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    Highlights—January 7, 2006

  • New York Times: I.B.M. to Freeze Pension Plans to Trim Costs. By Mary Williams Walsh. Excerpts: I.B.M., which has long operated one of the nation's largest corporate pension funds, said yesterday that it would freeze pension benefits for its American employees starting in 2008 and offer them only a 401(k) retirement plan in the future. The company said that the shift, which is expected to spur still more major companies to move away from traditional defined-benefit pension plans, would save it as much as $3 billion through the next few years and provide it with a "more predictable cost structure." [...]
    But the move by I.B.M., a financially healthy company, shows that even some of the most secure businesses in the country no longer want to bear the risk or the expense of providing a firm promise of a lifetime pension. While I.B.M. expects to reduce its labor costs substantially, its action bears little resemblance to the recent efforts to cut or freeze pensions at troubled companies in the steel, airline and auto industries. Those companies say they are unable to generate enough cash to have any reasonable hope of making good on their pension promises. I.B.M. has pumped about $6 billion into its pension fund in the last four years and says that its plan is fully funded. [...]
    I.B.M. provides the nation's third- largest corporate pension plan, with about $48 billion in assets. It said it planned to make similar changes across its international operations, but did not indicate how many people would be involved. The company said it held about $79 billion in its worldwide pension funds. It had already taken the smaller step of closing its pension plan to new employees at the end of 2004. Those employees were instead offered 401(k) plans similar to the one I.B.M. now intends to give to all employees as of 2008.
    I.B.M.'s treasurer, Jesse J. Greene Jr., said the company's current financial climate had been an important factor in its decision to freeze pensions. Unexpectedly low long-term interest rates made the American plan cost about $100 million more in 2005 than I.B.M. projected at the end of 2004, he said, and about $300 million more in other countries where it operates. Federal Reserve increases in benchmark short-term interest rates in 2005 caused $200 million more in unexpected costs.
    The cash-balance design that I.B.M. adopted is more vulnerable than traditional designs to rises in short-term rates, even though it was promoted by actuaries in the 1990's as cost-effective. Lawsuits at companies like I.B.M. with cash-balance plans were motivated in part by the anger employees felt at seeing the companies increase profits and executive bonuses at the expense of their own retirement benefits.
    Mr. Greene said that demographic changes affected costs as well. "These plans were never designed," he said, to cover obligations that "run as long as people are now living."
  • Wall Street Journal: IBM to Freeze Pension Program in '08. Shift Includes Enhancing 401(k) Benefits in the U.S., Saves Billions Through 2010 By Charles Forelle, Theo Francis and Ellen E. Schultz. Excerpts: Beginning in 2008, IBM will stop contributing to its traditional U.S. pension plan and a later retirement plan now held by 117,000 IBM employees. Instead, IBM says it intends to increase the amount it contributes to its workers' 401(k) plans. The changes will save it $2.5 billion to $3 billion between 2006 and 2010, the company said. About 125,000 retirees, and former employees, won't be affected, the company said. [...]
    "This is the prudent, responsible thing to do going forward," says J. Randall MacDonald, IBM's head of human resources. "This is clearly about preserving the financial stability of IBM."
    IBM has complained that it expects pension costs to increase in the future, but the move isn't a sign that the pension plan is unhealthy. Its $48 billion U.S. pension plan has a small surplus, about $200 million at the end of 2004, and its liabilities aren't likely to grow significantly, because a year ago it closed the pension plan to new employees.
    Rather, the financial allure of freezing a healthy pension is that even though the changes won't take effect until after Dec, 31, 2007, under accounting rules the company can record a reduction in its pension liabilities, which will generate a boost to income in future years. IBM declined to say how much the moves would reduce its pension liability. The company did say that the actions, combined with other changes it is making or contemplating in plans around the world, would reduce its retirement-related expenses by $450 to $500 million in 2006, and by $2.5 billion to $3 billion in the period between 2006 and 2010.
  • Washington Post: IBM Halts Pensions in Favor of 401(k)s. By Albert B. Crenshaw. Excerpts: International Business Machines Corp. said today it will freeze the pension plans of some 120,000 employees in the United States, effective at the end of next year, and will offer instead a more generous 401(k) plan. [...]
    The freeze means that benefits earned by current workers up to Jan. 1, 2008 will be preserved, but after that date they will not increase. The company already had eliminated traditional pensions for new hires starting last year.
    The company said it expects the changes announced today, along with changes it expects to make this year for workers in other countries, to cut worldwide retirement-related expenses by $450 million to $500 million this year and by $2.5 billion to $3 billion through 2010. [...]
    IBM over the past 15 years has revamped its pension offerings several times, most recently converting a number of workers to a hybrid "cash-balance" plan, which is operated by the company but delivers benefits in a form that resembles a 401(k). Unhappy workers sued the company over the cash-balance conversion, charging that such plans violate federal age-discrimination laws. A federal judge in Illinois agreed with the workers. That decision is now on appeal. MacDonald said that suit was not a factor in IBM's decision to freeze its pensions. [...]
    The change means that about 80,000 IBM employees under the cash-balance plan, as well as 30,000 who were grandfathered into an older plan, will earn no new benefits under those plans, regardless of how much longer they remain with the company. Typically, benefits under pension plans increase as the number of years worked accumulates and as salaries rise.
  • Yahoo! News: IBM to Freeze $48B Pension Plan in 2008. Excerpts: Furthering corporate America's move away from pensions, International Business Machines Corp. said Thursday it will freeze its $48 billion pension plan in 2008 and instead enhance its 401(k) benefits for its 125,000 U.S. workers. Nearly all IBM's U.S. employees — everyone hired before Jan. 1, 2005 — have pension benefits accruing under a traditional annuity-like plan or a cash-balance plan, which gives workers interest-bearing funds that they can take with them if they leave the company. [...]
    Beginning in 2008, then, IBM workers' pension benefits will be locked in place, based on salary and length of service. The accrual of benefits will stop, meaning future raises or additional years with the company will not signify bigger pension checks upon retirement. Instead, IBM will increase its contribution to its 401(k) plans, in which workers get a defined, predictable amount from the company that they're responsible for investing. IBM will double the percentage of employees' contributions that it matches, to 6 percent of salary; certain employees will be eligible to receive more. [...]
