inflated balloon of optimism, it is. International Business Machines (NYSE: IBM) trimmed its global services payroll by roughly 700 employees -- a move scored with the raspberry sound of a balloon deflating. Skill rebalancing is what IBM is calling it, as management looks to better match its outlook with the skills of its workforce. Euphemism. Coming as this does on the heels of layoffs in the company's software and microchip divisions, maybe money managers are due for a little portfolio rebalancing too. Why go black and blue on Big Blue? Well, it's just that most people are expecting an increase -- not a decrease -- in tech spending next year. Shouldn't IBM be installing "take a number" machines rather than pink slip dispensers?


  • New York Times: Big Increase Seen in People Lacking Health Insurance. Excerpt: The number of people without health insurance shot up last year by 2.4 million, the largest increase in a decade, raising the total to 43.6 million, as health costs soared and many workers lost coverage provided by employers, the Census Bureau reported today. ... A continued erosion of employer-sponsored coverage was the main reason for the latest increase, the bureau said. Public programs, especially Medicaid, covered more people and cushioned the loss of employer-sponsored health insurance but "not enough to offset the decline in private coverage," the report said.


  • BBC News: Pain for uninsured Americans. Excerpt: One wrong step and Valerie Bonds now faces up to $15,000 in medical bills and financial uncertainty for years to come.


  • Forbes: IBM wants death records excluded from Calif. trial. Excerpt: Facing trial in two lawsuits by cancer-stricken former employees, IBM will ask a California judge Tuesday to bar a jury from hearing evidence central to their claims of chemical poisoning: a study of 30,000 IBM worker deaths pointing to a higher-than-normal incidence of cancer. Known as the Corporate Mortality File, the collection of records maintained by International Business Machines Corp. over 30 years shows an "alarming" proportion of cancer deaths at the company, according to Dr. Richard Clapp, a Boston University cancer researcher hired by the workers.


  • CBS MarketWatch: Towers Perrin Calls on Congress for Legislation on Hybrid Pension Plans to Protect Workers' Retirement Security. Excerpt: Towers Perrin, the nation's leading retirement plan actuary to Fortune 1000 companies, in a letter to the U.S. Congress, called for legislation to clarify that hybrid pension plans, such as cash balance plans, are and always have been valid under the Employee Retirement Income Security Act (ERISA), the Age Discrimination in Employment Act and the Internal Revenue Code. Mark V. Mactas, Chairman and Chief Executive Officer, sent the letter to all members of the House of Representatives and the Senate. Towers Perrin called for this action by Congress following a recent ruling in the Southern District of Illinois (Cooper v. IBM), which ruled that IBM's hybrid pension plan discriminates against older workers. However, this court was not influenced by other federal court decisions and proposed Treasury Department regulations that concluded that cash balance plans do not inherently discriminate against older workers. If the court's ruling were to be upheld and became law, it would make cash balance pensions and other hybrid pension plans illegal.


  • Previous proclamations from Towers Perrin and other corporate consulting and lobbying firms pushing cash balance pensions include:
    • Conference of Consulting Actuaries (1986), Gary Hallenbec—Towers Perrin: "The third group of companies that ought to be looking at a cash balance plan would be those companies that are looking to reduce or at least control pension cost in the future." "The switch to the hybrid approach in effect represents converting the final pay play to a career pay plan with its inherent greater control of future costs but without the negative aspects of having to communicate that kind of change to the employee population. Needless to say, the way the plan is presented to employees looks so dramatically different than the defined benefit plan that the employees are used to that, and the change can be used to mask a benefit cutback." "Earlier I indicated one of the situations where a company might want to consider this approach is when it can be used to mask a benefit cutback."


    • Enrolled Actuary Meeting. Amy C. Viener, William M. Mercer, Inc. Keith S. Williams, Watson Wyatt Worldwide: Ms. Viener: "This is an introductory lecture. We wanted to have it because, at most of the conferences lately, they assume that everyone has dealt with cash balance and pension equity plans, and they just jump right into the really complicated issues. If you have never seen one it is pretty over your head and confusing..." Mr. Williams: "I've been involved in cash balance plans five or six years down the road and what I have found is that while the employees understand it, it is not until they are actually ready to retire that they understand how little they are actually getting." Ms Viener: "Right, but they're happy while they're employed."


    • Conference of Consulting Actuaries, Joseph H. Edmonds, 1987. "...it is easy to install a cash balance plan in place of a traditional defined benefit plan and cover up cutbacks in future benefit accruals. For example you might change from a final average pay formula to a career average pay formula. The employee is very excited about this because he now has an annual account balance instead of an obscure future monthly benefit. The employee does not realize the implications of the loss of future benefits in the final pay plan. Another example of a reduction in future accruals could be in the elimination of early retirement subsidies."

  • PBS Online NewsHour: Pension Gamble: Paul Solman of WGBH Boston reports on the current financial crisis in the pension system, and how future retirees are affected.
    • "wantedtoretire" comments on the current "pension crisis." Full excerpt: JMHO but these articles aren't addressing any of the root causes of this pension disaster. In IBM's case, why did the company quit contributing to the pension fund from 1995 thru 2001 or so? That's both before and after the cash balance rip-off. Stopping contributions is just plain bad investment practice. You use dollar cost averaging for long term investments. That way things average out. Instead IBM and I'm sure many other companies reduced this known future expense to inflate the profit picture. And then added insult to injury by claiming pension fund profits in their bottom line. As Janet and others have said, it was 12% in IBM's case. All the while skimming some of this fictitious profit to up executive pay. And now the current coverages seem to blame the lowly worker for having the gall to expect a pension he or she was promised. With the companies claiming they can't pay the pensions and be competitive. Disgusting.

