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    Highlights—September 25, 2004
  • Wall Street Journal: House Votes to Bar U.S. Intervention On IBM Pensions. Excerpt: In what could be a blow to International Business Machines Corp., the House of Representatives passed an amendment aimed at prohibiting the federal government from intervening on the computer giant's behalf in a massive pension lawsuit. Rep. Bernie Sanders, a Vermont independent, authored the amendment, which would prevent the government from using any funds to assist in overturning a federal court's ruling last year that IBM discriminated against older workers when it adopted a "cash-balance" pension plan in 1999. At any moment, the judge in that case, Cooper v. IBM, is expected to file a decision on how much IBM would have to pay 130,000 current and former employees. IBM has said it will appeal, and estimates that if it loses the case it will have to pay an additional $6.5 billion in pensions. "This vote sends a strong message to the Bush administration...that Congress supports the federal court ruling declaring that cash-balance plans are age-discriminatory," said Mr. Sanders. "Not only are IBM employees hurting, but millions of workers from one end of the country to another" whose pensions have been cut by as much as 50% when companies change to cash-balance plans, he said. ...

    Rep. Gil Gutknecht (R., Minn.), a co-sponsor of the bill, said in his comments on the floor that he didn't think cash-balance plans are all inherently evil. "The reason we are here today is to try and keep this administration from doing something incredibly stupid, and that is, getting involved in this case which the workers have already won -- and they are right," said Mr. Gutknecht. "This is where we, whether Republicans or Democrats, ought to stand together and say it is wrong to steal from pension funds." This was the third year that a version of the amendment was offered, and passed, with wide bipartisan support. If link is broken, view Adobe Acrobat version [PDF--25 KB].


  • CNN/Money: House backs IBM pension ruling. Vote aims to prohibit government from overturning ruling against IBM's pension plan. Excerpts: The House of Representatives voted 237-162 Tuesday to prohibit the government from trying to use regulations to overturn a court case that ruled against the cash balance pension plan of International Business Machines Corp. The move echoed a vote the House took a year ago. But the sponsor of both measures, Rep. Bernard Sanders, an Independent from Vermont, argued that Congress should weigh in on the subject again to make clear its opposition to cash balance plans that do not include protections for older workers. A federal court in Illinois ruled last year against IBM (IBM: down $0.42 to $85.30, Research, Estimates), saying that its cash balance plan discriminated against older workers under federal pension rules.

    The Treasury had been busy rewriting the regulations to address age discrimination concerns about the plans, but it withdrew those in June. However, Sanders noted Tuesday that IBM was expected to appeal and hundreds of other companies still offered the same kind of plans. He thought lawmakers needed to go on record again in support of the court ruling. "Taxpayer money should not be used to support an age discriminatory cash balance plan, and this amendment gives Congress the opportunity to make that very clear," he declared. "It is imperative that we keep fighting."


  • Bernie Sanders Videobite: Bernie On Cash Balance Pensions [Realplayer, 22 seconds].


  • The Scotsman (Scotland): Pension threat hits IBM staff at Greenock plant. Excerpts: THREE thousand employees at IBM’s Spango Valley plant at Greenock have this weekend been rocked by reports of a threat to their final salary pension scheme. According to an industry source, the computer giant is considering options that include winding up IBM’s contributory C-Plan scheme, which pays out a defined benefit on a final salary basis. It forms part of the US group’s £3.5bn UK pension scheme arrangement, which was closed to new entrants in 1997. Scheme trustee Brian Marks, in a personal capacity, told the IBM staff pensions website that the company is considering options that include a part wind-up of the scheme. ... IBM has already suffered problems with its pension scheme in the US, where a court told the company to reimburse 140,000 employees and ex-employees whose benefits had been underpaid. When Investment & Pensions Europe asked IBM’s UK pensions manager, David Newman, about the rumour, he replied: "I’m not interested in talking to you, I’m afraid."