    IBM executives said that by no longer having to account for pension accruals that would have mounted after 2008, the Armonk, N.Y.-based technology giant will save between $450 million and $500 million this year alone and up to $3 billion from 2006 through 2010. [...]
    Pensions have been a touchy subject for IBM, which was hit with a federal lawsuit — settled for up to $1.4 billion — filed by employees who contended that IBM committed age discrimination when it shifted to a cash-balance plan. Randy MacDonald, IBM's head of human resources, said the decision was unrelated to the lawsuit. "It's all about cost-competitiveness, so that we could continue to be the financially viable company that we are," he said.
Letter from Randall MacDonald, Senior VP of Human Resources, about IBM pension changes:
The following letter from IBM was posted by Janet Krueger in the Yahoo! "ibmpension" message board:
In recent years, financial and legislative pressures on employer legacy pension plans have increased around the world. Some of these pressures have to do with the challenges of funding long-term obligations; others have to do with changing laws and regulations. Employers in several major industries -- steel, auto, airlines -- cite the weight of legacy pension obligations as a hurdle preventing them from successfully competing in the face of rapid global change.
These obligations are an issue even for financially strong companies. At IBM, for instance, the company has contributed approximately $6.4 billion over the past three years to keep our U.S. pension plan fully funded, a sizeable commitment by any standard.
Just as we have made many big moves in recent years to transform our company and reshape our business model -- from acquisitions, like PricewaterhouseCoopers Consulting and leading services and software companies, to divestitures of our PC and hard disk drive businesses, to significant changes in how IBM is managed and new capabilities for IBMers to learn, collaborate and innovate -- so, too, we have evolved our HR programs.
Today, I am writing to tell you about another such evolutionary step. We are announcing that, in two years time, we will stop the future growth of pension benefits in our U.S. defined benefit pension plans and implement a new 401(k) savings plan -- which will be one of the richest 401(k) plans in the country. These changes are effective January 1, 2008. They will not affect current IBM retirees.
What I am announcing today continues an evolution we began some time ago. For many employees throughout the world, we have already migrated away from "defined benefit" pension plans -- which have volatile and unpredictable cost structures -- to more predictable "defined contribution" retirement plans. This allows IBM to offer meaningful benefit value for our people at costs we can control over time. And it's also consistent with, and actually better than, what our competitors provide. Historically, many have not offered defined benefit pensions; when they do extend pension benefits, it is through defined contribution models.
At IBM, the most recent example of this shift came last year, when we introduced a 401(k) pension program for new hires in the U.S. and closed the cash-balance pension plan to new hires. This announcement was widely acclaimed as leading-edge by retirement and industry experts, and 7,500 new IBMers have joined the company under these new terms.
Based on these competitive benchmarks and regulatory/legislative trends, IBM plans to adopt this defined contribution approach to retirement benefits in the U.S. in two years' time. We are providing the two-year notification to give employees ample time to understand these specifics:
Effective December 31, 2007, IBM will stop the future growth of pension benefits for current employees in the U.S. Pension Plan, and move employees to a new 401(k) "Plus" Plan. With the new 401(k) "Plus" Plan, employees will have an opportunity to build retirement benefits through automatic company contributions; a> dollar-for-dollar match on employee contributions of up to 6 percent of pay for those with affected pension benefits; annuity rollover options at retirement; and other special features. For those cash-balance participants who are receiving transition credits, IBM will automatically contribute the remaining credits for which you are eligible into your 401(k) account until June 30, 2009, when these credits were previously scheduled to end. IBM will also provide a special savings award for nonexempt employees eligible for the prior plan formula, so they can boost their personal savings.
The chart attached below summarizes the planned changes by each employee group.
With this approach, you continue to earn additional pension benefits under the pension formula that applies to you, through December 31, 2007; after that date, your earned pension benefit remains fully preserved and available for your use when you leave IBM. These earned pension benefits will increase somewhat, based on interest credits for the cash balance formula and other factors for the prior plan formula, but you will not accrue any new pension benefits as a result of future pay or service after December 31, 2007. Future retirement benefit growth after that date will come through the new 401(k) "Plus" Plan instead.
The transition to our new plan is designed to provide the majority of IBMers the opportunity to earn the same total IBM retirement contribution as they are currently eligible to receive, depending on their savings rates. It does not, though, mean that all participants will earn the same overall benefit that they might have earned had the pension plan continued without change.
In terms of next steps, we will publish additional information shortly on w3, which will be updated on a regular basis. A webcast will be made available for all employees on w3 to watch at their convenience during the next two weeks, and managers will receive additional information via our managers portal. Later this quarter, we will announce a wide-ranging set of other tools and services, including a company-wide financial education program that I believe will be the most extensive and robust program of its type ever undertaken by any company globally.
Change is never easy, but it is inevitable. Indeed, it's what this company has always been about. IBMers have continually reinvented IBM throughout our history -- from products, to processes, to management systems and strategies.
Today's announcement is about adapting our retirement plans to changing realities and doing so because more dynamic and innovative new opportunities have become available. Our new approach, in fact, should do a better job of preserving and extending those, aligned as it is with the realities and opportunities of the 21st century.
We will continue to provide you with more information in the days ahead.
Sincerely,
Senior Vice President, Human Resources
  • "ibm_slave" comments on a statement in Mr. MacDonald's letter. Full excerpt: "Change is never easy, but it is inevitable. Indeed, it's what this company has always been about," MacDonald wrote to employees yesterday." Perhaps we need a shareholder proposal to cap executive compensation. The "change" would not be easy, but "it's what this company has always been about..." It would certainly save the company Billions of $$$$ over the next ten years and cause the stock price to rise. IBM is up about $2.00/shr today in response to the pension plan change.
  • In a Yahoo! message board post, Janet Krueger comments on this question from another message board participant: Janet, have they defined what "earned pension benefit" means for an employee retiring with less than 30 years? I suspect this is where the company's financial savings come from. Ms. Krueger's full response follows: You've seen as many details as I have... If I was still an active employee, I would be doing the following:
    • Visiting the NetBenefits site and printing off a copy of what my vested rights are now, what they will be on 12/31/2007, and what they would have been when I had planned to retire (if the site still supports that option!)
