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    Highlights—December 24, 2005

  • Yahoo! message board post by Janet Krueger regarding the Cooper v. IBM lawsuit: I just uploaded IBM's appellate reply brief to the board as: COOPER____IBM_Reply_Brief.pdf. This is the last brief that needed to be filed; the next step will be for the appeals court to schedule oral arguments and appoint the 3 judge panel that will hear them. (Editor's note: For the convenience of our reader's, you may download the brief from the www.ibmemployee.com server).
    P.S. IBM is still lobbying heavily for Congress to retroactively legalize cash balance plans before our case is heard; that would allow IBM to keep $1.4 billion from the settlement instead of distributing it to the class members. Now that the house and senate have both passed the so-called pension reform act of 2005, the next step is a conference committee, which will most likely be convened in January... Both version of the bill legalize cash balance plans, although the house version does so much more egregiously... PLEASE sit down before New Year's days and write letters to your representative and your senators (you can find names and addresses at www.house.gov and www.senate.gov) to let them know just how upset you will be if the bill signed into law retroactively legalizes cash balance plans!!! They need to hear from as many of their constituents as possible. Thanks in advance,
  • Washington Post: Key Provisions of Pensions Bill. Excerpts: Requires employers to fund up to 100 percent of pension liabilities. Funding shortfalls must be filled within seven years. Establishes a new measure, using three interest rates calculated from a corporate bond yield curve, by which companies determine their pension liabilities. Bars underfunded pension plans from increasing benefits or paying plant shutdown benefits unless liabilities are paid for up front. States that plans that are less than 80-percent funded cannot use credit balances to avoid minimum required contributions. Bars funding of executive compensation plans when worker pension plans are severely underfunded. Raises the annual premium paid to the Pension Benefit Guaranty Corporation from $19 to $30 per participant. Clarifies current law by creating a uniform age discrimination standard for all cash balance plans.
  • Business Insurance (United Kingdom): Rentokil to close pension plan to active members. By Sarah Veysey. Excerpt: Rentokil Initial P.L.C. has announced plans to phase out its defined benefit pension plan to active employees in a bid to cut costs, the first such proposal by a major company in the United Kingdom. While many U.K. companies have closed defined benefit plans to new hires, the move would make Rentokil the first FTSE100 company to stop future benefit accruals for current employees.
  • History News Network: Ducking Out on Retiree Benefits. By Jennifer Klein. Excerpts: With the passage of a Senate bill shoring up private pension plans, public attention is finally turning to "legacy costs" -- what Wall Street bankers and corporate executives call long-promised retiree benefits. And not a minute too soon. After a decade of underfunding their pension plans, flagship American corporations have now been ducking behind the closed doors of bankruptcy court to dispose of employee pensions. [...]
    The word on Wall Street is that unless workers accept big cuts in their benefits, these corporations will be broken up. That's the wrong response and the wrong solution. Legacy costs are a political, not a corporate, problem. The right solution is to pool the risk for workers and employers through cooperative, shared, funded and mandated supplements to Social Security pensions. [...]
    After the Depression hit, Congress passed the Social Security Act in 1935 because legislators finally realized that businesses were too unstable to provide long-term security. Risk, the Congress decided, needed to be pooled across the whole society. The government's new role did not sit well with business, which feared the expansion of federal power into its relations with employees. To counter that possibility, companies after World War II sponsored new private pensions and insurance benefits. In 1950, General Motors took on health and pension obligations in an unprecedented 5-year contract known as the Treaty of Detroit.
    By extending promises for old-age security to employees, America's largest companies headed off political solutions such as national health insurance and more progressive public pensions. Outflanked, liberals and unions eventually accepted the system of employer-provided benefits. As a result, public policy consistently deferred to, indeed subsidized, the private system, even though plenty of gaps in coverage remained. Tax exemptions for contributions to pension plans and pensions trusts amounted to an annual $50 billion subsidy by the end of the century. [...]
    We need policies that emphasize social pooling of risk, not Wall Street's prescription of employee pay cuts and benefits roll-backs. Social Security is still the one sure deal. Unlike profit-seeking corporations, the government does not get liquidated by its shareholders.
  • Yahoo! message board post "The PBC 3's are flying". By "ibmgrunt". Full excerpt: I don't know if anybody else is getting reviews but the 3's are flying in my area and people are furious. 3 not only means you are the lowest contributor but no variable pay either. Another slap in the face for those that put in so much overtime once again this year. We are not being based on performance this year since all the low performers have been let go by now. Now we are judged on who contributes more to the department. It's still nonsense.
  • Yahoo! message board post by "whydo1lovemycats". Full excerpt: The word from managers I know is the Order from on High was every area in SO must appraise 10% of their reports as "3"s. This is a higher percentage than last year. No Variable Pay, probably no salary increase, and if you get two of these in a row - Sayonara. IMHO, Sam is looting the Company by destroying the human assets. The people who are left have shriveled souls and cannot care about the Customer anymore. No wonder the stock is tanking. There's no value in the Company anymore.