  • Forbes: IBM, Other Vendors Had Secret E-Rate Deal. Excerpt: Representatives of IBM Corp. and two other E-rate vendors offered to pay commissions to the National Alliance of Black School Educators for any E-rate business their members sent to them. Their letter dated Nov. 2, 2000, offered the organization commissions equal to 1.5 percent of the volume of federal funds their members schools received under the E-rate program, which uses phone user's fees to help schools and libraries obtain and keep telecommunications and Internet service. The letter said the agreement must be kept secret because it "might be misconstrued by third parties." It was signed by representatives of IBM, NEC-Business Network Solutions and Video Network Communications Inc., or VNCI. A later memorandum of understanding formalizing the agreement was signed by representatives of NEC and VNCI, but the space for the IBM official's signature was left blank. The documents were made public Wednesday at a hearing by the House Commerce Committee into e-rate waste, fraud and abuse. ...


  • Lucent Retiree Organization: Lucent Retirees Condemn Company’s Elimination of Dependents’ Health Care Benefits; Call Action A Flagrant Demonstration Of Corporate Greed. Excerpt: In a mailing to retirees, Lucent said, effective January 1, 2005, it will no longer subsidize the cost of medical coverage for dependents of management retirees who retired on or after March 1, 1990, and whose annual base salary at retirement was at least $65,000. Lucent’s current action coupled with similar cutbacks a year ago effectively eliminates coverage for dependents of 20 percent of the company’s management retirees. “Lucent executives are once again showing a total disregard for the commitments the company made to retirees and their dependents, said Ken Raschke, LRO president. “Their lack of compassion for retirees and their dependents while simultaneously defending their own excessive and unwarranted compensation is absurd!” He noted that Lucent Chairman and CEO Patricia Russo’s compensation is at an all-time high while the company’s profits are at record lows. While Lucent cuts back on health care benefits and increases the cost to retirees, Raschke noted that the compensations for top Lucent executives are at record highs.


  • Washington Post: The Politics of Social Security. Kerry to Use Study to Call Bush Plan a Wall Street Windfall. Excerpt: President Bush's push to create individual investment accounts in the Social Security system would hand financial services firms a windfall totaling $940 billion over 75 years, according to a University of Chicago study to be released today. Sen. John F. Kerry plans to use the paper, by economist Austan Goolsbee, as he campaigns in Florida today, hoping to open a new line of attack against Bush. The Democratic presidential nominee is expected to say that Bush's Social Security plan is a sop to Wall Street donors, who are among the Bush campaign's biggest financial backers.


  • Forbes 400: Record 313 US billionaires. Excerpts: For the first time since 2000, the magazine said, "the combined net worth of the nation's wealthiest climbed to $1 trillion, up $45 billion in 12 months." A record number of billionaires--313--was instrumental in reaching the trillion-dollar mark. (Editor's note: Louis Gerstner, former IBM CEO and Chairman, has apparently fallen off the Forbes richest 400 Americans list. He was #396 in 2003 with a net worth of $600 Million. In 2002 he was #364 with a net worth of $630 Million).

  • Forbes: Making More, Paying Less. Excerpts: The effective tax rate for America's largest and most profitable corporations has sharply declined in recent years, and one third of such companies paid zero taxes--or less--in at least one of the last three years, according to a study released yesterday. At the same time, IRS data indicates that the overall share of federal taxes paid by corporations in now less than 10%, down from nearly 13% in 1997. The study released yesterday by Citizens for Tax Justice and the affiliated Institute on Taxation and Economic Policy finds that in 2003 alone, 46 of the 275 companies it reviewed paid no taxes at all in 2003, despite reporting a total of $42.6 billion in pre-tax profits. Indeed, these companies received $5.4 billion in tax rebates that year. In the last three years, 82 of the country's largest profitable corporations paid no federal income tax for at least one year of the Bush administration's first three years, the study found. ...