    • Sending a note to my manager, asking for more details.
    • Talking to the nearest Alliance organizer to find out if they are looking at a fresh organizing drive so the new plan could be formalized into a contract, voted on, and only changed on the formal negotiating schedule (check www.allianceibm.org for details).
    As someone collecting an IBM pension, I am sending off a new round of letters to my representative and senators to remind them how important ERISA is to American retirees, and asking them to please ensure that the final version of the pension reform act does NOT allow companies like IBM, who have already taken action to freeze the pension plan for current employees, are not given an option of cashing out all their retirees.
    Do NOT blissfully assume this is the last change we'll see from IBM; there is still a $48 billion pot that the executives want to get their hands on...
  • Communications Workers of America (CWA) Press Release: IBM Assaults Employees' Retirement Security. Full excerpt: Following is a statement by CWA President Larry Cohen on IBM's plan to freeze employee pensions:
    The announcement by IBM Corp. that it is freezing the pensions of some 120,000 employees is outrageous, even by the "Gilded Age" standard of today's corporate executives.
    Just over the past few weeks, we've seen some of the richest corporations eliminating pension benefits wherever they can, just because they can. Verizon recently froze pensions for tens of thousands of management and unrepresented workers. IBM's action sends an equally chilling signal not just for current workers, who now have lost their retirement security, but to the future generation of workers who are penalized before they ever start their first job.
    In the United States, increasingly, workers are required to bear the costs and the risks for their retirement and health care security. But they're also forced to pay the costs for the bad business decisions that push companies into bankruptcy, like United Airlines and Delphi, not to mention the misdeeds of corporate lawbreakers whose actions have wiped out 401 (k) retirement savings at companies like Enron, WorldCom, and others.
    Curiously, the retirement packages of most top executives remain untouched, as we've seen at United and scores of other companies. It's not yet clear that the IBM change affects the executive supplemental retirement plan at all.
    Meanwhile, as defined benefit pensions go by the wayside, we have a White House that wants to kick away another pillar of retirement security by radically changing Social Security from a guaranteed social insurance program to a risky Wall Street-based scheme.
    If Congress is interested in real pension reform, it will begin by encouraging the establishment of defined benefit pension plans that provide true retirement security for working families.
    This downhill sled ride for U.S. workers will continue until the United States joins the mainstream of global democracies and ends the attack on workplace democracy and workers' rights. When IBM makes this kind of announcement in Europe, and now much of South America and Asia, it must negotiate with employees. Contrast that to the United States, where IBM employees have no bargaining rights and therefore no voice. CWA encourages our thousands of members at Alliance@IBM to speak out to elected officials at every level of government.
    ### More than 6,000 IBM employees are members and associate members of CWA Local 1701, Alliance@IBM, an association that fights for workplace, benefit and bargaining rights for IBM workers.
  • Alliance@IBM Press Release: IBM Pension Change 'Yet Another Cut in Employee Benefits'. Full excerpt:
    For More Information:
    Lee Conrad, in Endicott, N.Y., 607-658-9285
    Endicottalliance@stny.rr.com
    www.allianceibm.org
    Endicott, N.Y. -- At the end of the day on Jan. 5, IBM announced to the media, before notifying employees, that the IBM pension plan of $48 billion will be "frozen" in 2008 and the employee 401(k) plan enhanced.
    "This is a further takeaway of the employees' retirement security and part of a national trend to drive workers' standard of living down while enhancing corporate profits and executive bank accounts," stated Lee Conrad, National Coordinator of the Alliance@IBM, CWA Local 1701, the IBM union organizing campaign.
    The termination of the pension plan is expected to save the company $3 billion by 2010 according to IBM. No statement was made on how this change affects executives' Supplemental Executive Retirement Plan (SERP).
    Linda Guyer, an IBM Software Group employee and president of the Alliance@IBM said, "This is just one more top down edict from corporate headquarters that leaves employees with no say. We have seen this far too often. If a union contract was in place, changes as significant as this to employee retirement would have to be negotiated. It's time for employees to fight back."
    Earl Mongeon, an IBM Burlington employee and vice president of the Alliance, stated that for many long-time employees, the pension freeze is a reversal of an implied promise. "The company just pulled the rug out from us. The $48 billion in the plan is ours, because we built this company."
    The Alliance@IBM is deeply concerned that, considering the volatility of the stock market and recent downturns that have wiped out retirement for many, the move to retirement based on 401(k) savings could be disastrous for many employees, especially those not savvy in investing.
    "IBM, like so many other companies, is either eliminating or not offering the stability of a pension plan, or even basic benefits. The signs are already there that the next generation of workers will be in worse shape financially than this one. It is obvious that corporations of today do not value the work employees do," stated Conrad.
  • Lee Conrad, Alliance@IBM National Coordinator, comments on the changes in a Yahoo! pension board post. Full excerpt: The whole trend of declining pensions and benefits is a take away. Think of the next generation of workers (your kids)who will have less than we did. Except of course the kids of Corporate executives. Don't people remember the beating people close to retirement took in their 401k's a few years back. The market is volatile. Oh and by the way 401k's are another way for companies to get your money for investing while dangling out the carrot. Class war? You bet--and we are losing!
  • In a Yahoo! message board post, Kathi Cooper, of Cooper v. IBM fame comments on the changes to the pension plan. Full excerpt: It's about greed. It never was about employees old age retirement. IBM needs to keep their hands on our trust. With a frozen plan, they stopped the tub from draining. Those on the old plan get hurt because the old plan was designed to accrue the largest benefits from 25-30 years of service. Those on the new plan (cb) get hurt because they lose their daily (miniscule) accrual. And MOST are too old to get a different job. MOST are out of runway.
    Next step? My guess is they will move everyone's present value into their enhanced 401K. That seems to me to be the next logical move, to keep the money in their pockets and not ours. (and you know what happens to your $ when we use present value!)
    Angry? Nervous? Scared? THINK about the Alliance @ IBM. (my opinion only)
  • Yahoo! message board post by Janet Krueger. Full excerpt: If there are any active employees reading this who would be interested in discussing their reaction to the changes with a national reporter, on the record, please send me a note with your name, your location, and a phone number where you can be reached... I've got several reporters looking for people to interview!