  • Yahoo! message board post by "ibmgrunt". Full excerpt: On the HR website it says that a 3 is reflected by serious consequences meaning no variable pay. An old 3 still got you some kind of payout. My manager told me months ago he was told by up above that he HAD to give out a bunch of 3's this year, he has no choice, he has a percentage of them to give out. On the HR website it says there is no percentage of numbers that a manager has to give out. This PBC thing gets to be more of a joke every year. They are going to force us out one way or another.
  • Yahoo! message board post by "mrcammeron". Full excerpt: It is indeed sad that IBM embraces the entire PBC program. There are way too many variables involved to make it anyway near fair. I've gotten all kinds of ratings, myself, I feel there are many things that influence what rating you receive:
    • your relationship with your manager
    • the project you're working on
    • the customer you support
    • your current salary
    • your age. (Yes, I know that age is not suppose to play into all this, but it does.)
    Sorry to say, this is used as a tool by IBM to cull their employee ranks, regardless of how good or bad of an employee you are.
    IBM keeps wondering why employee moral is low... PBC's are one of the items that keeps the moral low... I've seen years where I did a "bang up job", busted my *$# and received only the rank of a 3 (old system) or 2 (new system).
    I guess I may be showing my age a bit. When PBC's and the HORRIBLE 360 program were first initiated, a 1 and 2 were good, a 3 said you didn't meet your goals, and a 4 said you were not IBM material. The 360 feedback, was the worst program that I ever participated in. it was like working in a gestapo environment. It was a disaster. Finally they got rid of it. Then a few years later, the wording of a '3' was changed to say that it was an OK rating to recieve...you just would get a lower bonus. Now they change the rating scale...again, it's just more of the same old same old.
  • Yahoo! message board post by Kathi Cooper. Full excerpt: Of course they are killing us. Not wanting to sound repetitive about it, but sometimes need to, are you a member of the Alliance yet? How about asking all your IBM friends to join? (Editor's note: Click here for information on joining the Alliance@IBM).
  • New York Times Magazine: New World Economy. By Matt Bai. Excerpts: In recent weeks, looking toward next year's midterm elections, leaders of both parties have engaged in highly charged arguments about withdrawal from Iraq, Medicaid shortfalls and allegations of Republican corruption. Anyone bothering to peruse the rest of the front page, however, might have noticed a few items that seemed tangentially related, but that, together, tell a story that is far more consequential for the next 50 years of American life. First, just before Thanksgiving, General Motors, buckling under the weight of $2 billion in losses, announced that it now planned to lay off 30,000 workers and scale back or close a dozen plants. A few days later, at the traditional commencement of the holiday season, thousands of American consumers began lining up in the dark hours of morning to be among the first to pile into Wal-Mart, hoping to re-emerge with discounted laptops and Xboxes under their arms. Wal-Mart has now inherited G.M.'s mantle as the largest employer in the United States, which is why these snapshots of two corporations, taken in a single week, say more about America's economic trajectory than any truckload of spreadsheets ever could. [...]
    While G.M. rusts away like some relic from the last century, Wal-Mart beckons us toward our shrink-wrapped and discounted future. Wal-Mart's founding family is said to be wealthier than Bill Gates and Warren Buffet combined, and yet more than half of the company's employees don't receive health care, and its enduring quest to bring us lower prices drives down wages everywhere. Here we have the model for globalization as Republicans envision it - a world in which rugged entrepreneurialism is overly romanticized and the unskilled expendable, and where shareholder profits are the only measure of success. Republicans have embraced the future of the global marketplace, but to them the future looks a lot like "Road Warrior."[...]
    What would be more constructive, probably, is a total reimagination of the basic contract between government, businesses and workers - a process that Clinton tentatively put in motion but that has since stalled as both parties retreated from the vexing challenges of globalization. After all, if you were going to sit down and create a system for our time, it probably wouldn't look much like the one we have. Does it make sense to expect businesses to finance lavish health care plans when foreign competition is forcing companies to cut their costs? Isn't government better equipped to insure a nomadic work force while employers take on the more manageable task of childcare - a problem that hardly existed 50 years ago? If government were to remove the burden of health care costs from businesses, enabling them to better compete, wouldn't it then be more reasonable to create disincentives for employers who are thinking of shipping their jobs overseas? Isn't the very notion of a payroll tax for workers antiquated and inequitable in a society where so many Americans earn stock dividends and where a growing number are self-employed? If they were to spend more time debating these and other longer-term questions, our politicians might have some small hope of leaving a legacy to match their predecessors' - a legacy better than the choice between the New Deal and no deal at all.
  • Center for Retirement Research: The House and Living Standards in Retirement. By Alicia H. Munnell and Mauricio Soto. Introduction: Do today's retirees have sufficient income to meet their needs? This brief is the third in a series examining replacement rates for current retirees. The first one looked solely at Social Security, the single most important source of retirement income. The second one added employer-sponsored pensions and other financial assets to provide a more comprehensive picture of replacement rates. This brief builds on the previous findings by considering how the addition of housing equity affects replacement rates.
  • Wall Street Journal, courtesy of the Pittsburgh Post-Gazette: Companies enlist employees' help to maintain benefits. By Carol Hymowitz. Excerpts: Rather than a flat-screen TV or a new car, the most coveted gift for many Americans this holiday season could be health-insurance and retirement benefits. In recent months, a growing number of companies have cut or eliminated this protection for their employees and retirees.
