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    Highlights for week ending October 18, 2003
  • Wall Street Journal: Treasury May Delay Pension Rules. White House Will Wait for Congress to Take Action on Cash-Balance Plans. Excerpt: Employee advocates were surprised by the news. "The Treasury Department's apparent decision to put the brakes on its proposed cash-balance regulations is a victory for the millions of American employees who have seen their pension benefits slashed by up to 50%," said Rep. Bernie Sanders, a Vermont independent. The Treasury was assumed to be writing regulations countering a July ruling by a federal district court that International Business Machines Corp. discriminated against older workers when it adopted a cash-balance plan. The Treasury has also been expected to develop regulations determining that cash-balance plans don't have to follow standard pension law when calculating payouts under the plan; three appeals courts, most recently in a case against Xerox Corp., have concluded that cash-balance plans must follow the same rules as other plans, which could prove more expensive for employers. In September, the House passed an amendment offered by Rep. Sanders to prevent the Treasury from issuing regulations on cash-balance plans. The vote amendment passed 258 to 160, with 65 Republicans and 192 Democrats in favor, and had bipartisan sponsors, including Rahm Emanuel, a Democrat from Illinois, and Gil Gutknecht, a Minnesota Republican.


  • CBS MarketWatch: Gambling on a Great Bull's return. Commentary: Congress shoots craps with pension funds. Excerpt: The House voted 397-2 last week to relieve Corporate America of $26 billion in required pension-plan contributions over the next two years. The Senate is considering a three-year relief period for companies to replenish underfunded plans. While current pensioners aren't at risk, employees, investors and taxpayers are being sold short by the House's failure to exact reforms in exchange for leniency on delinquent companies -- now deeper in pension debt than the total S&L bailout of $150 billion. "This current system is cascading into an ever-worsening situation," said U.S. Rep. George Miller, a California Democrat who co-sponsored the stopgap bill. "In good times, companies reduce contributions to pension funds (based on rosy projected gains) and in bad times, they claim they can't make them. There's less and less stability in the system."


  • Workforce Management: New Hope for Troubled Retirement Plans. Excerpt: At the end of July, cash-balance plans ran into a brick wall in federal court. In a class-action suit by IBM employees, a federal judge in Illinois ruled that IBM’s 1999 cash-balance plan--and also an interim system adopted in 1995--discriminated against older workers because its formula left them with smaller benefits than younger workers would earn in the course of their careers. The decision clearly has cast a pall over the future of cash-balance plans. Mercer Consulting recently conducted an unscientific poll of several dozen companies that had been considering a switch to cash balance, and learned that nearly all had put their plans on hold, says Jerry Levy, a Mercer actuary and pension expert. ... The American Academy of Actuaries, a professional association of business statisticians, is touting its "DB-K Plus" plan, which would combine the most desirable features of defined benefits and defined contribution in one program. Like a traditional pension, a DB-K Plus plan would offer retirees the security of a regular stipend for the rest of their lives. But instead of the company bearing the entire cost, the money that it put into the plan would be augmented by voluntary contributions from employees that would be tax deductible, in the fashion of a 401(k). The DB-K Plus could combine all that money into one pool for investment purposes, while keeping it segregated in individual accounts on the books, so that employees would have some say about how their money is invested. Employees who made bigger contributions would get more of a payoff in retirement, but all would be guaranteed at least a certain income.


  • American Academy of Actuaries Issue Brief: DB-K Plus: A Defined Benefit Plan With 401(k) Features [PDF--400 KB].
    • Dave Finlay comments (full excerpt): On the surface, it doesn't sound horrible, but here are my objections: 1) They are proposing a single trust for the combined Defined Benefit and 401K plan. That means the company owns the money. Currently, the employees own the 401K fund, and the company can't make a profit on it. The proposal would allow the company to invest the trust any way they want as long as they promise the employees the returns they would have received from their selected investments. 2) I have problems with Defined Benefit plans where the employees contribute part of the money because it's a 'heads I win, tails you lose' proposition. If the plan does poorly, benefits are cut; if the plan does well, the company gets all the excess.

  • Business Week: Big Blue Stokes Tech's Rekindled Fire. Not only are IBM's sales and profits up for the third quarter, it plans to start hiring again -- in a big way. Excerpt: Still, IBM's quarterly results suggest that tech companies are finally expecting a pickup in demand, as opposed to increased profits as a result of cost-cutting. Indeed, IBM said it expected to add approximately 10,000 new positions in key skill areas, including services, hardware, and software. That kind of hiring could go a long way toward convincing consumers that job creation is back on track -- although it's unclear how many of those new jobs will be U.S.-based.


  • Alliance@IBM Press Release: Alliance@IBM /Communications Workers of America Questions IBM claim of Adding 10,000 jobs in 2004. Excerpt: When IBM announced its 3rd quarter 2003 results, Chairman Sam Palmisano added in a written statement that IBM will “see the need for approximately 10,000 new positions in key skill areas, including high-value services, middleware technologies, Linux and open standards based hardware and software.” This announcement raises many more questions that it answers. The Alliance believes the announcement of these “new” jobs is merely a smokescreen to hide the fact that thousands of career IBM employees have already lost their jobs in 2003 and 2002. In fact, our sources within IBM say that up to 30,000 Global Services employees will lose their jobs by 2004 due to Offshoring. We also are very skeptical as to where these “new” jobs will be located. Will they be here in the United States? Or will these jobs be created in one of IBM’s many offshore locations, such as India, China or Brazil. IBM has already signed deals to train 100,000 software specialists in various Chinese cities over the next 3 years.


