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Highlights—August 20, 2005
- Yahoo! message board
post by Janet Krueger. Full excerpt: The settlement was finalized almost
as is -- the only
major amendment was that the folks IBM sold to AT&T as
of May, 1999 were shifted to groups 3 and 4, since IBM
converted them to the cash balance plan before closing
out their pensions in November, 1999.
Details of the settlement agreement are available at
you click on the FAQ file, you'll see sample payouts
at about page 3. The detailed formulae are included
in the settlement document itself.
The estimated date for when payouts might start is
November 2006, based on the probable schedule of the
The total settlement pot will be between $314 million
and $1.7 billion, depending on the outcome of that
The appeal is likely to go in our favor UNLESS Congress decides to retroactively legalize IBM's
discriminatory actions -- YOU can make a difference
- Signing our petition at
- Printing a copy and sending it to your
representative and senators in DC, with a handwritten
cover letter letting them know exactly how you will
feel if they vote yes to legislation retroactively
legalizing cash balance plans
- Asking your friends, neighbors and colleagues to
do the same.
- Yahoo! message board post by Janet Krueger. Full excerpt: I just uploaded
a document named
to the Files area of this board... It is another useful resource
for fighting the legalization of cash balance plans. Feel free to
extract bits and pieces to use in letters to the editor of your
local paper. Or hand deliver a copy to the local office of your
Representative and Senators while they are home on summer vacation.
Share it with your friends and colleagues...
Below are some excerpts; I can't include the whole thing in a note,
because it contains some good charts and footnotes that don't paste
well into plain text.
Comments? (Editor's note: An Adobe Acrobat version
of Ms. Krueger's excellent document is available from www.ibmemployee.com here) [PDF--32
MYTH # 1: EMPLOYERS PROTECT OLDER WORKERS FROM THE ADVERSE IMPACTS
OF CONVERSIONS TO CASH BALANCE PLANS.
FACT: While some employers have protected their employees from some
of the worst adverse impacts of a conversion, even cash balance
supporters have acknowledged that "it is not unusual in some cash
balance conversions for the 40 to 50 year old employee to lose one-third to as much as one-half
of his expected pension." A study of
actual cash balance conversions conducted by the actuarial firm
Towers & Perrin determined that in over one-third of the conversions
the employers provided no transition protections whatsoever.
In 2002, a General Accounting Office (GAO) report documented the
dramatic reduction in benefits for older workers: "a 45-year old
worker at the time of conversion receives an annual annuity of about
$18,500 at retirement from the cash balance plan instead of the
$39,800 annuity the worker could have received from the defined
benefit plan with a final average pay formula. Likewise, a worker
50 years old at conversion receives an annual annuity of about
$17,800 from the cash balance plan rather than the $35,100 annuity
the final average pay formula would have provided."---- 2002 GAO
To make matters worse, some employers structure their conversions so
that older employees often work for months or years without accruing
additional pension benefits while similarly situated younger
employees continue to accrue benefits. During a typical conversion,
many older workers experience what is referred to as "wearaway,"
which means that they continue working without earning additional
pension benefits until the amount in their cash balance plan reaches
the amount they had already earned under their traditional defined
benefit plan. The GAO found that the amount of wearaway any
employee experiences is tied directly to age. Older workers suffer
the longest periods of wearaway, which may last many years. For
example, a typical conversion scenario "generated a 2-year lump sum
wearaway for a 35-year old worker, a 4-year wearaway for a 45-year
old worker, and an 11-year wearaway for a 55-year old worker at
conversion." In such an instance, the 55-year old would earn no
additional pension benefit before reaching normal retirement age, in
effect working the last decade for no corresponding retirement
MYTH #2: EMPLOYERS DID NOT REALIZE WHEN THEY CONVERTED TO CASH
BALANCE PLANS THAT THE PLANS MIGHT VIOLATE AGE DISCRIMINATION LAWS.
FACT: From the earliest days of cash balance plans, the employer
community recognized the very serious legal issues posed by the age
discriminatory aspects of hybrid plans. In fact, as early as the
mid-1980s benefits consultants were "writing articles . . . panning
cash balance plans, that they are a flash in the pan, that they are
a gimmick, that they can't satisfy any of the rules."
Significantly, following an early meeting of what later became known
as the Cash Balance Practitioner's Group in 1990, attendees—which
included representatives from four large pension consulting firms
and two major law firms--circulated a memorandum acknowledging
that "it is well known that a [cash balance] plan is at risk under a
literal reading of" the age discrimination laws. The Working Group
Report noted that a "number of practitioners believe that there is a
very significant risk that the [Internal Revenue] Service will
ultimately take the view that it cannot avoid a literal
interpretation of the statute." The group concluded that in the
absence of a "legislative fix," the "potential employer exposure is
extremely high – potentially increasing the plan liabilities four or
The concerns of the Working Group Report were subsequently confirmed
in an Internal Revenue Service document indicating that Onan
Corporation's cash balance plan was not in legal compliance: "This
plan does not satisfy the clear and straightforward requirement of
section 411(b)(1)(H)(i) of the Code because the plan's benefit
accrual rate decreases as a participant attains each additional year
MYTH # 3: AUTHORIZING CASH BALANCE PLANS WON'T INCREASE THE PBGC'S
FACT: Authorizing cash balance plans will create significant
additional liability exposure for the PBGC at the very time Congress
is acting to reduce that exposure. It is indeed ironic that cash
balance advocates would suggest that provisions encouraging the use
of cash balance plans would be added to legislation designed to
reduce PBGC liability exposure and suggestions that cash balances
plans are "like" 401(k) plans or defined contribution plans are
grossly misleading as neither of those plans generate PBGC
exposure. Cash balance plans generate significant additional
liability exposure to the PBGC because the "leverage" inherent in a
cash balance plan creates funding issues should all benefits come
due immediately as would happen in the event of a bankruptcy. This
is because even though cash balance plans promise to pay
participants a benefit at any point in time which is equal to the
employee's account balance, the plans are funded by employers on the
basis of "actuarial liability." The result is that, even when the
plan is considered "fully funded" for PBGC purposes, the actuarial
liability used for funding purposes will often be as little as 70%
of the plan's current account balance liability thereby creating
additional potential liability exposure to the PBGC.