    This trend occurred against a backdrop of rising corporate earnings. The study attributes the trend to the widening availability of offshore tax shelters and other lawful avoidance techniques. Together the companies reported profits of $1.1 trillion over the three-year period and paid about $189 billion in taxes. The reduction from nominal rates was caused by the companies' abilities to shelter $540 billion in the pre-tax profits reported to shareholders. ...

    What the Citizens for Tax Justice terms "loopholes and other tax subsidies" led to savings of $71 billion for the biggest companies in 2003, up from 43.4% in 2001. Half of the "tax-break dollars" over the three-year period went to just 25 companies, the study says. All told, 82 companies paid zero or negative taxes in at least one of the last three years and 28, including Boeing, paid negative taxes for the entire period. The largest beneficiaries were some of the most profitable companies: General Electric, SBC Communications, Citigroup, IBM and Microsoft.

    The study says that the changes in corporate tax laws rules have not had their desired effect of spurring investment. Since 2003, the 25 companies that saved the most from the new rules actually reduced their investment in property, plant and equipment by 27%. The remaining 250 companies surveyed reduced their investments, too, but by much less, 8%.


  • Vault's IBM Business Consulting Services message board is a popular hangout for IBM BCS employees, including many employees acquired from PwC.

  • HealthLeaders News: Bush and Kerry: Fiscal Responsibility Out and 'Choice' In. Excerpt: President George W. Bush and Sen. John Kerry face very different challenges in crafting a healthcare platform. Kerry's challenge is to address the issues of coverage and affordability in a way that is both attention-grabbing and realistic. That means his plan must be a consensus plan that he can work through a Republican-controlled Congress while avoiding the "tax and spend" label. To answer both these challenges, Kerry has walked away from some traditional Democratic themes such as single-payor and a more muscular regulatory approach. While his plan is costly, he does have a budget neutral way of paying for it, and the plan employs ideas that sound, well, almost Republican: tax credits that serve as health insurance vouchers, an innovative stop-loss idea that improves affordability and lowers risk on the high risk member, and a novel form of "choice" in which he opens up the Federal Employee Health Benefit Plan, or FEHBP, to the nation. While his approach is bold, it is also hard to distill into an applause line or a 30 second commercial, and its costs are drawing fire. President Bush's challenge is quite different. His main task is to tout his own accomplishments in a way that suggests "mission accomplished" without actually using the damaged phrase. He will also want to undermine any new Democratic proposals as "tax and spend." Bush has already put forward most of his legislative agenda on health care, and a key component of that agenda has been signed into law -- the Medicare Reform bill, which adds a pharmacy benefit among other things. Unfortunately for Bush, the pharmacy benefit part of the Medicare bill will require defending as well as touting due to several controversial inclusions.


  • New York Times: How Not to Save Social Security. Excerpt: Among the clear-cut policy differences between President Bush and Senator John Kerry is each man's take on Social Security. In his acceptance speech at the Republican convention, Mr. Bush said, "We must strengthen Social Security by allowing younger workers to save some of their taxes in a personal account." Mr. Kerry, in his acceptance speech, said, "I will not privatize Social Security." Mr. Kerry is right, and Mr. Bush is wrong. The president's plan would do the opposite of what Mr. Bush claims. It would weaken Social Security, hurt the economy and endanger many workers' retirements by pushing them into unreasonable risks in the stock market. If Mr. Bush were a broker peddling stocks to low-income, uninsured, indebted individuals like many of the Americans who would be included in his plan, he would be violating rules that require brokers to recommend only suitable investments.