  • MSNBC News: U.S. still top spender on health care. Data also show fewer doctors, few signs of better health. Excerpt: The United States continues to far outspend other developed nations on health care, according to data released Thursday. Americans’ health costs now account for 13.9 percent of gross domestic product, or $4,887 per person. Yet Americans continue to lag in certain key indicators of health. That per-capita spending more than doubles the average of $2,117 among the 30 member nations of the Organization for Economic Cooperation and Development, which released the statistics. The next-highest spender on health is Switzerland, at $3,248 per person or 10.9 percent of its GDP.

    By comparison, Germany came in at about $2,800 a year (10.7 percent of GDP) and the United Kingdom, which has a public health system, spent just under $2,000 (7.6 percent) per person for 2001, the most recent date for the comparative data. ... Reinhardt notes the proliferation of insurance companies and health plans force doctors and hospitals to spend heavily on administrative costs that most other nations don’t have. In countries such as Canada, the government’s buying power as a sole purchaser drives down prices. ... The higher U.S. costs do offer some benefits: more technical innovations and intensive levels of acute care, which contribute to excellent outcomes for those who need serious treatment. And the lower numbers of doctors may underscore the efficiencies of a privatized system. But disparities in care levels appear to remain profound among Americans, especially for the uninsured. “There’s different ways of rationing care,” Docteur says. “The U.S. is one that, in some ways, rations by willingness to pay.”


  • Employee Benefit Research Institute (EBRI): Savings Needed for Retirement Health Costs May Exceed $1 Million for Many. Excerpt: Many Americans at or near retirement age would require more than $1 million to prefund medical costs over their remaining life, according to new research from the Employee Benefit Research Institute (EBRI). The highest costs face the majority of future retirees—more than two-thirds—who receive no health insurance from their former employer to supplement Medicare. Such employer-provided health coverage for retirees is increasingly rare. (Editor's note: It looks like our Future Health Accounts might run a bit short).


  • Motley Fool: 10 Shocking Stats. Excerpt: Here are 10 shocking statistics (or groups of statistics) that reveal too many people are thinking way too incorrectly or insufficiently about financial matters. Consider sending this article to people you care about who aren't tending to their financial gardens -- it may be a wake-up call for which they'll thank you for years to come.


  • Newsday editorial by Marie Cocco: Give Kucinich His Props: He'd Fix Health Care. Excerpt: Benefit-enrollment packages arriving in employees' mailboxes this fall will include the fifth consecutive double-digit hike in insurance prices, along with new devices to shift costs to workers. State programs like Medicaid, that are supposed to pick up the insurance slack when the economy slows, are themselves scaling back coverage to meet budget crises. If the privately run, employer-sponsored, health-care system were a government program, politicians would line up at microphones to declare its failure. Its costs are spiraling out of control. Its inefficiency is spectacular. The United States spends $294.3 billion a year on health administration, according to 1999 figures published in the New England Journal of Medicine. On a per-capita basis, that's more than three times what Canada spends. The alleged efficiency of managed care is an advertising claim, not a fact. The percentage of U.S. health care workers dedicated to administration only - filing forms, navigating among multiple insurers - has climbed since the managed-care experiment began. Government studies have shown that the administrative savings of moving to a single-payer system would free up enough funds to pay for expanding coverage to all. This is, in essence, what Kucinich wants to do.


  • Business Wire: Report: IBM Global Services Leads IT Outsourcing Vendors. Excerpt: "Reputation, innovation and quality personnel are key components of the overall commitment to serving the customer," said Rick Horton, general manager, IBM Strategic Outsourcing Services. "Our extensive experience and proven track record in providing outsourcing services -- more than a decade -- have allowed us to build a reputation and team that is second to none. We understand what it took to get here and we understand what it takes to stay here; we are not resting on our laurels. We are utilizing all parts of IBM -- such as our Business Consulting Services unit -- to ensure we have the most innovative vision of business transformation that enables customers to tackle the challenges of the future."


  • A union organizing effort at Texas Instruments is now in place. Visit the TI-Union Web site for information.

Coverage on H1-B and L1 Visa and Outsourcing Issues
  • Dr. Norman Matloff is a professor in the Department of Computer Science at the University of California, Davis. Dr. Matloff has been an active critic of the H1-B and L1 visa programs. His best known work is Debunking the Myth of a Desperate Software Labor Shortage, which he presented to Congress. Dr. Matloff maintains an excellent list of "supplementary materials" concerning the H1-B programs and his writing on this Web page.
This week on the Alliance@IBM Site:
  • Burlington Free Press: State, ex-IBMers ponder life after layoffs: Brain drain, company's departure among fears.
  • Burlington Free Press: Sept. jobless rate sees 21-month high. Excerpt: Vermont's unemployment rate in September posted its largest increase in more than a decade, rising by 0.4 percentage point to 4.3 percent on the back of 3,000 IBM workers' taking a forced one-week furlough during the month.
  • eWeek: Waiting for Offshore Outsourcing. Excerpt: The place to start isn't on the Web, which seems to defy common sense when thinking of anything in the technology field. The response to a political and economic problem must begin with "beef." The only thing that will persuade decision-makers in government and business will be the people who are willing to move away from their monitors and be counted. I suggest folks organize meetings from companies in a geographic area, at lunch or after work. Connect with other IT workers and start building an organization to discuss the issues. Start developing a plan to connect with other local business and governmental groups. When you have some steam built up, start bringing in local political figures, to share your concerns.
  • Vermont Jobs Cited in China Issue - by Nancy Remsen. Excerpt: (Bernie Sanders stated:) "With educated, hard-working Chinese workers available at 50 cents an hour or less, and with corporations' having the capability of bringing their Chinese-made products back into this country tariff-free," Sanders said, "why wouldn't American multi-nationals shut down their plants in this country and move to China?"
  • Think Twice newsletter for Sept/Oct 2003
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