In addition to increasing the liability exposure of the PBGC,
authorizing cash balance plans leaves a myriad of issues unresolved
in terms of what benefits the PBGC will provide to employees covered
by cash balance plans in the event of bankruptcy. Employees should
not be left to guess what their benefits would be in the event their
company fails and they are forced to look to the PBGC to provide
their hard earned retirement benefits.
MYTH #4: EMPLOYERS NEED CASH BALANCE PLANS TO APPEAL TO TODAY'S
MORE MOBILE WORKFORCE.
FACT: It is a total fiction that today's work force is more mobile.
As Eric Lofgren, an actuary at Watson Wyatt, explained to the
Society of Actuaries: "[B]aby boomers have had the same level of
mobility as their parents and grandparents when you look at people
at the same age... So far the boomers have been staying on the
job longer, actually, than their parents and their grandparents."
Mr. Lofgren's comments are consistent with a study conducted in
1998 by his firm which concluded that this phenomenon applied as
well to younger workers, age 25 to 34, who in 1996 spent a
considerably longer time, on average, with one employer than did
workers in that same age group in the 1950's. More recently, the
authors in the largest research study to date of conversions to cash
balance plans concluded that they had "found no support for claims
that CB conversions are a response to labor markets with more mobile
MYTH #5: BY CONVERTING TO CASH BALANCE PLANS EMPLOYERS MAKE
PENSIONS EASIER FOR THEIR EMPLOYEES TO UNDERSTAND AND APPRECIATE.
FACT: More frequently, employers use a conversion to cash balance
plans to hide benefit cutbacks. In 1986, shortly after the adoption
of the first cash balance plan, Eric Lofgren, an actuary with Watson
Wyatt, outlined for a conference of actuaries that a primary
objective of conversions to a cash balance plan was to "to
camouflage a benefit cutback, or remove early retirement
subsidies." Mr Lofgren even noted how a company converting to a
cash balance plan could use two very different announcements for the
same new cash balance plan. The upbeat version most commonly used
to announce a conversion optimistically touts the purported virtues
of a cash balance plan, describing it as "an exciting, modern,
flexible new plan design with the advantages of both defined benefit
and defined contribution." He also suggested what he described as
an equally accurate, but more candid, definition:
"Dear Employee: We've got for you a cash balance pension plan.
It's our way to disguise the cutbacks in your benefits. First we're
going to change it to career average. We'll express the benefits
as lump sum so we can highlight the use of the CPI, a sub-market
interest rate. What money is left in the plan will be directed
towards employees who leave after just a few years. Just to make
sure, we'll reduce early retirement subsidies."
This ability to use conversions to mask cutbacks was still being
touted in 1998, when an actuary with PricewaterhouseCoopers noted to
the annual meeting of the Society of Actuaries that "converting to a
cash balance plan does have an advantage of it masks a lot of the
As a practical matter, conversions to cash balance plans also have
been used to achieve artificial accounting gains. Existing
accounting rules have allowed publicly held corporations to use cash
balance conversions to generate "pension income." The company's
increased bottom line presents a more attractive financial picture
to the investing public. As Mark Beilke, chairman of the Academy of
Actuaries Pension Accounting Committee, recently observed, financial
statement "gains [from cash balance conversions are] mostly derived
from 'accounting gimmicks.'" Similarly, William Sweetnam, then a
member of the Senate Finance Committee staff and later a Treasury
Department Tax Benefits Counsel, acknowledged in 1998 that the "primary reason cash
balance plans are financially advantageous is the accounting treatment of cash balance plans
versus final average
earnings plans . . . So the reason that cash balance plans are
better is that they make the corporations [sic] financial statement
look better since pension liabilities are less." Warren Buffet has
described the practice by some companies of creating "phantom"
pension income to inflate reported income as a misrepresentation
that "dwarfs the lies of Enron and WorldCom."
MYTH #6: EMPLOYERS DO NOT ADOPT CASH BALANCE PLANS TO REDUCE
THEIR COSTS AT THE EXPENSE OF OLDER WORKERS.
FACT: Employers repeatedly have converted to cash balance plans as
a way to reduce their costs at the expense of older workers'
retirement benefits. For example, Chief Judge Murphy held in IBM v.
Cooper that IBM's actuaries projected that IBM's 1999 conversion to
a cash balance plan "would produce annual savings of almost $500
million by 2009." Consistent with the voluminous anecdotal
evidence, a survey of cash balance plan sponsors found that 56% of
firms expected the long-term cost of their defined benefit plans to
decrease after conversion. Similarly, the largest study of cash
balance conversions documented that "firms with employees who are
closer to retirement are more likely to convert to the CB format."
It also concluded that "the workplace of firms that undertake
conversion to CB plans has had a longer tenure with the firm, on
average" lending "credence to the claims of CB conversion opponents
that firms benefit from these conversions at the expense of older
MYTH # 7: IF LEGISLATION ALLOWING CONVERSIONS TO CASH BALANCE PLANS
IS NOT RETROACTIVE SOME 1,600 LARGE PENSION PLANS WITH HYBRID PLANS
ARE LIKELY TO EITHER FREEZE OR TERMINATE THEIR PLANS.
FACT: It is first important to note that even if you define large
employers as those as few as 1,000 employees, according to the PBGC
there are only approximately 625 such employers with hybrid pension
Putting aside the question of how many large employers have hybrid
plans, it is clear that some employers and certain employer groups,
such as ERIC, have threatened and will continue to threaten massive
terminations in an attempt to scare Congress into giving them
immunity for their prior illegal age discrimination. But whatever
exposure they have today for their prior age discrimination, they
will have the same exposure following the adoption of legislation
without regard to whether they terminate or freeze their plan. In
other words, prospective cash balance legislation would stop the
growth of their future exposure but their existing exposure remains
the same without regard to whether they continue, freeze or
terminate their plan. In short, while it is a threat that the
employers have used in the past and will undoubtedly continue to
use, it is a red herring.