  • Yahoo! message board post by "ibmamoeba": Pension Changes/my numbers. Full excerpt: My 30th service anniversary falls within first quarter 2008. So as I understand it my pension will be frozen on 12/31/207. Estimator shows approx. a +29.5 difference using dates of 12/31/2007 and one day after reaching my 30th service anniversary.
    Lets see how the math works in my case-the difference per month for my expected lifetime comes out to slightly over $150,000. So, after working for IBM 29.75 years they break their promise and reduce my retirement by +30% within 90 days of being vested.
    Now for my rant...For the past 28 years I have done my job and placed this job in front of family and personal considerations only to have this happen after obtaining 99.6% of my personal goal of reaching 30 years. I believe I would be less upset being layed off than being LIED to after all these years. My dictionary defines a lie as a false or deceiving statement.
    What other surprises are lurking just around the corner? Now back to the regular scheduled programming...
    • "eenemene" comments. Full excerpt: Think of it not as a "lie" but as a giant billboard of promises and advertising about all those great ibm benefits... but with a little legal disclaimer you need a microscope to read in the bottom corner about those nasty "legal documents". They always could have terminated the plan, but ("wink, wink") who ever thought they really would have with all that great stuff we were fed the past three decades.
      I'm still wondering if you looked at a distribution of financial impact of this decision as the Y axis and age as the x axis, I bet one could argue that the targeted impact has the effect of an age-based action. Of course that information must exist in confidential databases somewhere just waiting for a discovery procedure.
      I expect my financial impact to be about the same as yours... started several months after you did with the firm, made many sacrifices etc etc. Like I said, the brunt of this is most likely to be felt by folks in a very narrow age bracket of around 50-something.
      Look on the bright side, with all the money the company will save, maybe we can expect 2.5% raises every other year instead of 2% raises every other year. Certainly that will help us 26 to 28 year folks a lot (right).
    • Kathi Cooper comments. Full excerpt: Lies? How about illegal? What IBM did to us in 1999 and 1995 was illegal. We have pretty much settled 1995 but IBM is appealing us on the 1999 part of the case. This is not the first time IBM lied to you. You've been lied to and screwed more often than this. You do know about the pension suit, right?
  • Yahoo! finance board post by "thetrendsnotyourfriend". Full excerpt: I think it is painfully obvious that most people on this board that pump IBM don't have a clue about the business or the people who run it. Nor, do they understand the dedication that has been provided by many of us who have stuck with this company for nearly 30s years.
    Over the past 12 years, I have watched my annual estimated pension (for retirement in 30 years) drop from $70K to $42K to $30K. During that period I have also watched executive salaries and compensation more than double. I don't have much in terms of expectations...only that the company keep their side of the bargain and pay me based on the compensation plan that has been offered to me during my years with the company; and based on my continued performance which has never been rated anything less than "exceeded expectations".
    When and if Sam is shown the door, I don't think you'll see anyone taking anything away from him or his golden parachute. Is his contract so much more sacrosanct than the "contracts" we the workers have with this company.
    Given my 25+ years of contributions to one of the largest and most profitable companies in the world, is it too much to ask that my 30 year pension be more than 1/4 of my salary, especially when I will be expected to pay nearly 25% of it out to cover my retiree medical premiums.
    Is it too much to ask that if I'm within 5 years of retirement, and on the already revised pension plan that my pension be what their estimator tool told me it would be at this point in the game? Am I expected to put off my retirement simply because the executives in IBM aren't able to cash in on their excessive stock options.
    You don't have to be much of a financial analyst to know that what is effecting IBM stock has little to do with the already reduced benefits plans that its workers receive. Watching the executives shower themselves with stock options and use the companies cash to buy back shares to avoid to dilutive effect of this is growing kind of old, and the multiple that the market bestows on IBM stock is reflective of that.
    I believe the changes IBM is making to the pension this time around are positive for younger employees who are on the cash based plan, and interestingly enough provides incentive for IBMers already retirement eligible to stay. It is those of us in the middle who are being squeezed by the current plan. I doubt anyone in IBM HR was even smart enough to realize it prior to announcing this such a horrendous change.
  • Yahoo! finance board post by "ibmoptioneer". Excerpts: An investor that doesn't stand up and be counted to ensure their feelings are heard by the management appointed by the Board of Directors which creates what appears to you as an adverse environment for investing has essentially abrogated their duties as an investor. Investors are owners, yet investors have given the power and responsibilities of owning to analysts and executives through boards to create this problem.
    You can talk all you want about professionalism, helping the company and all that BS, but it's you the investor that has created the employee environment and no one else is to blame for it. See you at the next Annual General Meeting. Wonder why all the security, why investors are kept away from executives and why questions and questioners are cut off when they get too close to the truth. It's a great investor educational experience.
  • "madinpok" comments on how things might have been different if IBM U.S. had a union. Excerpts: Without a union, IBM will continue to sell divisions to companies like Lenovo and Hitachi and make whatever deals they feel like as to the future of the workers. With a union, the employees can have some say as to what happens and how they will be treated if a plant is closed or work is moved to other countries.
    In the case of the MTA workers in NYC, they demanded that there would be no changes to the pension plan and they won.
    In the case of the Delta airline pilots, they VOTED to accept a pay cut rather than risk driving the airline out of business. Hopefully, this is a temporary pay cut to help the airline get back on its feet and not a permanent one. The key here is that employees got to vote and the company could not unilaterally impose the pay cut.
    When IBM decided to cut pensions in 1995 by switching from the S&E plan to the PCF plan, and cut pensions again in 1999 with the C-B plan and cut them yet again with yesterday's announced freeze of the pension plan, did they ask the employees to vote if those changes were ok? I can see the value of a union. Can you?
  • In a Vault message board post, "Frank_Reality" comments on the IBM Supplemental Executive Retirement Plan (SERP). (Editor's note: It isn't clear yet whether the IBM SERP plan is affected by the latest changes to the employee pension plan). Full excerpt: No mention of the SERP being frozen. The Gods running the place are so special.