  • WashTech News: House Says ‘No’ to Bush Overtime Pay Attack. Excerpt: The House of Representatives dealt the Bush administration a stinging rebuke by approving a measure that could lead to defeat of President George W. Bush’s proposal to take away overtime pay protections from as many as 8 million workers. President Bush will now have to decide whether to withdraw the parts of his proposal that would take away overtime protection or to defy the wishes of both houses of Congress and insist on his right to take away overtime protection. The 221-203 vote is the second congressional setback in little more than three weeks for Bush’s plan to gut Fair Labor Standards Act protections for workers’ overtime pay. The Senate voted Sept. 10 to forbid the U.S. Department of Labor from implementing Bush’s attack on working families’ paychecks as part of fiscal year 2004 Labor, Health and Human Services and Education appropriations bill (H.R. 2660). The House passed its version of the bill in July but did not include the prohibition.


  • Reuters: Fidelity buys IBM payroll, HR software applications. Excerpt: As a result of the purchase, 200 employees of International Business Machines Corp., mainly in Germany and France, will join Fidelity. In July of last year, Fidelity began to administer IBM's pension, health and welfare plans as well as its human resources administration. In January, IBM added its payroll department to the list, and a total of 650 IBM workers joined Fidelity.


  • Dow Jones Business News: IBM Gets Human Resource Outsource Pact From Lincoln Natl. Excerpt: In a written statement, IBM said its IBM Business Consulting Services unit signed a 10-year deal with Lincoln, a financial-services firm based in Philadelphia. The value of the contract, which takes effect Jan. 1, wasn't disclosed. IBM, the Armonk, N.Y., computer giant, will assume responsibility for Lincoln's human resources, payroll, and health benefits administration and customer care.


  • "Joe Dirt" comments on a Vault message board about changes to IBM's benefits plan. Full excerpt: Ah...fall is in the air and it is time to cut costs at IBM. A great note and message at W3….how IBM is cutting benefits but giving me one more week of leave. I would rather have the better benefits than the leave since I will never get to take it. I am sure that our BUs will keep the utilization targets (if not increase) and base hours the same. I already can't take the two weeks that I have now so what is one more week going to give me ...nothing. Now they are going to cut the % of medical coverage for my spouse and children. HR suggests that you should use your spouse’s coverage. How can a spouse work with three young children while you lead the lavish BCS lifestyle (5,6,7 plan as opposed to the marketed 3,4,5 plan). This company is designed 100% for corporate employees and Global Services is an afterthought. IBM Global Services quality of life is a joke. I always wonder when they do the surveys (Global Pulse) and the positive responses are in the high 80%. I would be interested to see the same survey done for only Global Services.


  • "IGS_Consultant" comments on changes to the vacation plan. Full excerpt: For IGS consultants, the number of vacation days one has is irrelevant. I have to bill the same number of days with my five weeks of vacation that my young colleagues do that have only two weeks. And, with a utlization rate of 94% (94% of 2080 hours per year), it's impossible to take your "earned" vacation anyway.

Coverage on H1-B and L1 Visa and Outsourcing Issues
  • Forbes: Jobs abound in India's booming tech sector. Excerpt: Companies are slashing payrolls in the United States and Europe to cut costs, moving software work offshore and creating thousands of jobs for India's low-cost engineers. ... India's software sector, including the back-office services industry, added 130,000 -- nearly 25 percent -- to its workforce in the year to March, taking the sector to 650,000. Wage costs are rising but are not yet a threat for a nation that churns out about 200,000 engineers per year, analysts say. Software workers with two years of experience are paid about 25,000 rupees ($545) a month, roughly one sixth of what their U.S. counterparts earn but a princely wage in a country with an average per capita income of $480 a year. ... A full-page advertisement from IBM screams: "The global giant is at your desktop with the opportunity of a lifetime. Can you afford to ignore it?"


  • WashTech News: Congress Allows H-1B Limit to Drop. Excerpt: U.S. white-collar workers besieged by high unemployment achieved a small victory today, as the U.S. Congress allowed the annual limit on new H-1B visas to drop from 195,000 to 65,000 per year. Congress has yet to take action, however, on numerous legislative proposals aimed at addressing loopholes and widespread abuse in professional visa programs.


  • New York Times: Cap on U.S. Work Visas Puts Companies in India in a Bind. Excerpt: Prasad Tadiparti, global general manager of human resources at MindTree Consulting, is working his way around what he calls "a logistical nightmare." He is trying to anticipate what skills his clients in the United States may need in the next few years and match them with the profiles of his approximately 1,000 software engineers and others. All this while factoring in how many are willing to travel, how many hold valid visas to work in the United States, and for how long. The "nightmare" is a sharp drop - to 65,000 from 195,000 - in the number of H-1B visas granted for skilled foreign professionals. The change, effective Wednesday, is making the business environment tougher for Indian software services companies like MindTree.

    According to an estimate by the American Immigration Lawyers' Association, there are some 900,000 H-1B employees in the United States, 35 percent to 45 percent of them from India. The H-1B program became an issue as the United States economy softened and employment slumped. Critics of the program argue that American corporations are replacing employees with less-expensive foreign workers from places like India and the Philippines.


  • MSN Money: Will your job move to India? Millions of U.S. jobs will be exported in the coming decade, forecasters say. Here are the jobs that are especially vulnerable, plus 5 that aren't. Excerpt: Of this group, the two software engineering jobs would seem to be the most susceptible to eventual relocation overseas. The two non-tech positions -- home-care aides and medical assistants -- are the least so. When measuring the total numbers of new jobs created, the top 10 skew heavily toward in-person kinds of service jobs; food preparation and restaurant work, customer service, nursing, retail sales, and office and clerical work are among the occupations that dominate. Computer support and applications-software engineering are the only tech categories represented.
This week on the Alliance@IBM Site:
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