What most employers ignore is that all that retroactivity eliminates
is the potential liability with respect to past conduct -- benefits
that employees have already accrued. Employers and employer groups
are also reluctant to admit that most employers did not provide the
kind of transitional protections included in the Senate Finance
Committee bill. In other words, they will also have to persuade
Congress to eliminate transitional protections against wearaway and
other abuses or they won't get any benefit from retroactivity
language inserted in the bill.
message board post by Jimmy Leas. Full excerpt: A Senate staffer is
looking to talk to IBMers whose job was sent to another country or who helped train them to
take over jobs. Please forward this to others you may know who either lost their job to offshoring
or who helped train Indians or Chinese to take over the jobs of American IBMers.
Please contact Liz Urschel at Senator Dorgan's office. This senator is very interested in the
offshoring issue. Her phone number is 202 224-4354 and her email address is email@example.com.
Thanks very much.
- Benefits Restoration, Inc. is an organization devoted
to the restoration of retiree benefits with a focus on Legislation, Media Awareness, Shareholder
Resolutions and Litigation. Their August
newsletter is now available on their Web site. Excerpts: To all of you, my apologies for
being among the missing for the past two months. I had found it necessary to take on full time
work in Asia ….in order to be able to pay for the family’s Medical Contributions!!
I had foolishly thought that I could continue to at least get out a newsletter while traveling
but as you know by now, I failed in accomplishing this. When I left, as things were going,
Medical Contributions to IBM were continually increasing while retirement income was remaining
unchanged causing many of us to cut expenses, find work or sell homes and “downsize”.
Now, however, we all face a new threat…the potential erosion and/or reduction in our
pensions. Those of you who have been paying attention have seen the move to convert your pensions
(known a Defined Benefit Pensions) to Cash Balance Pensions. Others have been carrying the
banner while I have been gone; it is time now for everyone to weigh in on this issue.
Janet Krueger, Kathi Cooper and the folks at Alliance@IBM have been very
active in ensuring that the issue of Cash Balance Pensions and the legislation that is being considered
in Washington has been loudly communicated. This is not a time for you to sit on the sidelines
and wait for someone else to carry the banner. I already have a case of the guilts for having
been AWOL while all of this has been going on. Please keep in mind the way this works….each
change that takes place is very small. The culmination of all of these small changes results in
major impacts to retirees. Think of your medical benefits; each year beginning in 2000, you were
asked to pay a little more, then a little more. Finally, in 2004, there was the big change…IBM
realized that we retirees were not paying attention and were not organized to oppose them!
For a very detailed analysis of the various bills that have been introduced,
immediately following this brief introduction is a fine piece of work done by the National Retiree
Legislative Network (www,nrln.org) that describes the bills and the NRLN position on each. Benefits
Restoration has added highlights and italics in those areas that we feel are of particular importance.
Lastly, there is a list of Senators who make up the Committee on Health,
Education, Labor and Pensions. I heartily encourage you to write to each of these people,
whether your own Senator or not, stating your objection to any form of Cash Balance Pension
that does not fully protect retirees and those close to retirement. Keep in mind Gary Sullivan’s
closing remarks in our last newsletter...
“In conclusion, just in case you think this can’t happen with
our gilt-edged IBM pensions, recall what happened to our ‘medical benefits for life’.”
Some of you have written regarding the Medicare Modernization Act and
the letter sent out by IBM’s own Randy MacDonald earlier this year. Farther down, Art Richter,
our New York Director includes a piece on this ….why do I hesitate to call it legislation?
Well, read Art’s piece and you will get the idea. While we are under no immediate threat,
rest assured this is an upcoming battle that we will have to face and in the not too distant
future. Stay aware and stay alert. Sandy Anderson.
- Wall Street Journal: Three
Republican Governors Hit Unions.
Bargaining Rights Are Rescinded
For State Employees, One of Big Labor's Last Strongholds. By Joi Preciphs. Excerpt: Several Republican
governors are trying to weaken organized labor in the one place it has remained strong: representing
public employees. First-term Missouri Gov. Matt Blunt rescinded collective-bargaining rights for
state employees this year, undoing an executive order issued by a Democratic predecessor, and
has eliminated a state board overseeing union elections for public employees. Indiana Gov.
Mitch Daniels, a former Bush White House budget director, overturned an executive order that for
15 years provided collective-bargaining rights for that state's public employees. And Maryland's
Robert Ehrlich, backed by the state Supreme Court, suspended a 2% pay increase unions had negotiated
for state employees with his predecessor.
- New York Times: Death
Tax? Double Tax? For Most, It's No Tax. By Edmund L.
Andrews. Excerpts: WHEN Congress comes back from its summer recess, one of the first things
Senate Republicans will try to do, again, is kill the estate tax.
Perhaps no other tax has so many passionate, persevering and politically organized opponents
as the estate tax, or "death tax," as they have branded it. As Michael J. Graetz
and Ian Shapiro of Yale recount in "Death by a Thousand Cuts" (Princeton University
Press), their entertaining account of the repeal movement, opponents of the estate tax have
already achieved a remarkable political feat by building broad public support for abolishing
a tax that currently affects only 2 percent of all estates.
But repeal would be costly - more than $70 billion a year, once it was complete - and
many of the populist arguments in favor of repeal are misleading. If estate or inheritance
taxes were frozen at today's levels, they would have almost no impact on family farmers
and most small-business owners. [...]
But despite the populist rhetoric and oft-repeated horror stories about
families being forced to sell their farms in order to pay estate taxes, the battle is over a very
large amount of money held by a very small number of families. A report last month by the Congressional
Budget Office found that in 2000 only 2 percent of all estates - about 52,000 - were subject to
any estate tax. At that point, taxes were imposed only on estates worth $675,000 or more. The
limit rose to $1.5 million in 2004, and if that limit had been in effect in 2000, only 13,771
estates - fewer than 1 percent - would have been subject to the tax. All but 740 of them would
have had enough in liquid assets to cover estate tax liabilities, the office estimated.
- New York Times: Announcing
an Award for Greed. By Nicholas D. Kristof. Excerpts:
I'm pleased to announce the first annual Michael Eisner Award for Corporate Misgovernance.