    Some companies are adding inequity to injury by continuing to reimburse top executives for their medical expenses -- even when they have been dismissed -- while slashing employee coverage. US Airways Group eliminated health coverage for 28,000 employees and 10,800 retirees late last year. But the financially ailing airline had already guaranteed departing CEO David Siegel and his family medical coverage for life. Roughly one in eight U.S. employers offers executive-medical-expense reimbursement plans, according to Hay Group, the consulting firm. [...]
    "We've got the same health plan for everyone, top to bottom, and we think paying for the bulk of it is one way to show respect and caring for employees," says John Signer, vice president of human resources. That, in turn, he believes, has helped Acuity boost revenue an average 16 percent annually for the past four years, more than twice the industry average. [...]
    "Some CEOs ask me how can we afford all this, and my answer is 'how can we not?' " says CEO Paul Graziani. "Our assets are our employees' minds, and we have to protect that."
  • Washington Post: Pushing Fast-Forward on Options. Speeded-Up Vesting Is a Way Around New Accounting Rule, but Some Cry Foul. By Ben White. Excerpts: At least 22 Washington area companies are among hundreds nationwide that have transformed millions of stock options, many of which would not have been available for executives to use until 2009, into fully vested shares. According to Wall Street estimates, the fast-forwarding could wipe away more than $4 billion in expenses that would otherwise have shown up on income statements starting in 2006 under a new accounting rule that goes into effect Jan. 1.
    None of this is illegal. But some financial analysts and corporate-governance experts say it is a dubious exercise nonetheless because it undermines the intent of the much-debated new rule. The critics also say that speeding up options hands an extra treat to already-well-fed executives, hurts a company's shareholders and misleads prospective investors.
  • New York Times: Last-Minute Budget Madness. Excerpts: "The Republican revolution is back," proclaimed Representative Mike Pence of Indiana, a leader of the conservative Republican "budget hawks" now trying to palm off political rope-a-dope as revolution. Their ballyhooed savings, less than one-half of 1 percent of Congress's $14.3 trillion projected spending plan across the next five years, would be more than canceled by the next wad of tax cuts for the affluent - up to $100 billion - that G.O.P. leaders are vowing to enact next year. These same lawmakers have repeatedly fed the record deficit and debt by rubber-stamping tax cuts.
    In the final deal-making, the Republican Congress spared the pharmaceutical and managed care industries from cutbacks but increased the workfare burdens on low-paid former welfare recipients. They granted flu vaccine makers windfall protection from lawsuits, but enacted a startling $12.7 billion cut in student aid. Including hurricane reconstruction aid and anti-torture strictures hardly disinfects the budget morass being left behind.
  • New York Times: What Do You Expect for $99.23 a Night? By Manny Fernandez. (Editor's note: This article may be of interest to IGS consultants working in Manhattan that need to find hotels priced under the IBM limit). Excerpts: It was about 4 p.m. when something crawled on the carpet. A large insect of unidentified species made its way across the hotel lobby, and a group of European tourists tracked it with a cheerful curiosity until a gray-haired man in a baseball cap waiting to check in stomped on it. No one else noticed the dead bug. The lobby - a sensory overload of neon, mirrors, bright lights, televisions, yard-sale furniture and pay phones - was too distracting. Guests streamed in and out with befuddled stares, mild complaints and curious requests. A woman asked a worker for bug killer after finding a roach in her bathroom. She was handed a spray bottle of kitchen cleaner and sent on her way.
  • New York Times: Health Care for All, Just a (Big) Step Away. By Eduardo Porter. Excerpts: You may find it shameful that some 45 million Americans lack health insurance. Well, by reallocating money already devoted to health insurance, the government could go along way toward solving the problem. But you may not like the solution. [...]
    Next year, the federal government expects to provide about $130 billion for Americans to buy health insurance. The amount is substantial: it is equivalent to about 11 percent of all federal income tax revenue and more than a fifth of federal spending on Medicare and Medicaid. And it is growing fast: the bill is expected to surpass $180 billion in 2010. Nonetheless, this financing remains under the political radar because it is provided indirectly - not as direct spending but as a tax break that allows workers to receive health insurance coverage from their employers without having to pay income taxes on whatever it costs.
    Although subsidizing health insurance may seem a worthy effort, a positive contribution to the goal of universal coverage, it is among the most inefficient spending in the nation's fiscal arsenal. "If you had $150 billion to play with, you could come very close to universal coverage," said David Cutler, an economics professor at Harvard. One reason that we are 45 million people short of that goal is that the money isn't being spent on them.
  • New York Times, courtesy of the Tri-Valley Herald: Drugs, Devices and Doctors. By Paul Krugman. Excerpts: MERCK, the pharmaceutical giant, is under siege. And one side effect of that siege is a public relations crisis for the Cleveland Clinic, a celebrated hospital and health care organization. But the real story is bigger than either the company or the clinic. Its the story of how growing conflicts of interest may be distorting both medical research and health care in general.
    Merck stands accused of playing down evidence that Vioxx, a best-selling painkiller until it was withdrawn last year, increases the risk of heart attacks. The most recent accusation of obscuring the evidence came from The New England Journal of Medicine, which discovered that the authors of a Merck-supported paper published in the journal had removed data unfavorable to Vioxx. The journal called on the authors to issue a correction.