    • S - Self-serving
    • E - Executives
    • R - Raping other employees'
    • P - Pensions
    Greed Incorporated strikes again. Employees don't matter.
  • In a Yahoo! finance board post, "eddyshimmy" comments on the pension plan changes. Full excerpt: You said: "I have been at IBM for 6 years(since 2000) I am fully vested. So what have I lost?" The answer is YOU probably haven't lost anything by virtue of the fact you have only been there six years.
    The guys who lose are the mid 40 to early 50 year olds, who have spent their entire career under a defined benefit (DB) plan. The DB plans tend to gain the most value in the last few years of your career. The defined CONTRIBUTION, or Cash Value, or 401(k) type plans tend to have the most value on the EARLIEST contributions (as they have the longest time to build up equity.
    Both approaches are perfectly fair. What is not fair is the buzz saw that the guys late in their careers experience when it is too late to get the thirty years of interest on early contributions (ala Cash Value or 401(k) , and they are robbed of the soon to be realized significant growth experienced at the END of the DB plan.
    There were significant age discrimination issues on these types of conversions in the past. The IRS (don't ask me wy this is in their world, but it is) recently passed rules changes that makes these types of conversions easier to do. I am not sure if the IBM one screws the guys who are ten years from retirement or not, but it smells an awful lot like the type of scenario that does.
    • "MrBillKnows" comments. Full excerpt: You probably haven't lost much, because you're young and pensions weren't going to last until you retired anyway. The ones who have really lost a lot are the people who are in their 40s and 50s and bought into the idea that IBM was going to take care of them. Those people are screwed, and they can't do anything about it. You, however, can move on. Just make sure that your next employer pays you enough so that you can save a lot of money for your retirement on your own.
  • Yahoo! finance board post: Putting the pension rip off aside. By "thetrendsnotyourfriend". Full excerpt: When the smoke clears, the market will assess this appropriately. IBM has no ability to increase revenue, no ability to improve product cost, and no ability to development new and innovative technology. If all this company is capable of doing is increase earnings by raping its own employees, the stock will be judged accordingly. IBM had huge savings when it switched to the Cash based pension plan...which was revealed during the class action suit that IBM lost. Just follow the declining share price from then to now.
  • Yahoo! finance board post: "T. J. Watson Sr." by "seymour_cash". Full excerpt: Would T.J.Watson be rolling over in his grave over the pension freeze? IBM lied about medical coverage for retirees. Now they have lied about a pension benefit. Loyalty and morale will fade further.
  • In a Yahoo! message board post, "chz_whiz" replies to Randy MacDonald's letter. Full excerpt:
    Hey, Randy -
    Got your note. Thanks a bunch. Got a second? I'd like to ask you a few questions for clarification. Shouldn't take more than a couple minutes. Since I'm not the NSA, I'll just post my side of the conversation, not yours. OK? Great! I thought you'd see it that way.
    Your note said that the company had contributed approximately $6.4 billion to the pension fund over the past three years to remain fully funded. Now $1.7B of that was to set aside funds for the class award, right? Kathi caught the execs with their hands in the cookie jar, right? $1.7 B is a pretty good chunk o' change, no?
    Now the other $4B was because the stock market went down for a very unusual three consecutive years, right? Stuff happens. So now you're moving all investment risk from highly paid IBM and non-IBM professional investment advisers to IBM employees who have other day-to-day jobs. Is that correct? So we're moving away from, to use your words, "defined benefit" pension plans – which have volatile and unpredictable cost structures – to more predictable "defined contribution" retirement plans. Sure is comforting that an IBM systems engineer will invest better than than a professional investment adviser.
    OK, you said IBM had to contribute $6.4B over the past three years. $1.7B was from the cookie jar incident, and the other $4B was from stock market declines. Stuff happens.
    How much did the company contribute to the trust fund during the 90's decade? They didn't? Oh, they could just pull funds out of an overfunded position due to stock market gains? Great!! And they could show that as corporate profits? Fantastic! And corporate profits generate executive boni? Wow!! Isn't that just absolutely ducky?
    OK, and you're "providing the two-year notification to give employees ample time to understand" the specifics of the pension change. Two years? Are IBM'ers slow to comprehend, or what?
    Your note said that the change "does not mean that all participants will earn the same overall benefit that they might have earned had the pension plan continued without change." So I guess that means that some of the participants will get burned, huh? Badly burned? How burned?
    Your predecessor, (remember "Socks B."?) had said that previous pension changes were not to save money for the company; they were because the mobile work force wanted the changes. The mobile work force apparently wanted to be mobile, laid off, down-sized and out-sourced. I appreciate your sincerity in admitting that these changes are to save the company money.
    Since this is saving money for the company, the savings must come from somewhere. Could you identify the employees it is being taken from? Oh, I didn't think you would.
    Maybe not the employees (who cares about them?) but it sounds like the corporation and executives have been doing well. Where to from here?
    You've estimated $3 billion in savings through 2010. What happens after that? After 2010, the company won't have nearly as much of the trust fund left to generate vapor profits (and subsequent vapor profits). The actual investment will be transferred into the hands of employees. The company won't have as much income, but they will still be paying (in real $$$) the 401(k) Plus contributions. What will you do then?
    Oh yeah; nearly forgot, You're 56 years old (according to Forbes). So in 2010, you'll be 60 and moving from IBM to your next opportunity…it'll be somebody else's problem.
    Randy, thanks for your candid answers. Appreciate all you've done for us.
    Your friend, cw
  • Yahoo! finance board post by "ibmaccountant". Full excerpt: Sam [another finance board participant], I agree 100% with you except that you are making an uninformed assumption: that IBM is not going bankrupt. Do your due diligence as an employee or as a shareholder, or both, but make sure you understand the trends and what percentage of that alleged 9B a year is truly from actual customer revenue as opposed to "traditional accounting gimmickry" like currency, pension vapor accounting, etc. and new forms of misleading investors.
    If there is one thing IBM employees and shareholders should have learned from the 1995, 1999, 2004 and 2006 pension actions and the 4Q01 and 1Q05 financial reporting event is that you should expect critical information to not be reported except possibly in the fine print and misleading statements highlighted.
