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

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    Highlights—July 10, 2004
  • Business Week: The Benefits Trap. Excerpt: Shifting the Risk. As employers abandon ever-more-costly traditional retirement plans, the burden is falling on individuals and taxpayers. ... As industry after industry and company after company strive to limit -- or eliminate -- their so-called legacy costs, a historic shift is taking place. No one voted on it and Congress never debated the issue, but with little fanfare we have entered into a vast reorganization of our retirement system, from employer funded to employee and government funded, a sort of stealth nationalization of retirement. As the burden moves from companies to individuals -- who have traditionally been notoriously poor planners -- it becomes near certain that in the end, a bigger portion will fall on the shoulders of taxpayers. "Where the vacuum develops, the government is forced to step in," says Sylvester J. Schieber, a vice-president at benefit-consulting firm Watson Wyatt Worldwide. "If we think we can walk away from these obligations scot-free, that's just a dream." ... Despite the stampede to defined-contribution plans, there are still 44 million Americans covered by old-fashioned pensions that promise a set payout at retirement. All told, they're owed more than $1 trillion by 30,000 different companies. Many of those employers have also promised tens of billions of dollars more in health-care coverage for retirees. Even transferring a small part of the burden to individuals or the government can have a profound impact on the corporate bottom line. The decision by Congress to have Medicare cover the cost of prescription drugs, for example, will lighten corporate retiree health-care obligations by billions of dollars. Equipment maker Deere & Co. estimates that the move will shave $300 million to $400 million off its future health-care liabilities starting this year. ...

    IBM, which is already fighting with retirees in court over changes made to its pension plan in the 1990s, is now getting an earful from angry retirees about health-care costs. In 1999, IBM capped how much retiree health care it would pay per year at $7,500 of each employee's annual medical-insurance costs. Although IBM is certainly in no financial distress -- the company earned $7.6 billion on $89 billion in sales last year -- Big Blue says its medical costs have been rising faster than revenue. Last year the company says it spent $335 million on retiree health care. This year, for the first time, many IBM retirees are beginning to hit the $7,500 limit. Sandy Anderson, who worked as a manager at IBM's semiconductor business for 32 years, and today is the acting president of a group of 2,000 retirees called Benefits Restoration Inc., saw his own insurance bill triple this year. He suspects that the company is trying to make the perk so expensive that retirees drop it, a cumulative savings calculated by the group at $100,000 per dropout.

    But more than that, Anderson is angry that as a manager, IBM encouraged him to talk to his staff about retirement benefits as part of their overall compensation. The job market was tight, and IBM's message was our salaries aren't the highest, but we will take care of you when you stop working, he says. Now he feels the company is reneging. "I feel I've misled a lot of people, that I've lied to people," says Anderson. "It does not sit well with me at all." IBM says its opt-out levels are low and that it often sees retirees return to the plan after opting out for a period of time. The company also argues that it has not changed its approach to retiree medical benefits for more than a decade and that the rising cost of health care is the real issue. Even with the reductions, Anderson and his generation of retirees are better off than many. In 2003 the giant computer maker said it would pay nothing toward health insurance for future hires when they retire. If link is broken, view Adobe Acrobat version [PDF--37 KB].


  • Photo of Kathi Cooper BusinessWeek: The New Retirement. Full excerpt: Kathi Cooper graduated with honors from the accounting program at the University of Texas and has spent 25 years working in finance for IBM. Cooper says she needed that finance background to calculate how changes IBM was making to its pension plan in 1995 and 1999 would affect her. IBM, which faces younger rivals such as Microsoft and Dell that don't offer traditional pensions, was trying to cut costs. But Cooper, who had been planning on the benefits IBM had promised, didn't like what her calculations showed. So she sued. Last summer, she won the first round in the case against her employer, and IBM now calculates the case could cost it $6.5 billion if the plaintiffs' proposed remedy is accepted. That's a big number for a company with only $7.3 billion in cash on hand. Cooper argues that IBM's new plan, a so-called cash-balance plan that structures a pension more like a 401(k) account, discriminates against older workers. IBM says the plan is fair and gives workers who switch jobs more flexibility. Retirees at a half-dozen other companies, including Xerox, AT&T, CIGNA, and Georgia-Pacific have brought suits similar to Cooper's. "All I care is that every baby boomer in America realize what has happened to them," says Cooper.