    Dr. Eric Topol, a famed cardiologist at the Cleveland Clinic, has been warning about the dangers of Vioxx since 2001. In videotaped testimony at a recent federal Vioxx trial (which ended in a mistrial), he accused Merck of scientific misconduct, and also testified that Mercks former chairman had called the chairman of the Cleveland Clinic to complain about his work — an action Topol called repulsive.
    Two days after that testimony, according to Topol, he was told early in the morning not to attend an 8 a.m. meeting of the clinics board of governors, because the position of chief academic officer, which gave him a seat on the board, had been abolished.
  • Eugene (Oregon) Register-Guard, courtesy of Physicians for a National Health Program: Kitzhaber's Rx for state. In eyeing a new run for governor, he thinks on a revolutionary scale. By David Steves. Excerpt: The last time John Kitzhaber put Oregon on the map as a health care pioneer, it was by working within the decades-old system that delivers medical care. This time, the former doctor and governor wants to bulldoze what he sees as an antiquated system and replace it with a 21st-century model that would deliver universal health care to every Oregonian.
  • Los Angeles Times: Hospital bills -- but with interest. Now patients who can't pay, or who have high deductibles, can get credit cards specifically for medical care. But the rates can reach 23%. Excerpt: With many Americans struggling to pay their medical bills — and more of those bills going unpaid — hospitals and medical providers are scrambling for solutions. They may have found at least a partial one: credit cards that can be used only for healthcare expenses. The cards can help patients meet their deductibles and other out-of-pocket expenses, obtain elective surgery, even help pay for care that might otherwise be off-limits. They could also increase the nation's already staggering medical debt by increasing the amount of interest on unpaid hospital bills. Kaiser Permanente last year began offering credit cards with $5,000 limits to customers in Hawaii and Colorado and is considering expanding the program to other states, including California. Hospital chains such as the Carolinas HealthCare System and Kansas-based Via Christi Health System are also signing up patients with cards. GE Capital has started offering credit cards to patients in several pilot programs around the country.
  • Associated Press, courtesy of the New York Times: Nearly One in 10 Pension Plans Said Frozen. Excerpt: Employers froze nearly one in 10 pension plans insured by the federal Pension Benefit Guaranty Corp. in 2003, according to a study released Wednesday. The Pension Benefit Guaranty Corp., the federal agency that guarantees worker pension benefits, said 9.4 percent of the 29,000 plans it insures and for which it had data were ''hard-frozen'' in 2003, the most recent year for which numbers were available. Hard-frozen means employees can no longer accrue benefits under a pension plan. The study comes amid a steady stream of headlines about companies, including Sears Roebuck & Co., Motorola Inc. and IBM Corp., freezing pensions to cut costs. Among the latest was Verizon Communications Inc., which recently said it would freeze the pensions of 50,500 managers.
  • Christian Science Monitor: Transit strike's high stakes. Other unions and management teams watch to see how New York negotiates wages and key benefits. By Ron Scherer. Excerpt: It's a collision America is seeing more often: Management tries to have workers move back their retirement age and pay more for healthcare, while workers try to keep their benefits and make up for lost ground on wages. [...]
    Some of the issues in the Big Apple - especially the effort to diminish pension and healthcare benefits for future employees - will be watched carefully by other unions. Management teams around the nation will also be watching to see what succeeds and what doesn't.
    "The surprise is that it's only now that not just unions but [their members] are starting to cry, 'Where's mine?' " says Ken Goldstein, a labor economist at the Conference Board, a business research organization in New York. "We're paying the price for keeping the lid on wages and costs."
  • AARP, courtesy of Plan Sponsor: Hiring Older Workers Makes Financial Sense. Excerpt: Hiring managers only have to shell out as much as 3% extra to attract key 50+-year-old employees, but are likely to get an unusually well-motivated worker in return. That was the conclusion of a new Towers Perrin research report prepared for AARP that set out to examine traditional fears that hiring older workers would be significantly more expensive than bringing on their younger counterparts, according to an AARP news release. The AARP/Towers Perrin analysis said that the extra per-employee total compensation cost of retaining or attracting more 50+ workers ranges from negligible to 3% in key industries. At the same time, the research found that older workers are more motivated to exceed expectations on the job than younger workers.
  • AFL-CIO: This is America. Where We Have Freedom... [PDF]. Excerpt: ...of religion, freedom of speech, freedom of assembly— and the freedom to join a union. In theory. For most working men and women today, the freedom to form a union—a fundamental human and civil right—is elusive. When employers block workers’ efforts to form unions, it is no small infringement: Some 57 million nonunion workers say they want to be part of unions. [...]
    But when workers seek to join unions, most employers infringe on workers’ freedom to make their own decisions— using legal as well as illegal tactics to thwart their efforts. Nearly all private-sector employers force workers to attend anti-union meetings. More than three-quarters of these employers require workers to sit in one-on-one meetings with supervisors who try to persuade workers to oppose the union. Fully one-quarter of them illegally fire workers, according to Cornell University researcher Kate Bronfenbrenner. The American public thinks such tactics are wrong. But polls by Peter D. Hart Research Associates show the public doesn’t realize how routinely such abuses take place. Even most union members aren’t aware of employers’ hidden war against workers. But union members do know that when union membership declines in an industry or community, it’s harder to negotiate good contracts. Union members know that by helping other workers form unions, they improve wages and working conditions for themselves and their families.