    The stock is languishing not because of performance, but because of loss of trust and confidence in the Board and senior management team. Short term traders love this and will pump and dump the stock continually on this board and IBM is a great short term play (lay) but the value investor for the long haul as well as the long term prospects for this company are not that good.
    As I've said before, caveat empore. Don't trust the actual publicly stated reasons for the pension change, look for the REAL reasons as to why they did it now and not later or before. I'll surmise that in that 270 million charge and 500 million accounting vapor profit is much more hiding, possibly a drying up of the IGS pipeline or worse news. You've been warned. The stock moved only a fraction of what it should have. Why?
  • National Bureau of Economic Research: Executive Pensions. Abstract: Because public firms are not required to disclose the monetary value of pension plans in their executive pay disclosures, financial economists have generally analyzed executive pay using figures that do not include the value of such pension plans. This paper presents evidence that omitting the value of pension benefits significantly undermines the accuracy of existing estimates of executive pay, its variability, and its sensitivity to performance companies. Studying the pension arrangements of CEOs of S&P 500, we find that the CEOs' plans had a median actuarial value of $15 million; that the ratio of the executives' pension value to the executives' total compensation (including both equity and non-equity pay) during their service as CEO had a median value of 34%; and that including pension values increased the median percentage of the executives' total compensation composed of salary-like payments during and after their service as CEO from 15% to 39%.
  • "madinpok" explains IBM's "Future Health Account" in a Yahoo! message board post. Full excerpt: Employees who are not first choicers and we hired before 1/1/04 (I think I got that date right) have a Future Health Account. Employees hired after that date have no retirement medical coverage paid for by IBM, although they have "access" to buy coverage from IBM out of their own pocket.
    The FHA is a fictional account to which IBM contributes $2500 a year from age 40 - 50 and earns a low rate of interest. To use it, employees must remain employed until age 55 (except for second choicers, who can retire earlier).
    Once you leave IBM, the money in the FHA account can be used only to buy health insurance from IBM at whatever rate they want to charge you. This year, employee+spouse coverage is priced at about $14,000. Since most employees will have somewhere around $35k in their account when they leave IBM, that is enough for less than 3 years coverage. Since the cost goes up every year, it will buy even less in the future. Once the money in the FHA account runs out, you have to pay for it out of your own pocket. For someone who leaves at age 55, that means they will probably have to pay for 7-8 years of their own coverage before being eligible for medicare. So they will spend at least $100k out of their own pocket, and probably much more as medical costs continue to rise.
  • In a Yahoo! message board post, Janet Krueger explains how IBM employees fit into one of three groups. Excerpt:
    • A first choicer is someone who was within 5 years of retirement eligibility on July 1, 1999 -- these people, when they retire, can still participate in what is left of IBM's promise of life time health care benefits for retirees as long as they are willing and able to pay the rapidly increasing retiree contribution.
    • A second choicer is someone who was over age 40 AND had over 10 years of service on July 1, 1999 -- these people were forced to switch to the cash balance plan, but then were magnanimously given the option to revert back to the 1995 plan on Sept 17, 1999 the day before the HELP committee meeting on cash balance plans took place in the U.S. Senate. These people were left with the Future Health Account (nicknamed the Future Hell Account by some) which cannot be accessed until the employee qualifies for full retirement and turns 55, which can only be used to purchase roughly three years of health insurance from IBM, and which never vests and can be eliminated at any time.
    • The last group you may see referenced from time to time is the 'no choicer' group that was stuck in the cash balance plan and will most likely never get any retiree health benefits.
  • BusinessWeek (July 29, 2002): An Excerpt from The Great 401(k) Hoax. Authors William Wolman and Anne Colamosca believe the recent problems are just the beginning. Excerpts: For people who are approaching retirement, 401(k) plans haven't yet proven to be the wealth-creating machines many had hoped. Steep and prolonged declines in stocks have eaten away at many people's retirement savings. [...] And, of course, most employees now realize their retirement income is more uncertain with a 401(k) than it would have been with the so-called defined benefit plans popular in the past -- where employers promised to provide a set monthly pension, no matter what. [...]
    In the midst of this crisis of confidence comes The Great 401(k) Hoax: Why Your Family's Financial Security Is at Risk, and What You Can Do About It, by William Wolman and Anne Colamosca (Perseus Press). The book contends that the woes now plaguing 401(k)s are just the beginning. In the introduction, reprinted below, the authors contend that this "ugly combination of letters and numbers" will prove to be "the greatest systemic financial hoax ever perpetrated on an unsuspecting public."
  • Yahoo! finance board post: Let the Lawsuits begin. By "thetrendsnotyourfriend". Full excerpt: Should be no surprise to anyone that IBM took its latest shot at screwing over some of its older workers with the latest pension plan changes. This is similar to IBM's opening salvo for the cash based pension plan changes several years back. Certain not to hold up under the pressure of legal action. As with the last changes, expect a short term blip up on the stock, then as logic prevails, watch the stock drop on the prospect of growing dissent internally, legal action and the realization that in the long run this will only cost the company. You have to begin to wonder whether or not this management team will ever get anything right. And I'm long this stock...argh.
  • Yahoo! finance board post by "bye_low_sell_hi". Full excerpt: What a disaster for many employees who are 3 or more years out from maturing their IBM pension. ALL the money IBM will "save" is money that long-term employees were counting on getting. Those folk are the ones being robbed - its up to them to fight with a class action age-discrimination law suit.
  • Raleigh News & Observer: 'F' looms for IBM schools network. By Tim Simmons. Excerpt: State education officials are threatening to cancel a multimillion-dollar contract with IBM because of problems involving a sophisticated computer network. The program, NC WISE, has been dogged by glitches since it began six years ago. It's supposed to give schools a single place where a wide range of information can be entered and analyzed. Through the system, schools can create individual report cards or track entire groups of students. It offers grade books for teachers, electronic transcripts for colleges and data for parents, from test scores to attendance records. But teachers say it has a tendency to crash and freeze to the point where some have dubbed it "NC STUPID."