  • Philadelphia Inquirer: Happiness equals productivity. That's the prevailing wisdom at Analytical Graphics Inc. in Exton, named the top small U.S. company to work for. Excerpt: As some companies keep a tight rein on costs, AGI's chief executive officer, Paul L. Graziani, says spending money on employees pays off. Not only are they happier and more productive, he said, but AGI saves hundreds of thousands of dollars by keeping employee turnover costs low. The company's 195 headquarters employees enjoy perks including free food, a free, fully equipped exercise room, and discount tickets to ball games, while the 15 employees in AGI's branch offices in Washington, D.C., Colorado, California and Madrid, Spain, eat on the company dime. The perks cost about $5,000 an employee, or about $1 million annually. That is over and beyond salaries and the standard array of health benefits, vacations, a 401(k) match, and profit-sharing. ... But companies that win these designations usually have a work culture that goes well beyond perks or even pay, said Lisa Ratner, project manager for the Great Place to Work Institute, a San Francisco organization that creates the Best-Places-to-Work lists used by Fortune and others, including business organizations in Pennsylvania. The organization polls employees, seeking their input on the credibility and trustworthiness of their managers as well as how they feel about their role in the company. That "trust index" makes up about two-thirds of the score. Answers to questions about benefits and policies posed to the human-resources director determine the rest of the score. "When you walk into a 'Best' company, you can feel the energy," Ratner said. "It's not just something tangible like having pet insurance or food or XYZ benefits. It's the whole work culture that's incredible, and you can sense that." "I think it's about trust and open and clear communications," she said. "It's about people feeling respected and knowing how what they do contributes to the mission, and then they are thanked for the work they are doing."


  • CNBC/MSN Money: Broken retirement promises? You can fight back. Excerpts: Many employers are paring benefits and changing other provisions in their retirement plans, spurring retirees to organize and ask Congress for help. Excerpt: A lot of retirees aren't happy. In fact, a growing number of them are, as the old movie said, mad as hell. And they're not just taking it quietly anymore. The issue is retirement benefits that many employers are trimming back or eliminating entirely to meet Wall Street demands for increasing profits. When retirement benefits are cut, retirees' plans and budgets can be thrown into disarray. The people who are angry aren't just retirees and current employees of small businesses, who tend to have less structured and less comprehensive retirement benefits Some of the country's biggest companies have been accused of breaking their promises to retirees, including General Electric, General Motors, IBM, Sears Roebuck, Textron, the old Bell Telephone companies, Walt Disney and other household names.

    Employers are cutting benefits that include free, subsidized or merely available lifetime medical coverage. Employee benefits consulting firm William M. Mercer says the number of companies with 500 or more employees offering medical plans that cover current and future retirees shrank substantially -- 4% -- in just one year alone. The percentage for "early retirees" (not yet eligible for Medicare coverage) shrank from 35% to 31% from 1999 to 2000, and the number for "regular retirees" (Medicare eligible) fell from 28% to 24%. In many cases, these benefits were promised, and employees relied on those promises when they made their retirement plans and budgets. But between 5 million and 10 million retirees are paying more for medical coverage, have lost it altogether or find themselves doing the "medical plan shuffle" -- moving in retirement, then having to travel long distances to find a doctor who is part of their medical plan. The problem is especially acute for early retirees who aren't yet eligible for Medicare, because they may have a hard time finding other medical insurance. Continued coverage is often available, but it is very expensive. And federal Medicare coverage, which retirees must pay for, covers most, but hardly all, of the costs for those who are eligible.


  • Janet Krueger answers questions about the Cooper v IBM pension lawsuit. Full excerpt:
    • So, can somebody concisely summarize where we are on this case? Once again, we are waiting on a final ruling from the district court judge. There is no way to predict how soon that might happen. Further information on the case is available at http://www.allianceibm.org/pensionlawsuitfaq.htm.