Last week, a Delaware judge sent a warning shot over corporate boards everywhere, chastising
Mr. Eisner, the C.E.O. of the Walt Disney Company, for having "enthroned himself as the
omnipotent and infallible monarch of his personal Magic Kingdom." Ultimately, however,
the judge turned down a shareholder suit against the Disney board for giving Michael Ovitz
a $140 million severance package as a reward for having failed catastrophically in just 14
months as the company's president.
So I've decided to offer my own prize for executive greed. My aim is
to honor those who, in the spirit of Mr. Eisner's pioneering achievements in rapacity,
have been so visionary in ripping off shareholders and aggrandizing themselves that they
deserve special recognition. The winner of the Eisner award will receive a shower curtain, in
honor of the $6,000 floral-patterned shower curtain that Tyco's shareholders unwittingly bought
for their former C.E.O., Dennis Kozlowski. This year's grand-prize shower curtain is a lovely
translucent model that comes with metal grommets to prevent tearing, suction cups to stick to
the wall, and even an antimildew treatment! And it cost just $5.96. [...]
Corporate America has nurtured a cult of chief executives, hailing them
as geniuses and then excusing their misconduct and megalomania. Corporate documents released
this spring show that the Fog Cutter board awarded Mr. Wiederhorn $6.3 million in total
compensation for 2004 and for the nine months of prison time in 2005. I can't think of a board
that has ever so disgraced the principles of corporate governance by overpaying a C.E.O. even
as he sits in prison.
So as Mr. Wiederhorn uses his prize shower curtain (which I'll send to his office, to await
his release), I hope he'll reflect on the need of the business world not only to celebrate
genius, but also to feel shame.
- New York Times: One
Global Game, Two Sets of Rules. By William J. Holstein.
Excerpts: GLOBALIZATION is imperfectly understood by many American policy makers, with dangerous
consequences for the United States economy, says Clyde Prestowitz, author of "Three Billion
New Capitalists: The Great Shift of Wealth and Power to the East" (Basic Books, 2005, $26).
A former trade negotiator in the Reagan administration, he is president of the Economic Strategy
Institute in Washington. Here are excerpts from a conversation: [...]
We have a very distorted global economy. It is tilted. There's one consumer,
which is the United States. All the other major countries are producers and net exporters.
The United States consumes far more than it produces and has to borrow money from the rest
of the world to finance that consumption. The rest of the world, particularly Asia, and particularly
the central banks of Japan and China, provide a kind of vendor financing to the United States
to enable it to continue buying their exports. You have a kind of Ponzi scheme that constitutes
the global economy. Like any Ponzi scheme, it's not indefinitely sustainable. At some point,
the world will run out of savings to finance American consumption, or the rest of the world
will begin to doubt the ability of the United States to make good on its obligations. There
will be a collapse of one kind or another. [...]
Q. Why is it a problem if other people want to sell the United States
their things and finance the purchases?
A. It's not a problem for a while. In fact, it feels really good for a while because you get
free consumption. But as Warren Buffett has pointed out, in the long term, it turns you
into a sharecropper. To finance the consumption, you keep selling off your assets. You sell the garage.
Then you sell the guesthouse. After a while, there's nothing left to sell and you have
to go to work and earn real money to pay your debts. Your kids and grandkids will have less opportunity
and lower standards of living. [...]
Q. Aside from fiscal policies, what are the other elements of a response?
A. We need to have a strategy. When I.B.M. sold its PC division to China, C.E.O. Sam Palmisano
told The New York Times that I.B.M. wants to be part of China's strategy. I don't blame
him. If I were the head of I.B.M., I'd want to be part of China's strategy, too. But it raises an
interesting question: If you ask an American C.E.O. if he or she wants to be part of America's
strategy, none of them can answer the question. Because America doesn't have a strategy.
- Asbury Park Press: Many
employers say they need visas to bring in high-tech workers from abroad. But critics contend
the process has been abused. By Lorraine Ash. Excerpt: The
way Manoj Prasad sees it, he came to the United States from his native India to fill a void.
When he came to the United States in 1995, he was one of 65,000 specialized workers who got
an H-1B visa that year to work at a specific job.
Like all H-1Bs, he was not considered an immigrant. His stay had a time limit — three
years, with the likely promise of a three-year extension.
Filling voids, supplementing the American work force. That was the intent
of H-1B legislation in the United States where, some industry leaders contend, there is a
dearth of workers capable of filling cutting-edge positions in technology, science and engineering.
But not every economist is so sure that is how H-1Bs are playing out. [...]
The ideal staff, then, for Prasad and for others in the tech industry,
is a mix of workers — local and H-1B. As a business owner and an American, he prefers bringing
in an H-1B worker to fill a domestic job than offshoring that job.
But Eileen Appelbaum, an economist and member of a National Research Council committee that
studied the impact of H-1Bs on the U.S. economy, does not accept the way the H-1B option
is typically framed: One can have an H-1B worker in an American job, or lose that job to
said in 2001, "Let us have the H-1B visas and we'll do the work here, or
you can say no and we'll just move the work offshore,' " she said. "Well, they got
all the H-1Bs they wanted, and they still moved work offshore. In 2005, that's an argument
industry can't make with a straight face."
- New York Times: Social
Security Lessons. By Paul Krugman. Excerpts: Social Security
turned 70 yesterday. And to almost everyone's surprise, the nation's most successful government
program is still intact.
Just a few months ago the conventional wisdom was that President Bush would get his way on
Social Security. Instead, Mr. Bush's privatization drive flopped so badly that the topic
has almost disappeared from national discussion.
But I'd like to revisit Social Security for a moment, because it's important
to remember what Mr. Bush tried to get away with.
Many pundits and editorial boards still give Mr. Bush credit for trying to "reform" Social
Security. In fact, Mr. Bush came to bury Social Security, not to save it. Over time, the
Bush plan would have transformed Social Security from a social insurance program into a mutual
fund, with nothing except a name in common with the system F.D.R. created. [...]
Last week Jo Anne Barnhart, the commissioner of Social Security, published
an op-ed article claiming that Social Security as we know it was designed for a society in
which people didn't live long enough to collect a lot of benefits. "The number of older Americans
living now," wrote Ms. Barnhart, "is greater than anyone could have imagined in 1935."