    When responsible politicians talk about "fixing" Social Security, what they generally mean is finding a way to guarantee a basic level of financial security for the elderly while closing the gap that will develop over time in the system's finances if nothing is done. Social Security's trustees plan for solvency over 75 years. Currently, the program is projected to come up short in 2042, when it will be able to pay about 70 percent of the promised benefits. That's a lot of money, but the gap can be bridged over the next 38 years with a package of modest reforms, which we will discuss in a future editorial. What Mr. Bush proposes - allowing workers to divert some of their Social Security taxes into personal investment accounts in exchange for agreeing in advance to receive a much-reduced guaranteed government benefit when they retire - would neither provide retirement security, nor take care of the solvency of the Social Security system. And it would wreak havoc with the overall federal budget. ... Privatization would invite overexposure to the stock market - a risk that is not justified by the potential return. Most people who already save for retirement rely heavily on stock investments through 401(k)'s and other savings plans. Even workers who have traditional pensions are more exposed to the stock market than ever, as employers increasingly strive for outsized stock market returns to make up for inadequate contributions to their plans.


  • New York Times: Deal in Congress to Keep Tax Cuts, Widening Deficit. Excerpt: Putting aside efforts to control the federal deficit before the elections, Republican and Democratic leaders agreed Wednesday to extend $145 billion worth of tax cuts sought by President Bush without trying to pay for them. At a House-Senate conference committee, Democratic lawmakers abandoned efforts to pay for the measures by either imposing a surcharge on wealthy families or closing corporate tax shelters. "I wish we could pay for them, but this is a political problem and we have people up for re-election,'' said Representative Charles B. Rangel of New York, the senior Democrat on the House Ways and Means Committee. "If you have to explain that you voted for these tax cuts because they benefit the middle class and against them because of the deficit, you've got a problem.'' Fearful of being attacked as supporters of higher taxes, Democrats said they would go along with an unpaid five-year extension of the $1,000 child tax credit; a four-year extension of tax breaks intended to reduce the so-called marriage penalty on two-income families; and a six-year extension of a provision that allowed more people to qualify for the lowest tax rate of 10 percent.
Coverage on H1-B and L1 Visa and Off-Shoring Issues
  • CNET News: Can you say 'offshore' anymore? Excerpts: Euphemism is alive and well again when it comes to axing jobs in America. For much of the past two years, the business world has been happy to trumpet the benefits of sending technology work and other tasks offshore to lower-cost labor markets such as India and Russia. But as labor advocates and politicians have fumed over the "offshoring" trend, businesses are changing their terms, if not their tune. It's not too different from the way corporations in an earlier era employed softer words for "layoffs," like "downsizing" and "rightsizing." "Offshoring" is giving way to phrases such as "co-sourcing" and "global sourcing," said John McCarthy, analyst with Forrester Research. "It's all part of everyone going into the offshore witness protection program," McCarthy quipped. "They're changing the title, but the activity is the same." Earlier this year, McCarthy reiterated his view that more than 3 million U.S. services jobs will go offshore between 2000 and 2015. And he bumped up his estimate of near-term lost jobs by some 240,000, meaning he expects a total of 830,000 positions to have moved offshore by 2005. ...

    IBM, which has been expanding its operations in India, has moved away from the related term "outsourcing." Outsourcing refers to a business farming tasks out to companies like IBM--which may complete the work abroad. Big Blue avoided using the word "outsourcing" in announcing deals with two energy companies and with two German banks that all involve IBM taking over certain operations. Big Blue described some of the deals as "business process transformation services" agreements and said the phrase refers to an emerging market category. ...

    Corporate language transformations related to offshoring rile populist commentator Jim Hightower. "Excellent news, Americans! U.S. corporations say that they are no longer 'offshoring' our middle-class jobs," Hightower wrote in an essay published Friday. "Does this mean that greedheaded CEOs are no longer shipping our manufacturing, professional, and high-tech jobs to India, Pakistan, Russia and other low-wage centers? Of course not. It simply means they no longer say the word 'offshoring.'"

In Politics—
Note: The views expressed in the news articles and editorials in this section are those of their authors. They do not reflect the views of the Alliance@IBM. They do reflect the views of the editor of www.ibmemployee.com.

 

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