    • I left IBM in 2002 with 19 years. In 1999 when the big CB change was made, I was under 40 years old and had no choice in plans, so I was forced into the CB. The initial seeding in the CB plans seemed inequitable, and I have seen posts here that indicate other companies used a totally different formula than what IBM used. Those companies ended up with no lawsuits and happier employees.
      The lawsuit is not about the conversion. It is about the plans themselves. Both the CB plan, and the plan it replaced, were found to be illegally discriminatory. The plans at many other companies are also the subject of lawsuits, but they are different cases.


    • So, where are we, and what are the likely outcomes? I understand the judge is looking at the resolution; when might we see a decision?
      Hopefully there will be a decision some time this year, that does not mean you will get a check in the mail any time soon.


    • Will IBM appeal, and drag this out forever?
      IBM has stated on multiple occasions, including in the last annual report, that they will appeal. They will do everything possible to drag the case out as long as the courts will allow. Bear in mind that the way ERISA is written, IBM does not have to pay pensioners who die before the settlement -- they have everything to gain by delaying, and little to lose.


    • What are the possible outcomes? 1) IBM has to re-seed the CB accounts with more funds?
      No, because the CB accounts themselves are illegal.


    • 2) Guys like me will be allowed to convert back to the old DB plan and all its' provisions?
      No, because the old DB plan is also illegal.


    • 3) Others?
      IBM will have to implement a non-discriminatory plan, probably a new one but possible a pre-1995 plan, and then pay people the difference between that and what they have now. Anyone who gets less under the new plan would be left with the old plan, as they are vested in the old plan even though it is illegal.
    • Net: You will probably get more, you will definitely not get less, and the settlement date is most likely still years out in the future.

  • CIO.com: The New World Order. What Does American Business Owe the American Economy? Excerpts: What the American public is largely unaware of is that major employment trends like offshore outsourcing don't just happen. They are planned years beforehand, by global leaders in banking, industry and government, in forums like the annual Bilderberg Group meetings and others. The fate of the American public, and many other nations, are decided at these meetings without anyone's knowledge or approval. The meetings are top secret and off-limits to all but the invited, but details have leaked out over the years. For instance, the EEU (European Economic Union) was created in a Bilderberg Group meeting.


  • New York Times: Inquiry Confirms Medicare Chief Threatened Actuary. Excerpt: An internal investigation by the Department of Health and Human Services confirms that the top Medicare official threatened to fire the program's chief actuary if he told Congress that drug benefits would probably cost much more than the White House acknowledged. A report on the investigation, issued Tuesday, says the administrator of Medicare, Thomas A. Scully, issued the threat to Richard S. Foster while lawmakers were considering huge changes in the program last year. As a result, Mr. Foster's cost estimate did not become known until after the legislation was enacted. ... When President Bush signed the Medicare bill on Dec. 8, he hailed it as "the greatest advance in health care coverage for America's seniors since the founding of Medicare'' in 1965. Republicans were counting on the measure to help them win votes from the elderly in this year's elections. But Democrats, including Senator John Kerry, the party's expected presidential nominee, have waged a campaign to discredit the law, which they say is more helpful to drug companies and insurers than to elderly and disabled people. ... In recent weeks, Mr. Scully has registered as a lobbyist for major drug companies, including Abbott Laboratories and Aventis; for Caremark Rx, a pharmacy benefit manager; and for the American Chiropractic Association and the American College of Gastroenterology, among other clients. All are affected by the new Medicare law, which Mr. Scully helped write. ... Mr. Foster had estimated that the Medicare legislation would cost $500 billion to $600 billion over 10 years. The White House told Congress the cost would not exceed $400 billion. If link is broken, view Adobe Acrobat version [PDF--19 KB].


  • Workforce Management: The Company Picnic is Alive and Well. There's no demonstrable ROI, but that doesn't stop the venerable company picnic. Excerpt: "There’s no way I’d ever cancel a company picnic," Smith says. "My biggest business advantage is my people, and the more I build a great environment, the better job they will do. If my workers are happy, it carries over when they deal with clients, prospects and each other--and I make more money." The picnic is a way to support workplace morale, relationship-building and retention, says Mallary Tytel, president of Healthy Workplaces, a human resources consulting firm based in Bolton, Connecticut. "In times of uncertainty, it is particularly important to maintain corporate routines and rituals whenever possible," she says. "That’s why more and more companies recognize that the company picnic is part and parcel of the organizational fabric, and that the return on investment is less tangible but more critical than a line item in the budget."