Now, it turns out that an article on the Social Security Administration's Web site, "Life
Expectancy for Social Security," specifically rejects the idea the Social Security was
originally "designed in such a way that few people would collect the benefits," and
the related idea that the system faces problems from "a supposed dramatic increase in life
expectancy in recent years."
And the current number of older Americans as a share of the population is just about what the
founders of Social Security expected. The 1934 report of F.D.R.'s Commission on Economic
Security, which laid the groundwork for the Social Security Act, projected that 12.7 percent of Americans
would be 65 or older by the year 2000. The actual number was 12.4 percent. [...]
But the campaign for privatization provided an object lesson in how the
administration sells its policies: by misrepresenting its goals, lying about the facts and
abusing its control of government agencies. These were the same tactics used to sell both
tax cuts and the Iraq war. [...] Forewarned is forearmed: the real goals of reform won't
be as advertised, the administration will say things about the current system that aren't true,
and the Treasury Department will function in a purely partisan capacity.
- Reuters, courtesy of the New York Times: Democrats
Demand Conditions on Social Security. Excerpts: On the eve of Social Security's 70th anniversary, Democrats said on Saturday
they are ready to move toward revamping the financially troubled retirement program but warned
against stripping away benefits to retirees and relying on private accounts for funding. "We
have a moral obligation to stand up and protect Social Security for the next 70 years and beyond
-- that means stopping privatization and dropping partisan demands for private accounts,"
said Rep. John Salazar, a Colorado Democrat, in his response to President George W. Bush's
radio address. [...]
"Social Security has never failed to pay promised benefits, and Democrats
will fight to make sure that Republicans do not turn a guaranteed benefit into a guaranteed
gamble," said House Democratic leader Nancy Pelosi of California.
"Democrats stand ready to address the challenges facing Social Security's solvency, but this
cannot begin until Republicans begin talking about ways to make Social Security stronger,
not weaker," she said.
- New York Times: The
Promise and the Pitfalls of Health Savings Accounts. By
Michelle Andrews. Excerpts: HEALTH savings accounts, a sort of I.R.A. for health care, let
people set aside money tax-free to pay for medical expenses, both now and later. But the accounts
have been controversial since their introduction in January 2004. Depending on whom you ask,
they are either a wonderful tool to help Americans become wiser, more price-conscious health
care consumers, or just another way for employers to pass along more health care expenses to
their workers. Critics also contend that the accounts are basically a tax-shelter gimmick for
people who are healthy and wealthy enough to invest in them but don't have to rely on them
to cover their care costs. [...]
Some people are discovering downsides to the accounts. Ric Joyner, president
of the National Association of Professional Benefits Administrators, says he has received
frequent calls from companies and individuals interested in setting up the accounts. But
lately, Mr. Joyner, who is also president of eflexgroup.com, a benefits administration company
in Madison, Wis., says he has been getting calls from people complaining that their account
balances are shrinking even though they have not used the money.
"The money they're setting aside for health care is being eaten up by fees," he said. [...]
But even if you deposit the maximum amounts and don't touch the money to
pay for health care before you are 65, you won't accumulate enough to cover medical expenses
in old age, according to an analysis by the Employee Benefit Research Institute, a nonprofit
research organization based in Washington. In a model created by the institute, a 55-year-old who
set aside the annual maximum - as well as catch-up contributions - starting in 2004 would save
$44,000 in 10 years, assuming a 5 percent return. If that person lived to 80 and had retiree health
coverage, he would need anywhere from $137,000 to $337,000 to cover premiums and out-of-pocket
medical expenses, according to the institute's analysis.
Investing in a health savings account at an earlier age won't solve the problem, said Paul Fronstin,
the institute's director of health research and education and a co-author of the report.
- New York Times: Patients
Turn to Advocates, Support Groups and E-Mail, Too.
By Jan Hoffman. Excerpts: Privately hired patient advocates can, among other things, research
medical options, make appointments and negotiate with insurance companies. The advocates, who
include doctors, nurses and lawyers, charge anywhere from several hundred dollars for a consultation
to the $30,000 initiation payment and $25,000 annual fee for a soup-to-nuts service for the
wealthy. There are also nonprofit advocacy centers. Patients can find advocates through the Internet
or through support programs for their conditions.
- The Century Foundation: Health
Care: Universal Coverage. Four Plans for Health Care Reform. Excerpts: s the crisis in U.S. health care worsens, ideas for universal health
coverage have returned to the headlines. Despite the passage of only a dozen years since the
failure of President Clinton's health care reform effort, several key trends have emerged which
may point to a more receptive reform environment in the near future.
- Untenable costs for businesses. Employer-based coverage is eroding rapidly and employers are
increasingly dissatisfied. The cost of employer premiums is up 59 percent since 2000 alone, and
employers are increasingly paring back or dropping coverage and shifting risks to employees.
- Financial strain for the middle class. Previously, most Americans have been pretty satisfied
with their own health insurance even as they've sympathized with the problems of the uninsured.
But as the numbers of uninsured rise and employers cut back, this is increasingly a pocketbook
issue for the squeezed middle class.
- Industry cooperation. There's an increasing possibility that a coalition of interests in the
healthcare industry will band together to seek reforms in place of combined interests or a single
powerful interest thwarting reform.
- Consensus on the financial wisdom of reform. The trend is moving away from the conventional
wisdom that achieving universal coverage would be a fiscal black hole. A recent report (PDF)
from the National Coalition on Healthcare estimated that comprehensive reforms of different
kinds, different models, would run up some $75 billion, roughly, in initial costs. But by year
ten of these reforms, $125 billion to over $180 billion could be saved, largely through increased
- New York Times: The
Binge Continues. Excerpt: When a country buys more from foreigners
than it sells to them - as the United States does - the result is a trade gap that must be
plugged by selling off American assets, mostly corporate and government bonds. We've seen that
system, for lack of a better word, function swimmingly in the past few days. [...]
More disturbing still, the trade gap itself is likely to grow substantially
and require ever greater foreign financing. The deficit in June was measured before the price
of oil rose in July and August. Factoring in higher energy costs, future deficits are likely
to be higher than June's by tens of billions of dollars every month for the near future, if not
for a long time to come. Even before the recent spikes in oil prices, the United States was on
track for a trade deficit this year of more than $700 billion, easily twice the size that most
economists consider sustainable.