  • Monthly Review: The Social Meaning of Pensions. By Michael Perelman. Excerpts: Pensions offer a wonderful example of the perverse phenomenon of the corporate sector winning support by taking actions that harm individuals. Between 1979 and 1997, the share of employees with defined benefit plans -- i.e., plans that promise a specific level of support -- fell from 87 percent to 50 percent (Mishel, Bernstein, and Boushey 2003, p. 247). Under defined benefit plans, employers bear the responsibility to provide the promised pensions -- a responsibility that they were more than happy to shed. [...]
    Some workers were less resistant to changing to defined contribution plans because, prior to 2000, the stock market was doing so well. In fact, money from defined pension funds was a major factor in fueling the stock market bubble of the late 1990s. Rather than keeping their promises to workers, corporations were using their pension funds as cash cows, pretending that overly optimistic estimates of investment returns in the future would be sufficient to cover promised pension benefits. This tactic let corporations divert billions from their pension plans, adding to their profits. For example, by 1999, General Electric's pension plan was adding more than $1 billion to its profit statement (Schultz 1999). As profit rose, so did the stock market.
    The resulting appreciation of stock prices helped to give the illusion of funding the defined benefit plans, meaning that corporations could avoid putting more money into their pension plans. This mutual reinforcement came to an end with the collapse of the stock market bubble in 2000. Many firms were ill-prepared to adequately fund their pensions, accelerating the transition to the defined contribution plans. [...]
    Conservatives relish defined contribution plans, believing that reliance on defined contributions will make the political landscape more conservative. Two economists from the Federal Reserve Bank of Dallas investigated how these changes in pensions have affected domestic politics in the United States. They found that the mutual fund revolution has accompanied an increased Republican share of the popular vote in elections for the House of Representatives. They concluded that further legislation to make social security dependent on the stock market will reinforce people's feeling of dependence upon corporate success (Duca and Saving 2001).
  • Wall Street Journal, courtesy of the Pittsburgh Post-Gazette: Some companies shield executives from taxes. By Mark Maremont. Excerpts: Like most Americans, rank-and-file employees of Home Depot Inc. must reach into their own pockets to pay taxes. But not Robert Nardelli, the home-improvement retailer's chief executive. Under his employment contract, Home Depot picks up a big chunk of his federal and state income taxes. Specifically, the company is obliged to reimburse its CEO for taxes due on a slew of perks, including a high-end luxury car, his family's travel on Home Depot jets and forgiveness of a $10 million loan. Last year, these payments amounted to at least $3.3 million, topping Mr. Nardelli's $2 million base salary.
    Amid soaring CEO compensation, a number of companies are paying extra sums to cover executives' personal tax bills. Many companies are paying taxes due on core elements of executive pay, such as stock grants, signing bonuses and severance packages. Others are reimbursing taxes on corporate perquisites, which are treated as income by the Internal Revenue Service. They run the gamut from personal travel aboard corporate jets to country-club memberships and shopping excursions.
    "This smacks of Leona Helmsley-like treatment, that only little people pay taxes," says Patrick McGurn, an executive vice president of Institutional Shareholder Services Inc., an influential adviser to big investors that often critiques companies' corporate-governance practices. For these top executives, he says, companies "are removing taxes from the list of inevitable life experiences, leaving only death." [...]
    According to a study done by compensation-research firm Equilar Inc., 52 percent of companies disclosed they paid gross-ups to one or more top executives last year, up from 38 percent in 2000. The study, which was done this month for The Wall Street Journal, examined the U.S.'s 100 largest companies by revenue and counted those for which public filings could be found in both periods. [...]
    The bottom line: Grossing up an executive for taxes on $1 million can easily cost an additional $700,000 to $900,000. In some circumstances, gross-up reimbursements can be more than double the covered pay. Tax gross-ups have proliferated for one major reason, many compensation experts say: They allow companies to quietly pay more to top managers at a time when executive compensation is increasingly controversial. The current rules don't require companies to disclose tax reimbursements separately in pay tables given to shareholders.
  • Yahoo! message board post by Kathi Cooper. Full excerpt: IBM audits itself through their Corporate Internal Audit group. They have a designated team that does executive audits. IA shares their results with PWC, our outside auditors. PWC can act at any time, with or without the internal audit results. Lastly, IBM has always provided gross-ups. I never knew otherwise.
  • New York Times: The Tax Cut Zombies. By Paul Krugman. Excerpts: If you want someone to play Scrooge just before Christmas, Dick Cheney is your man. On Wednesday Mr. Cheney, acting as president of the Senate, cast the tie-breaking vote in favor of legislation that increases the fees charged to Medicaid recipients, lets states cut Medicaid benefits, reduces enforcement funds for child support, and more. For all its cruelty, however, the legislation will make only a tiny dent in the budget deficit: the cuts total about $8 billion a year, or one-third of 1 percent of total federal spending. So ended 2005, the year that killed any remaining rationale for continuing tax cuts. But the hunger for tax cuts refuses to die.