  • Vault's IBM Business Consulting Services message board is a popular hangout for IBM BCS employees, including many employees acquired from PwC. Some sample posts follow:
    • "Entry level" by "Irrational_Exuberance". Full excerpt: Saw a comment on this board a few weeks ago that I agreed with - most of the staff issues/griping on this board are for those of us who have been around for a while. (do not discount any of these issues - they are all real and valid). But, entry-level at IBM Consulting should be pretty much the same as at any big consulting firm. You will be working on project teams doing process or IT projects. You probably won't have too much client interaction on your first few assignments. Typical day might be attending interviews led by more senior team members, and then documenting results. Helping with PowerPoint presentations. Helping with project admin (billing, etc.). Maybe coding programs or doing system testing if you are more technical. Key is to have a good attitude, be flexible, and do what is asked of you. Develop relationships with team leads and PM's, and they will pull you along to better assignments the next time around. Also, develop a good relationship with your Resource Deployment Manager, who staffs you on assignments. If you are a pain in the a.. to your RDM, you will pay for it later. In terms of staff issues at IBM, with the ways things are today, I wouldn't plan on a long-term career. Put in your 2-3 years, develop some good skills, but always keep an eye out for good opportunities. If you find a client you like, that is always a good place to look. Good luck!


    • "Is anybody up there listening?" by "Dose of reality". Full excerpt: We have succeeded in creating an environment where staff have no reason to strive for upward mobility, annual raises, or bonuses. The first is more trouble than it is worth, and the latter two have extremely low expected value vis a vis the effort required. The natural response is to just do enough to get by. Our answer is to raise the standards required to get by, which sends the best people packing. Can you see where this is heading?! High turnover, lack of experience, poor resource coordination, and an inability to sell premium services competitively. Continuing my favorite Titanic analogy, we are about to transition from rearranging the deck chairs to throwing some of the furniture and other luxuries overboard, and jettisoning a lot of fuel. What is really needed is a new captain and senior crew, some top flight engineers to patch the holes, and our very own Vicki (from the Love Boat) has got to go!

  • Dave Barry: For God's sake! Have your boarding pass and photo ID ready (humor for road warriors). Excerpt: We're entering the busy summer air-travel season, which means the airports will be swarming with millions of vacation travelers, all of them ahead of you in the security line, many of them with the intelligence of an avocado.

    No, that's unfair to avocados. I say this because of the passenger behavior I often observe at my local airport, the Miami International Permanent Construction Zone and Narcotics Bazaar. Every security checkpoint there is festooned with signs informing you, in several languages, that you must produce two things: (1) Your boarding pass; and (2) A photo ID. Also there are people announcing in loud voices, "Please have your boarding pass and photo ID ready!" Also, as you near the checkpoint, you can see that all the passengers in front of you are being required to produce a boarding pass and a photo ID.

    If there were an avocado in the line -- even a non-gifted avocado -- at some point it would grasp that it needed to produce a boarding pass and ID (which would say "Avocado"). But many human air travelers cannot manage this feat. Dozens of times, I have stood behind people who are taken totally by surprise. A boarding pass! AND an ID! Of all the things to need, here at the airport! And so they start rooting through their belongings, while those of us in the line roll our eyes, and the avocado rolls its pit.

  • Paul Krugman: Moore's Public Service. Excerpt: Since it opened, "Fahrenheit 9/11" has been a hit in both blue and red America, even at theaters close to military bases. Last Saturday, Dale Earnhardt Jr. took his Nascar crew to see it. The film's appeal to working-class Americans, who are the true victims of George Bush's policies, should give pause to its critics, especially the nervous liberals rushing to disassociate themselves from Michael Moore. ... Mr. Bush's carefully constructed persona is that of an all-American regular guy — not like his suspiciously cosmopolitan opponent, with his patrician air. The news media have cheerfully gone along with the pretense. How many stories have you seen contrasting John Kerry's upper-crusty vacation on Nantucket with Mr. Bush's down-home time at the ranch? But the reality, revealed by Mr. Moore, is that Mr. Bush has always lived in a bubble of privilege. And his family, far from consisting of regular folks with deep roots in the heartland, is deeply enmeshed, financially and personally, with foreign elites — with the Saudis in particular. Mr. Moore's greatest strength is a real empathy with working-class Americans that most journalists lack. Having stripped away Mr. Bush's common-man mask, he uses his film to make the case, in a way statistics never could, that Mr. Bush's policies favor a narrow elite at the expense of less fortunate Americans — sometimes, indeed, at the cost of their lives. In a nation where the affluent rarely serve in the military, Mr. Moore follows Marine recruiters as they trawl the malls of depressed communities, where enlistment is the only way for young men and women to escape poverty. He shows corporate executives at a lavish conference on Iraq, nibbling on canapés and exulting over the profit opportunities, then shows the terrible price paid by the soldiers creating those opportunities.