The United States will always manage to finance its deficits. The question
is how high the interest rates will have to go. The answer depends in large part on getting
the fundamental weaknesses under control.
Unfortunately, the Bush administration is crowing about long-term budget deficit targets it
cannot reach under any set of reasonable assumptions, while Congress's response to the
trade deficit is to blame China. In the meantime, the interest on the bonds that are financing Americans'
insatiable appetite for everything from gasoline to toys is piling up, to be paid by the
children and grandchildren of today's consumers.
message board post by "bozemansmith". Full excerpt: H-1B Visa's actually HURT
American workers. They are another device to
increase supply so that wages and wage growth are suppressed. They also
provide a pool of workers to "backfill" workers who quit because of a
company's policies or benefits, making it more painless for a company
and thus reducing an employee's negotiating strength. Finally, many of
these workers use US employment to build skills to ensure good job
placement when they repatriate to their home countries, taking the
outsourced jobs with them. Just the thing for a company looking to
outsource: trained on your business, comfortable with US and home
country language and customs, already on the payroll!
Given the significant outsourcing of high tech jobs that has occurred
so far and is continuing, does anyone really believe that there is
actually a shortage of qualified American workers? There is perhaps a
shortage of qualified workers who will accept employment for low wages
and no benefits, of course.
Yes, fewer American students are pursuing college majors in the high
tech arena. Why? If you ask them they will tell you: too many layoffs,
too much offshore outsourcing, and too low a return on a very
difficult and time intensive education. How does increasing H1-b
levels help turn THAT around?
There are many reasons for bright and capable people to want to
emigrate to the US; if they want to make it their new home they can
use the front door like everyone else, not the side door of an H1-b.
It is also not clear that folks who lose their H1-b status for
whatever reason automatically depart the US, given the overall
shambles our immigration control system is in.
It would appear that AeA is "not our friend".
- Fortune: Can
Americans Compete? Is America the World's 97-lb. Weakling?
In the relentless, global, tech-driven, cost-cutting struggle for business, America isn’t
ready—here’s what to do about it.
By Geoffrey Colvin. Excerpts: It’s a crisis of confidence unlike anything America has felt
in a generation. Residents of tiny Newton, Iowa, wake up to the distressing news that a Chinese
firm—What’s it called? Haier? That’s Chinese?—wants to buy their biggest
employer, the famed but foundering Maytag appliance company. Two days later, out of nowhere,
a massive, government-owned Chinese oil company muscles into the bidding for America’s Unocal.
The very next day a ship in Xinsha, China, loads the first Chinese-made cars bound for the
West, where they’ll compete with the products of Detroit’s struggling old giants.
All in one week. And only two months earlier a Chinese company most Americans had never heard
of took over the personal computer business formerly owned—and mismanaged into billions
of dollars of losses—by the great IBM. [...]
The result is that many Americans who thought outsourcing only threatened
factory workers and call-center operators are about to learn otherwise. That is a giant development,
because information-based services are the heart of the U.S. economy. With 76% of its jobs in
services, America’s economy is the most service-intensive of any major country’s.
Of course many of those jobs can’t be shipped abroad: Chefs, barbers, utility and NFL linemen,
and many others know they can’t be replaced by even the smartest person in Bangalore.
But growing numbers of other service jobs are not safe. Everyone has heard
about the insurance-claims processors, accountants, and medical transcriptionists in India and
elsewhere who’ve taken away U.S. jobs by doing the same work for much less money. More alarming
is that the value of outsourced jobs is steadily rising. Morgan Stanley is hiring Indian bond
analysts, fearsome quants who can make or cost a company millions. Texas Instruments is conducting
critical parts of its next-generation chip development—extraordinarily complex work on which
the company is betting its future—in India. American computer programmers who made $100,000
a year or more are getting fired because Indians and Chinese do the same work for one-fifth the
cost or less.
The big question is how far all this will go. A massive new study from
the McKinsey Global Institute predicts that some industries could be changed beyond recognition.
In packaged software worldwide, 49% of jobs could in theory be outsourced to low-wage countries;
in infotech services, 44%. In other industries the potential job shifts are smaller but still
so large they’d create major dislocations: Some 25% of worldwide banking jobs could be sent
offshore, 19% of insurance jobs, 13% of pharmaceutical jobs.
Looking at occupations rather than industries, some fields will never be the same. McKinsey
figures that 52% of engineering jobs are amenable to offshoring, as are 31% of accounting
- Physicians for a National Health Program: Taking
away choice. Pick and Lose.
By Jonathan Cohn.
The New Republic. Excerpts: Has any word done more to cloak the modern conservative
agenda than “choice”?
…what conservatives in this country never mention is that giving us these new choices
also means taking something away—typically, programs that make us more secure.
Health care… may be the most vivid example of this. And a new bill quietly moving through
Congress this summer shows why. It is called—what else?—the Health Care Choice
Act. Sponsored by Representative John Shadegg of Arizona and endorsed by everybody from The
Wall Street Journal editorial page to the Cato Institute, it was voted out of committee late
last month. With both Speaker Dennis Hastert and Bush now embracing it, it seems destined for
approval by the full House soon, though its fate in the Senate remains uncertain. [...]
But the best way to fix this isn’t to gut existing regulations.
It’s to create one big pool of beneficiaries through some kind of universal health insurance
system—whether it’s one that allows people to pick from among well-regulated private
health plans (like President Clinton once proposed) or one that simply bypasses insurance companies
altogether, giving consumers direct, affordable access to the doctors and hospitals they like
best (like many European nations already do). Those aren’t the kind of choices that conservatives
want to give Americans, since they happen to require expanding government. But they’re the
kind of choices Americans would appreciate most.
- MarketWatch: Time
to overhaul HSAs. Health accounts no panacea for retirement. By Robert Powell. Excerpts:
Hailed as an IRA for current and future health-care expenses, researchers now say HSAs may
not be the greatest thing since electric toothbrushes. HSAs will help retirees pay for just
a fraction of future health-care expenses.