  • Yahoo! message board post by "sby_willie": let's hope our "variable pay" or "bonus" doesn't decline again for 2005 results. Full excerpt: Let's hope our "variable pay" or "bonus" doesn't decline again for IBM 2005 results. But I think it will be less than before (2004 results) due to:
    1. More hard working IBM employees being pigeonholed as "3" PBC'ed.
    2. More and more hard working IBM employees that are "2" and "2+" PBC'ed receiving the minimum "variable pay" or "bonus" payout (maybe 2% or so?).
    3. More and more IBM business units who had set unreasonable measurements and business attainable/result metrics for 2005. The "2005 Scorecard" will bear this out in most, maybe all, IBM business units not receiving at least a 100 score.
    4. Have to "bonus pay and retain" the top IBM executives since they have been leading and setting company direction leading to stock price results/return of approx. -14% YTD. Redirect some employee bonus pay to the executives to reward the executives for their "great work in a tough, competitive, 2005 I/T business climate".
    I hope I am absolutely wrong on all four of points. Happy New Year to all. But I hope it really is.
  • Barron's, courtesy of SmartMoney.com: You Don't Know Jack. By Jonathan R. Laing. Excerpts: Jack Welch, General Electric's demanding former chief executive, delighted in setting the bar high. When he stepped down a few days before Sept. 11, 2001, he left his successor, Jeffrey Immelt, the challenge of matching a remarkable string of years of strong profit growth. What was most remarkable about those years, however, wasn't apparent to anyone outside the company until recently. The bar might have been set artificially high.
    During the last five years of the Welch era, ended in 2001, GE's reported earnings jumped from 72 cents a share to $1.37, a rise of 65 cents a share, or 90.2% — spectacular for a behemoth like GE. But without a massive under-reserving at its reinsurance unit, the company would have shown a cumulative earnings gain of just four cents, or 5.6%.
    • "ibmaccountant" comments on the Yahoo! finance board. Full excerpt: Kinda like IBM stock, isn't it. Gerstner leaves IBM and Welch leaves GE and both stocks suffer from all the issues surrounding the tenure of these CEO's. Very similar to AMEX and RJR after Gerstner left them as well.
  • New York Times: The Machete Budget. By Bob Herbert. Excerpts: If Congress were merely useless, the country would be better off. But it's worse than useless. In the iron grip of a Republican Party that is almost slavishly devoted to the Bush administration, it's downright destructive, especially to the interests of poor and working people.
    Consider the budget that will soon be sent to the president for his signature. Members of the House and Senate have agreed on legislation that achieves something approaching $40 billion in savings over five years primarily by hammering the sick, the poor, the elderly and college students and their families. This is the same Congress that genuflects each time the president asks for yet another gift-wrapped tax cut for the wealthiest among us. The textbooks tell us that the U.S. is a representative democracy, but only the upper strata are truly represented. [...]
    The largest chunk of "savings" in the budget bill would come from student aid. With the special interests driving up in 18-wheelers to haul away our tax dollars, Congress and the administration apparently felt that mugging college students would be a good way to recoup a bit of those losses. "This is the biggest cut in the history of the federal student loan program," said David Ward, who heads the American Council on Education, an umbrella group for public and private colleges.
  • Seattle Post-Intelligencer: Before taking a buyout, consider the costs. By M.B. Owens. Excerpt: In today's ever-changing business environment, in order to reduce overhead, employers are often faced with offering employees a buyout in the form of early retirement. Several years ago, one of those employers was a nationally known tire manufacturer. It was experiencing a significant decline in revenue because of issues with some of its tires. The company decided to use buyouts for some employees as an option to reduce costs. Brian (not his real name) was one of the employees offered a buyout, with different options to select from. Having worked for the company for more than 30 years, he had a lot to think about.
  • Dallas Morning News: Lower-income workers will get hit hardest by higher premiums. By Pamela Yip. Excerpts: On workers' 2006 wish list is a pay raise that will exceed the higher costs they're having to pay for health care. On average, forecasters say, they'll get it, even if it doesn't feel like it. But, not surprisingly in our society, lower-wage workers will get hit hardest, with the smallest raises after health care inflation is factored in. Average pay increases for 2006 are projected to be around 3.6 percent, according to Mercer Human Resource Consulting. [...]
    Meanwhile, workers are expected to shoulder a 10 percent increase in annual health insurance premiums, according to Towers Perrin, a management consulting firm. “In 2005, health insurance premiums rose by 9.2 percent, which was three times the increase in wages,” says Larry Levitt, vice president for communications and online information at the Kaiser Family Foundation, which studies health care issues. “Certainly, there are no signs of that abating. It's very likely that in 2006, health care costs will continue to squeeze out wage increases.”
  • Hewitt Associates: Best Employers in Canada. Excerpt: "Best Employers' 'people practices' support their business goals and are communicated and executed effectively." Organizations on the list come in different sizes, from different industries, from all across Canada - in 2006, 24 from Ontario, 14 from Western Canada, seven from Quebec, one from Nova Scotia, and one represents a consortium of five companies from across Canada. A number following the organization's name indicates the number of years that it has made it onto the Best Employers list. Thirty-seven organizations on this year's list appear on previous years' lists. Could your organization make the list? Take a look at who made it - you may be surprised. (Editor's note: IBM has not been on the list since 2000).
  • Computerworld: 100 Best Places to Work in IT 2005. Excerpt: These select companies have can-do workplaces where cool projects and competitive pay are standard fare -- some even have lavish perks. Their strategy seems to be working: This year's survey of more than 20,000 IT workers shows upticks in job satisfaction and morale. (Editor's note: IBM is not on the list).
  • Associated Press, courtesy of the Chicago Tribune: Abbott suit gets class-action status. Excerpt: A federal judge has granted class-action status to a lawsuit accusing Abbott Laboratories Inc. of cheating older workers out of retirement benefits when it spun off its hospital equipment business in 2004. The ruling Friday by U.S. District Judge Robert W. Gettleman allows the suit to cover all Abbott employees shifted to newly created Hospira Inc. between Aug. 22, 2003 — the date the spinoff was announced — and April 30, 2004. Also included are Hospira employees who were eligible to retire from Abbott when their jobs were eliminated. The plaintiffs claim North Chicago-based Abbott, a manufacturer of pharmaceutical and medical products, spun off the unit containing many of its older workers because they were near to claiming rich retirement benefits from Abbott.