  • New York Times (courtesy of the Sarasota Herald-Tribune): Over the Counter, Yes, but Out of the Insurance Plan. Excerpt: While high prescription costs hog the spotlight, more and more consumers are being hit with another expense: over-the-counter drugs that aren't covered by insurance. Allergy drugs like Zyrtec and Claritin, as well as heartburn medications like Prilosec, can now be bought without a prescription, and drug makers are pushing to sell cholesterol drugs directly to consumers, too. ... Much of the shift, Mr. Field said, stems from insurers seeking to reduce their expenses. It started, he added, in 2001, when WellPoint Health Networks of Thousand Oaks, Calif., petitioned the Food and Drug Administration to have allergy drugs like Claritin and Zyrtec sold directly to consumers. "It was the first time an insurer wanted a drug to go O.T.C.," he said. "It was the shot heard around the world."


  • Boston Globe: More find health plans too costly. Coverage from employer goes untaken. Excerpt: Soaring premiums and copayments are squeezing a rising numbers of Americans unable to purchase health coverage offered by employers. People who have access to insurance, yet can't afford it, even when it's subsidized by an employer, are adding to the nation's population of 37 million uninsured, a new survey by the Urban Institute found.


  • Washington Post: Health Care Costs Darken Sunset Years. Excerpt: Through the first half of the 20th century, a long and comfortable retirement was something few workers experienced. Pensions were not common, Social Security was just getting started, and anyway, most workers died on the job or shortly after retiring. Then things changed. Social Security flowered. Unions extracted better pensions and other benefits from employers. New federal laws made if difficult for employers to renege on promised benefits and provided government-backed insurance for pensions if employers went broke. Now, that latter period, especially the years from about 1975 to 2000, is beginning to look like the golden age of retirement in America. In other words, those were the good old days, and if you're still working, there's a good chance you've missed out. The retirement that looms for many of today's workers is likely to be quite different. While some will still have that magic combination of Social Security, a private pension, a 401(k) and company-sponsored retiree medical insurance, their numbers are shrinking steadily. The conclusions of experts who study the situation are depressingly uniform. Retiree medical insurance is fading fast. Private pensions -- the kind that provide a lifetime stream of income -- have declined drastically over the past two decades, though they are slipping more slowly now. Social Security's future is problematic, and workers are not doing well in their 401(k)s. The do-it-yourself trend in retirement -- and the low participation in 401(k) and similar plans -- is the heart of the problem, and has been getting some attention lately. But not widely appreciated is the impact of the disappearance of retiree health insurance.


  • New York Times Opinion by Paul Krugman: Health Versus Wealth. Excerpts: John Kerry has proposed an ambitious health care plan that would extend coverage to tens of millions of uninsured Americans, while reducing premiums for the insured. To pay for that plan, Mr. Kerry wants to rescind recent tax cuts for the roughly 3 percent of the population with incomes above $200,000. ... Second, the Kerry plan would provide "reinsurance" for private health plans, picking up 75 percent of the medical bills exceeding $50,000 a year. Although catastrophic medical expenses strike only a tiny fraction of Americans each year, they account for a sizeable fraction of health care costs. By relieving insurance companies and H.M.O.'s of this risk, the government would drive down premiums by 10 percent or more. This is a truly good idea. Our society tries to protect its members from the consequences of random misfortune; that's why we aid the victims of hurricanes, earthquakes and terrorist attacks. Catastrophic health expenses, which can easily drive a family into bankruptcy, fall into the same category. Yet private insurers try hard, and often successfully, to avoid covering such expenses. (That's not a moral condemnation; they are, after all, in business.) All this does is pass the buck: in the end, the Americans who can't afford to pay huge medical bills usually get treatment anyway, through a mixture of private and public charity. But this happens only after treatments are delayed, families are driven into bankruptcy and insurers spend billions trying not to provide care. By directly assuming much of the risk of catastrophic illness, the government can avoid all of this waste, and it can eliminate a lot of suffering while actually reducing the amount that the nation spends on health care. If link is broken, view Adobe Acrobat version [PDF--18 KB].