    In other words, the starve-the-beast theory - like missile defense - has been tested under the most favorable possible circumstances, and failed. So there is no longer any coherent justification for further tax cuts. Yet the cuts go on. In fact, even as Congressional leaders struggled to pass a tiny package of mean-spirited spending cuts, they pushed forward with a much larger package of tax cuts. The benefits of those cuts, as always, will go disproportionately to the wealthy. Here's how I see it: Republicans have turned into tax-cut zombies. They can't remember why they originally wanted to cut taxes, they can't explain how they plan to make up for the lost revenue, and they don't care. Instead, they just keep shambling forward, always hungry for more.
Benefits Restoration, Inc. November Newsletter
The following newsletter was published by Benefits Restoration, Inc. According to the organization's welcome page, Benefits Restoration is an organization of retirees, retirees' spouses and working employees growing in size daily. "We are united by our belief that over the years companies like IBM have committed lifetime medical benefits to employees who stayed with them until retirement. We are united by our resistance to recent actions that have greatly reduced many corporations' percent of contribution to the cost of retiree medical benefits. We are united in our demand that corporations like IBM honor their contract with their retirees and restore the medical coverage that was promised. We are united by our belief that many corporations in the past, particularly IBM, recruited employees with the promise of providing a 'total compensation package' (salary and benefits) from cradle to grave and agree that many corporations have since broken their promises.
For your convenience, Benefits Restoration's November newsletter is duplicated here in full:
Well I spent the last month or two quietly waiting for the new 2006 Retiree Medical Plan with an understanding on my part that it would be pretty good. The more fool I!! Now to be straight, no one at IBM “told me” that it would be a good plan; it was simply what I was led (or led myself) to believe. A nice Thanksgiving gift, thank you very much.
Imagine my surprise when I looked the new package over and found that there is a year to year increase in premiums of some 22% for those under 65 and, according to Art Richter, a solid 30% increase for those over 65. IBM has stated in their letter from Randy MacDonald that Health care costs have increased over 9%; an interesting number that! Health Care IN$URANCE PREMIUMS increased by 9%; actual health care costs increased by only 6%. The difference between the two is the profit that insurance companies put in their pocket. Since IBM is self-insured, I can only conclude that the difference is profit that they are putting in the IBM pocket.
So let’s see if this is making any sense at all:
  • There has not been a Cost of Living Adjustment in many years (1997 and that parsimonious at best)
  • Retirees are living on less and less real income as a result (or are spending their savings just to eat)
  • Medical Contributions that we pay continue to increase at a rate 2-3 times higher than insurance premiums do (22-30% vs 9%)
  • Medical Contributions to IBM increase at a rate 4-5 times higher than the true cost of medical care (22-30% vs 6%)
  • Medical Contributions for retirees themselves are pretty fair; for spouses, the increases are outrageous! (Perhaps divorce is an option although that may be more expensive…so much for the family oriented IBM that I knew)
  • All of this during a time when pensions themselves seem less and less “guaranteed” and in fact, unless you keep pressure on your own elected officials, they are in danger of disappearing
  • Now think of this…IBM is self-insured:
    • If the true cost of medical care increases 6%
    • Average insurance premiums increase by 9% and the difference goes into the insurance companies pocket as profit...in this case IBM
    • IBM increases your medical contributions by 30%, where does that money go?
  • Is IBM actually making money on the health care plan? Randy MacDonald stated that IBM paid out $1.3B for medical care in “this year alone”. Interesting question is “How much did you take in from employees and retirees?”
Ten years ago, I never would have asked that last question…now it seems appropriate.
My suggestion, write to Sam Palmisano (sam@us.ibm.com) and express your utter disgust at the way you are treated….professionally if you can!
The Pension Security and Transparency Act
The good people at the National Retiree Legislative Network (NRLN) as well as you retired IBM’ers that took the time to write to your elected officials are to be congratulated on helping to get The Pension Security and Transparency Act passed. Please, take a moment to track down your Senators by going to the attached website, clicking on your state and checking how they voted. To those that senators who voted in favor, please take a moment to enter your zip code (on that same site) and send your Senator a thank you. This act protects retirees and workers from under-funded retirement plans. http://mygov.governmentguide.com/mygov/issues/votes/?votenum=328&chamber=S&congress=1091
Crossroads
I think we are at a crossroads here at Benefits Restoration. There have been a number of emails advocating various actions and I am soliciting your feedback. Some of the suggestions are very practical, others more “direct” to say the least. Please feel free to email me at ibmnobenefits@aol.com with your thoughts. Here are some suggestions that have been made:
  • Picketing at Pok, Endicott and HQ locations on behalf or retirees
  • Continued “town meetings” such as Art Richter has hosted in NY
  • “Town meetings” with elected representatives in attendance to make them aware of your concerns
  • Lawsuits regarding failure to honor “commitments” to provide benefits for life
  • Open meeting with Randy MacDonald to address IBM’s actions to date and planned for future “forensic accounting” to unravel exactly where all the money really does go
  • Grass roots campaign to swamp IBM with email…
  • Legislative actions such as support of HR 1322…which is on-going
  • And of course, continue to embarrass IBM publicly at every opportunity.