And those expenses are expected to be huge, according to recent research from the Employee
Benefits Research Institute, a Washington-based nonpartisan group. Consider: a person retiring
at age 65 in 2015 might need somewhere between $160,000 and $687,000 to pay for health-care
expenses during retirement. Or put another way, EBRI says health-care expenses are likely
to be higher than most individuals anticipate and could add 20% or more to the amount of preretirement
income that workers will need to replace in retirement.
- Seattle Post-Intelligencer: Corporate
Pay: Executive sweets. Excerpts: We learned
earlier this month that 33-year-old Lachlan Murdoch, son of Australian media mogul Rupert,
will probably get the equivalent of his 2005 salary and $7 million bonus (total: $18 million)
after quitting as operating officer of his daddy's company, News Corp.
Having spent three whole months at Morgan Stanley, Stephen S. Crawford walked away with a $32
million payout. After 14 months at Disney, Michael Ovitz received a $140 million pay package.
The second stab is that chances are that most hard-working, talented
people who devote 30 years to a company will never see that kind of cash -- heck, they
might not even see their pensions. Executives at companies such as Boeing, Ford Motors and IBM
continue to receive staggering paychecks, payouts and bonuses even as employee pension plans
are underfunded by billions of dollars. United Airlines flat out defaulted on the pensions of
120,000 employees, while CEO Glenn Tilton's $4.5 million pension remained untouched.
Talk about a demoralizing blow to the American work ethic.
- EE Times: IBM
opens research center in Bangalore. Excerpt: IBM Corp. today
opened a new research center here that will focus on developing innovative technologies and
solutions, acting as an extension of IBM’s India Research Lab (IRL) in New Delhi. The
IRL is one of eight such labs the corporation has worldwide.
The new center here will have on its rolls researchers from distributed computing, software
engineering and knowledge management and will be headed by Guruduth Banavar. [...] IBM
already has several software development centers in India, employing over 20,000 engineers and is now
in the process of scaling up these centers.
- Bloomberg: IBM
to Double Number of Employees in Brazil by Yearend 2006. Excerpt:
International Business Machines Corp., the world's No. 2 software maker, plans to double
its number of employees in Brazil by the end of next year.
IBM started the year with 4,000 workers in Brazil and plans to increase that amount to 8,000
by the end of 2006, said Juan Fernandez Oliva, the company's president for Latin America.
|Vault Message Board Posts
military analogy" by "Dose of Reality". Excerpt: It doesn't matter how many great captains,
majors and colonels you have if the generals and field marshall (or in this case queen) are starving
the troops. Most of the great wars have been lost due to deterioration in supply lines and logistics,
not due to bad operational tactics. You can't fight if you have no weapons and troop morale sucks.
There is no question that we have legacy IBM managers in that upper rear echelon. I have been
living in their Waterloo disaster for several years now.
they worth giving up my current work/life balance?" by "ILBoy23". Full
excerpt: Will I be staying at Holiday Inns or Sheratons?
Will I be able to fly American whenever and wherever I want?
Do you guys have a per diem or a limit to the amount one can spend on meals?
Any honest answer to how many "perks" there may be at IBM BCS would be appreciated.
Thanks in Advance!
perks! Here they are..." by "IGS_Consultant". Full excerpt: You will
be able to stay at a Holiday Inn or Sheraton if there happens to be a particularly worn out
property in a given city. The same is true of Marriott, Hilton, or any other hotel chain. Only
those properties that have trouble attracting "normal" business travelers will agree
to IBM's ridiculously low negotiated rates. At this time I'm working in a midwestern city that
is roughly the size of Atlanta. There are two IBM hotels in this city, neither of which are
downtown. The hotel limit in this city is less than $70 a night, so even the Hampton Inns are
too expensive to meet IBM's rate limits. The Hilton in this city has a corporate room rate of
$129. The Sheraton has a rate of $109. The Hampton Inn is $95. There is not a Holiday Inn in
this city, although I believe there is a Crowne Plaza.
The meal limit in this city is $31 a day, which you must stretch to
pay for three meals, including tax and tips. Forget about room service...you'll blow it in one
Employees are "encouraged" to share rental cars.
You may have good luck staying on American Airlines as IBM has negotiated
rates with them and it is a "favored" airline. You may want to move to Chicago or
Dallas or another American hub.
On the other hand, if you are a Northwest or United flyer, good luck.
IBM's "patent pending" online travel reservation tool will likely not offer you flights
on "scorned" airlines, even though those flights are non-stop and cheaper.
Perks? A three-year old laptop. Depending on your band level, IBM may
pay for your cell phone...or it may not, but expect you to use your personal cell phone for
business calls. Utilization targets above 90%, calculated on 2080 hours a year...no subtracting
vacation, sickness, or holidays!
Other perks? The ability to take on-line training courses offered by
the IBM Global Campus on your evenings and weekends! Forget about classroom training, or ever
attending a professional conference.
is still behind the pack" by "Dose of reality". Full excerpt: While travel
in this industry is not what it was 5 years ago, IBM is still much worse than the competition.
The difference between the IBM approach to expense reimbursement and the competition is that
firms like Accenture and the old PwC were willing to be flexible with BOTH choice of
hotel/airline vendor and budget to suit the needs and demands of the client.
At IBM, the standards are all driven down to the lowest common denominator
- the typical non-reimbursed traveler that is on the road one or two weeks a year. We are all
subject to the same draconian limitations that he is, despite the fact that we travel >80%
(so the cumulative burden is much higher), and our expenses are reimbursed (so the favorable
impact to IBM of more room in client contract bidding is much lower than the direct hard dollar
savings we realize from the non-reimbursed traveler).
Treating all travelers the same is bad business, but we do it because
at IBM Standardization is King.
BTW, I don't think we can blame the evil diabolical blonde bimbo for this. This is a finance
driven initiative - let's blame JJ, since he was in charge there and he “isn't here
- "Congratulations!" by "Dose of repetition".
Full excerpt: Important things need to be repeated. I need to repeat what I say at least a couple
of times to make sure you understand what I am saying. Do you understand what I am saying? Things
need to be repeated. Once is never enough.
This is the only place where you can get an unbiased, unfiltered perspective on BCS.