  • Boston Globe: Fatally Uninsured. Excerpt: To be uninsured in one's 50s or early 60s is to run a substantial risk of premature death. That is the conclusion of a study of 8,736 adults aged 50 to 64. The study found that being without health insurance raised the risk of death by 43 percent, even after researchers accounted for the greater poverty and poorer health of the uninsured. The finding is a strong argument for publicly financed measures to increase coverage in this age group. ... Of the approximately 40 million Americans without health insurance, more than 6 million were in this age group in 2002, when the AARP Public Policy Institute did a study of the uninsured. That figure had grown from 4 million a decade before, an increase of 50 percent. According to the AARP study, most lacked insurance because their employers did not provide it, or they couldn't afford offered coverage, or they had retired early and then lost coverage.


  • Computerworld: Sprint signs 5-year, $400M outsourcing deal with IBM. The agreement expands on existing IT work between the companies. Excerpt: Sprint has signed a five-year outsourcing deal with IBM that's worth more than $400 million and designed to accelerate delivery of Sprint products to its customers, the companies said in a statement. As part of the agreement, approximately 1,000 Sprint IT employees will transfer to IBM to support Sprint applications, the companies said. Under the terms of the deal, which expands the scope of existing IT work between the two companies, IBM Global Services will provide application development and maintenance support for selected Sprint IT software systems. IBM will also work to speed up software application delivery services to allow Sprint to save money and more quickly deliver new products to customers. Sprint said the agreement will help it cut annual operating expenses by more than $1 billion over the next two years.

Coverage on H1-B and L1 Visa and Off-Shoring Issues
  • ZDNet: Offshoring verdict--fear a backlash. Excerpt: Recent research has suggested a consumer backlash could hit firms in the pocket if people switch their custom, so we asked our pool of CIOs if this threat now figures in the overall business equation for offshoring. In an overwhelming result, 11 of the CIO Jury said it does, with only one dismissing it as a passing phase. ... Graham Benson, information services director and CIO at Screwfix Direct, said that while offshoring can deliver the process side of call centers it does not effectively deliver the relationship element. "It is not as 'personal' to the offshore contact centre agent as it would, or certainly should be, to a salaried employee."


  • ZDNet: Offshoring backlash spreads. Excerpt: The threat of a backlash against offshore outsourcing of IT and call-center work to countries such as India has tended to focus primarily on the United States but recent developments suggest a more organized and growing opposition to moving work overseas is beginning to emerge here in the UK. On the jobs front, the Amicus trade union, which recently merged with financial services union Unifi, has warned of "by any means necessary" strike action in protest at the large numbers of jobs it claims are being moved abroad purely to cut costs. HSBC, which last month announced some 3,500 jobs are to leave the UK, looks set to be the first target. But it is the customer backlash that is now gaining prominence, with a controversial report by call-center industry analysts ContactBabel claiming it would need only a small percentage of customers to switch allegiance over offshoring to wipe out any cost advantage of doing it in the first place.


  • WashTech: Are you serious about addressing the loss of U.S. jobs? Help Send A Message To Congress.


  • NetworkWorldFusion: Face-Off. Do offshoring's benefits outweigh its drawbacks? Excerpts: Yes. S.M. Balasubramaniyan, Wipro Technologies. Organizations all over the world are under constant pressure to provide value to their customers and meet the challenges of competition. In globalized free economies, this is truer today than ever. The primary factor that directly or indirectly contributes toward a company’s business success is the cost of production and operation. Read more. No. Linda Guyer, Alliance@IBM Cracks are appearing in the offshore sidewalk where IT jobs travel from developed countries to places such as India and Costa Rica. There is a plethora of problems that can offset or erase the cost savings of offshoring. Read more.

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