I offer these without comment and look forward to hearing your views—see next page for some interesting graphs from your own government. Best wishes, Sandy Anderson
Some graphs from the Pension Benefit Guaranty Corp:

Vault Message Board Posts
Vault's IBM Business Consulting Services message board is a popular hangout for IBM BCS employees, including many employees acquired from PwC.
  • "Follow-up" by "Dose of reality". Full excerpt: To be clear, BCS is part of IGS. There are no real impediments to getting a transfer from a back office role to front line consultant, as long as you have the skills and talent needed. As far as career advancement goes, I don't have any knowledge of any executive training programs in IGS finance. What I can tell you is that getting ahead here is heavily dependent on politics, having a well-connected mentor, and having total blind loyalty to IBM and everything it stands for. It has been my experience that creativity is routinely punished at IBM. We are very bureaucratic, and hierarchical. If you are looking for a place to express yourself, don't join IBM!
  • "If you have to ask" by "Dose of reality". Full excerpt: Yes – we do extensive drug testing. It is critical to have an understanding of an applicant’s tolerance and reaction to the entire arsenal of drugs that are used to control staff. Here are a few of the drugs that you can expect to sample during the test:
    • Compusux – Dulls your sensitivity to having money taken away from you without notice.
    • Burostrain – Causes you to look forward to opportunities to spend hours keying information into various vintage administrative systems
    • Utilizamax – Generates an overwhelming urge to charge hours to clients regardless of project need or benefit to you
    • Loyalorest – Makes you sing the praises of the company whenever you hear anyone saying anything unfavorable about IBM
    • Puckeron – You should be able to figure this one out (hint – has to do with a color, an olfactory facial feature, and another unmentionable body part)
    • Pacifon – Will cause you to want to take any assignment that is offered to you – it is used in conjunction with:
    • Homisbad – Makes you want to stay as far away from home for as long as possible
    • Superate (also known as rochesotel) – Significantly lowers your minimum requirements for humane living conditions.
    There are more, but you should get the idea. If you are taking any illicit drugs, you are definitely IBM material. I wouldn’t worry about being screened – I would worry about what happens to your career after you accept!
  • "Who is left" by "CandorSense". Full excerpt: Dose would it be safe to say most of the good PWC partner/associate partners are gone? The reason I ask is, I have heard loads of stuff lately that I hope is representative of leftover deadheads. Like, partners and associate partners telling band 9 & 10 folks that they shouldn't associate with 6 & 7s (dinner and such), that we have partners and associate partners eating fine while the workers on the projects are told to cut back, that seniors are getting the 1 & 2s on project assessments and lower bands get 3s and less, that we have partners charging expenses to personal credit cards while they chuckle at the lower bands who don't feel safe to do likewise, and worse... recommendations of software to earn something in return from the vendor (and not to IBM) etc. Things I have never seen in IBM pre-PWC and things I would want to see, but not totally unexpected when I hear the names of the partners. After what, 4 years, are we left with just the bottom feeders and low ethics bullies?
  • "Can GM sell Buick?" by "Dose of reality". Excerpts: IBM would have the same trouble selling BCS that GM would have selling Buick - 1) what do we have to sell? and 2) Who would be big enough and dumb enough to buy it? On the first point, all that we have right now is a roster of consultants, and a portfolio of contracts that have an average time to run-off date of less than a year. We have no intellectual property to speak of and all of the support functions are embedded in those of IBM at large. On a scale of 1 to 10, the roster of consultants have a composite morale level of around 2! Recruiting quality control has been abysmal the last few years, and we haven't been offering competitive rates, so we don't have a blue chip roster. Look around at your neighbors, and tell me that isn't the case! Many of the contracts are under duress, and most are integrated with other IBM products and services. Unwinding them would be a logistical and legal nightmare, and absorbing the staff and administrative functions into another similar sized operation would be a huge drain. Like Wonder said, our embedded direct management overhead within BCS is much too high. We also would have to stop using the marketing ploy of playing up the purchase of PwC as the advent of the "New IBM". Changing course and admitting you were wrong is very much against the IBM management culture.
    On the second point, why would any one of our competitors want to buy us? With its current business model, the real value that BCS brings to IBM is in its lead generation for other products and services. For the deal to make sense to us, a purchaser would have to not only compensate us for the economic value that comes from BCS revenue, but we would also have to be compensated for the value we have from cross-selling, even though the purchaser would not realize much value from it. Of course, we don't realize nearly the value that we should from cross selling, because there are no real incentives for us to pursue them on the BCS side, and in many times our counterparts, in their zeal to make their numbers, bastardize the integrity of what we do and the dynamics of the client relationship. But I digress…
  • "BCS Performance Targets" by "Midwest Al". Full excerpt: The one thing about Performance Targets at BCS when I was working there, was that it is not the same as making profits. I think BCS was profitable, but that the Performance Targets were set so high, too high. I believe this was happened as a result of the execs dictating what their cut of the bonus needed to be. So they would get their share, but since the target was so high, the BCS targets did not get "met", so the consultants qualified for little to none of a share of the profits in the form of a bonus. This is why I left. In the past, I know Ancient laid out how these targets got set in a way for the higher ups to siphon off the lion's share, leaving little for the workers below.