Only anonymous posters on vault message boards can feel free to tell the truth. IBM management
will insure that the propaganda machine drowns out the truth everywhere except for here
on this board. Only this board is effective in avoiding the affects of the IBM propaganda
machine. This is the only place one can read the truth. This is the only place where real research
can be done.
Congratulations veryblue on finding a reason to leave IBM. It really
doesn't matter why you leave as long as you leave. More people need to leave. We need
more people to leave so that the current IBM management regime will fail. We need them to fail
so that the whole regime can be dismantled and then allow us to start over. If we can't get
more people to leave and convince more people to stop accepting job offers at IBM, the current
regime may not fail. If they don't fail, we can't get a regime change. We must have a regime
change. That is the only solution to IBM's problems.
Congratulations on leaving. Take some more people with you. Thanks for doing your part to
help with the regime change.
on the Alliance@IBM Site:
Cuts at Sprint Account, IBM Kansas City. Name : Anonymous From-Kansas-City. Comments:
I just got notice of my layoff from IBM on the Sprint account. I'm supposed to be working,
now, a "month-to-month" contract with IBM on their AT&T
account. The lady writing my specs, after nine years as an AT&T person-rebadged-to-IBM,
told me she was just two days away from buying & closing on a new house when she
got word that she was to train her replacement from India. However, he was to learn
her nine-year job in six weeks. He ended up too overwhelmed after just a few weeks;
such that he took a job with another company in Cleveland! I have had two people, from
IBM's division of India, waiting for my cubicle in my last position at Sprint!
- Alliance@IBM: Attention IBM employees: IBM
is blocking e-mail to and from the Alliance@IBM e-mail address firstname.lastname@example.org from
inside the company. Please send your job cut information and other correspondence from
your home e-mail. You can also contact us the following ways: Phone 607 658 9285 or Fax
607 658 9283.
- IBM Pension
Lawsuit FAQ about Cooper v IBM,
Updated 6-21-05. Excerpt: Below is a list of frequently asked questions about the class
action lawsuit against IBM's 1995 and 1999 pension plans. The answers are my personal
opinions, have not been verified with either IBM or plaintiffs’ counsel, and
should not be construed as legal advice.
On July 31, 2003, a federal district court judge ruled in favor of the employees in
this case. IBM will appeal portions of the ruling.
On September 28, 2004, IBM and the legal team on Cooper v IBM announced that an agreement
had been negotiated that settles some of the claims and set the amount of damages that
IBM will pay to the class if IBM's appeal of the district court's age discrimination
rulings is unsuccessful.
Click on any question to jump to the answer. Or scroll down and read them all.
Cuts Status & Comments
Page. Excerpts: Job cuts are coming. Information needed:
What is Your location?
How many job cuts at your location?
What locations are cutting jobs?
Name of Division and Business Unit?
Some sample submissions follow:
- Comment 08/15/05: I am still here. Many good people, valuable assets are
not. Projects important to moving the company forward are falling down in all directions.
Serious quality issues go unattended as fear and paranoia drive project groups to "show
measures of success". Quality has gone out of software group products. I am not even
proud anymore to promote IBM software and services because I've lost my belief that they
really care about quality.
SWG transformation is undergoing changes (and change is good;
but not in this case). The buzz word we hear is "componentization". What this
means really is the identification and modularization of software products and redesign
into units. Then these units can be pasted together to form "business solutions".
While this seems reasonable in theory, it will not work the way they are doing it
and ultimately our competitors will win and here's why. The trouble is in the pasting-together
part. You need people with narrow and deep skills, business experience, business
acumen, and perseverance, to help industries migrate or integrate systems with composite
parts. This means you need people with lots of TIME and EXPERIENCE, not kids out of college.
It is sad to see the slow
demise of quality within IBM software group. I am still employed, and wishing every day
that they cared about quality again. I work probably 60 plus hours per week, though not
because I am thanked for it, I am one of those people who think a good job is worth doing
well. However, I am starting to believe that my employer doesn't care about core business
at all, and this I do not understand. IBM may still have the seeds to turn this around,
but myopically they are focused instead on cutting cutting cutting. They are killing SWG.
-waiting for the next shoe to drop-
- Comment 08/15/05: IBM SWG is frantically transforming their business. The
idea is that the way to succeed with so many software products is to componentize them. The
theory is that whole is greater than the sum of it's parts. So - they believe that you can
take the "heart" of Lotus and the "lungs" of Tivoli and the "brain" of
Websphere, and because they have value -- you can simply knit them together into "business
solutions". There is even a campaign to promote Business Services - "...The other
IBM". Theory is good, but years from now we will see that it failed because of a few
- The whole is NOT greater than the sum of it's parts.
- To succeed with this you need robust, solidly-reliable processes that form the connections between the parts
need people with the business knowledge and process experience/industry savvy to articulate,
design, and build solutions based on this. By killing the aging workforce (layoffs) you are
sending a message that business knowledge doesn't matter. Kids just out of college and people
who are not well-versed in how systems work will not be able to take this cookie-cutter approach
and build solid systems for enterprise use.
The demise of SWG will come at a dear cost, I
don't even know if IBM will be able to survive the bad press they are going to
get. Dependable, quality, systems will not be the norm anymore. Little by little other software
companies will find exploitable niches (they already have) while the executives scratch
their heads, stuck in analyzing just WHY this is all happening. So they will respond by
throwing out more business knowledge (people) to lean down the business and keep the stock
prices up. -sad to see a good company go-
- Comment 08/18/05: I work for IBM BS which is Part of SO-Business in Germany.
In the beginning of March 2005 Johannes Nagel came to tell us that IBM BS GmbH in Hannover
and Schweinfurt will be closed for 100% on 2005-09-30. Transfers to different location or
parts of IBM will not be possible. This affects about 600 persons in sum over both locations.
We were told that the jobs will go to Czech or China. Interestingly even Managers in first
or some of the second row are affected. Jobs previously available on www.ibm.com were suddenly
removed. Also interesting is, that these locations do not have workers from the Deutsche
Bank deal. Less than a week after that day we all found an example of an offer for leaving
IBM. A month later the original arrived. A major part of us have signed, since the amount
was possibly not too bad. -Anonymous-