    • "Concisely put..." by "wonderaboutibm". Full excerpt: ...but let me be even more concise: the bonus plans are just plain rigged.

New on the Alliance@IBM Site:
  • Alliance@IBM: Attention IBM employees: IBM is blocking e-mail to and from the Alliance@IBM e-mail address endicottalliance@stny.rr.com 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.
  • "Who's On Our Side" Campaign Will Hold Members of Congress Accountable for Their Votes. Excerpt: The AFL-CIO has launched a "Who's On Our Side" campaign to hold members of Congress accountable for the votes they cast for or against the priorities of working families. "The mission of the AFL-CIO is to fight for America's working families and that means serving as a watchdog and holding politicians accountable when they stand on the wrong side of workers," said AFL-CIO Secretary-Treasurer Richard Trumka in announcing the campaign Dec. 13. "Working families - with the facts in hand - have the power to take back the country and make sure we are represented by leaders who are fighting for our best interests, and not the special interests, every day."
  • From the Visitor's comment page and the Job Cuts Status & Comments page.
    • Comment 12/21/05: After being resource actioned out of IBM a few months back, I've been sought out by a contract company and told that 1). there is a need in my city for them to fill a lot of jobs for IBM (no surprise because IBM got rid of a lot of jobs via resource action a few months ago) and 2). they have a particular need for my particular skills (the same skills that were considered "lacking and unnecessary" a couple months ago by IBM and got me fired). Also note, these non-entry , higher level skill jobs are NOT being advertised on the public employment web sites for employment directly with IBM. IBM is turning to contract companies to replace the skilled job needs (read "avoidance of pension-liability") they got rid of earlier this year. How can a company not need your skills one month and then shortly thereafter need your skills? Does it seem right that they fire you one month and then seek you out a few months later once you've had time to job search elsewhere, hoping that you'll be more desperate and take basically the same job back at lower pay and w/o a pension? Congress Wake Up! IBM is bailing out on pension commitments. These are not the young employees that are being targeted by these aggressive (and illegal?) fire and rehire tactics. -Anonymous-
    • Comment 12/19/05: I have been an IBM employee for nearly 29 years. On Thursday, it was announced that our team (about 35 people) that we would be experiencing the equivalent of a 35% pay cut by taking us off a leveraged sales plan and placed onto salary. We have made out numbers for the last 5 years running and have been held in high esteem by the teams we support.. A big blow with timing that made this all the more painful. -Anonymous-
    • Comment 12/20/05: Responding to Anonymous, dated 12/19/05. In 2004, I was asked to leave (retire) IBM. Before my retirement occurred, I too was taken off of a sales plan and the resultant drop in OTE (On Target Earnings) affected my pension negatively. When ones salary is reduced, take home pay isn't all that's affected. The pension estimator will list your projected pension decrease. -Anonymous-
    • Comment 12/21/05: How many folks, IBM or not, operate their personal finances with a 35% contingency buffer? Last Friday my team was told that our compensation plan will change next month with an effective 35% drop in annual income next year. IBM is making no attempt to make the impacted employees whole by offering step payments, or base pay adjustments, during the transition. Plans change, but this knife edge transition is cruel. IBM values "Trust and personal responsibility in all relationships" which includes employer/employee relationships. I trusted - where is this trust demonstrated by my employer? -Anonymous-
    • Comment 12/21/05: I am another employee that has been affected by a change in my compensation. The change will be effective on January 1, 2006 and will mean a reduction of 20% to 30% in annual compensation. I know that this will affect my pension and retirement. If I had been told sooner, I would have had more time to find another job. Right now I am competing with the people that were part of a resource action who need to find other jobs. They will get priority-Anonymous-
    • Comment 12/21/05: The compensation changes referenced in a number of comments over the last few days is just the tip of the iceberg. In fact, my team that was effected by this 1/1/06 change was told by a director in IBM that we are one of many organizations that will have this plan change implemented. ALL IBM "sales support" roles will be removed from a leveraged sales plan. If an organization does not have "customer ownership" (eg brand/services/ sales specialists/Client Teams) they will be subject to this cut in compensation. FTSS, ISC, Techline, Financial Offering Leaders, WW Sales positions, TSMs and many others will be phased out of a leveraged sales plan by 1/07. We were told this is being driven by the highest levels in IBM (Marc Lautenbach with Palmisano support). We were given 2 weeks notice of this as the change for our team is effective 1/1/06. No increase in base pay is anticipated. This Director confirmed this as well. We were given the option to look for another job, but once a move out of the Sales and Distribution organization occurs on 1/1 or 1/16 at the latest, the move back to S&D becomes all the more difficult. BTW, we have a very seasoned organization with an average employee age that is in the late 40s, and many are close to 30 Years/Retirement age. IBM clearly understands the impact to employee pensions due to this change. My team has exceeded plan for a number of years. It was in no way performance driven. This decision was made without any regard for the employees well being nor the long term viability of IBM. It is all based on short term goal of cutting expenses and boosting short term stock prices. The business impact of this will be huge as a result. -Anonymous-

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