  • Richmond Times Dispatch (courtesy of Blue Cross, Blue Shield Health Issues): Employee cost of health plans vary. By Tammie Smith. Excerpts: The new year means the start of a new benefits year for many employees. The luckiest employees will see no increases in health insurance costs. Others face higher monthly premiums, higher co-pays for office visits and drugs, deductibles where there used to be none, co-insurance on top of deductibles and new "consumer driven" health plans that couple high deductibles with health savings accounts. "It's just not understanding co-pays anymore," said Sharon Jahn, benefits director for the VCU Health Sys- tem, which employs more than 5,000 people.
  • Washington Post obituary: Frank Cary; Drove Personal Computer Creation for IBM. Excerpts: Frank T. Cary, 85, the chairman and chief executive of IBM who pushed for the creation of the company's once-dominant personal computer, defended the giant business against a 13-year-long federal antitrust lawsuit and helped launch a decade-long effort by U.S. corporations to end apartheid in South Africa, died Jan. 1 at his home in Darien, Conn. His wife of 63 years, Anne Curtis Cary, described her husband as a quiet, down-to-earth person who would prefer a bare-bones obituary, if any at all. She declined to provide a cause of death. [...]
    Mr. Cary was not solely concerned with financial goals. According to IBM, he joined General Motors chief executive Tom Murphy and the Rev. Leon Sullivan, a General Motors board member, in 1975 to recruit 21 top American corporate leaders for a decade-long effort to end apartheid in South Africa. The meeting led to the creation of the original Sullivan Principles, which committed businesses to equal and fair pay practices, training of nonwhites for management positions, and improving the quality of life for nonwhites in housing, transportation, school, health and recreation facilities.
  • Computerworld: H-1B workers earn less than American counterparts, report says. The visa holders are supposed to be paid prevailing wages. Excerpt: H-1B visa IT workers earn on average $13,000 less than their American counterparts, according to a study of U.S. Department of Labor records released by the Center for Immigration Studies. H-1B workers are paid less, even though the law requires that they receive prevailing wages, according to the study by John Miano, a former chairman of the Programmers Guild, a group that has been critical of the H-1B program. Miano’s report compares wage data that employers file with the Labor Department against U.S. wage data collected by the Bureau of Labor Statistics. While employers must attest that they will pay prevailing wages on a form called the Labor Condition Application, Miano says in the report that agency officials haven’t been required to verify that data.
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.
  • "point 3: the principals/associate partners" by "byebye2". Full excerpt: Point 3: The high potential associate partners/principal consultants (level 5) really got the raw end of the deal. No (mentionable equity), no opportunities on a real partnership (read equity). Therefore 70% of them left between 2002 and today. Again IBM shooting itself in the foot. They believed the fairy tale that the Partners (Chiefs) at PwC were doing all sales and project management and the rest were just dumb "indians" that could be replaced with ..."Indians, but than from India". Or Cheap Mexicans, Canadian, Chinese and other PM's from low wage countries... Now IBM BCS is search extensively for real project management talent, but IBM HR recruits less talented PM's every round of recruiting.
  • "dream on stekker1" by "byebye2". Full excerpt: Stekker1, you either are a IBM HR person or may ask what you dream of at night? Last year the break-even point was not yet reached where the partners could make more money elsewhere. Now IBM (2000 Ex-PWC) partners make $180 salary + $200-$400k vesting = $380k-$580k with vesting. After vesting they only make about $200k, whereas elsewhere they can still make $250base + $200k bonus= $450k. Obviously it is not a pretty internal PR picture that the partners make $500k while the consultants make below market while working above market hours on challenging projects. No or little raises the last 4 years because IBM it still paying the PwC vesting.
  • "$180k Salary - you have no idea what your (sic) talking about" by "mvp21". Full excerpt: IBM Associate Partners make that - there isn't an ex-PwC Partner making anything less than $200k in base salary. And that's the low end. Average is closer to $300k.
  • "depends on their band" by "byebye2". Full excerpt: Their salary is tied to their band. Partners in the D band do make less than $200k. But you are right the partners in the C and B bands do make around $300k, but this is part of the ex-PwC employment legacy. Newly minted BCS partners don't make the $300k. And the $300k is only sustainable for the B level partner execs. So the group and industry leaders they will still make $300-$500k but than you are talking about managing hundreds of consultants.
  • "correction: senior partners got a good deal" by "byebye2". Full excerpt: Actually only about 80% of the IBM BCS (ex PwC) partners got a bad deal: the most junior partners that were partner less than 6 years. But these were actually close to 80% of all partners. The senior partners (Industry and Group leaders) actually received a pay-off to retire very comfortably (read 7 figures) after spending 5 years with the big blue company. Don't pity them. They are also IBM C-level or B-level execs.
  • "Excellent Point" by "Dose of reality". Full excerpt: The post acquisition compensation economics were a catastrophic failure, driven by the Mckinsey study that came to the idiotic conclusion that in the 2002 environment the acquired staff "would have no place else to go".
    Of course, the time horizon of the study couldn't have been more than 6 months. The problem was that screwing with compensation has a cumulative effect on people, and the groundswell of "I'm outta here" was bound to build up until the market inevitably rebounded. Even in the short term, the most marketable and most prescient talent bailed out pretty quickly, and many of those that remained through the first year reduced their efforts from the "partner opportunity" inspired energy that they had infused into PwC.
    The tragic part is that it wouldn't have cost that much to maintain and energize the roster. Normal salary increases, and more bonus differentiation of top 40-50% performers would have been more than compensated for through hard and soft benefits of lowered attrition, and higher productivity and project/proposal effectiveness. Not only did they squander a golden opportunity, but now, with several years of bad compensation history, it's even harder to recruit top talent. We have to pay a premium just to overcome the stigma of our reputation.
    I have no doubt that an objective analysis of this would show this to be a real economic drain in the hundreds of millions, if not billions. The problem with this is how do you quantify the lost opportunity that comes from having replaced an up an coming thought leader or experienced PM with Sanjeev and his merry band of JIT trained linguistically challenged offshore coders? They look great on hourly rate year-over-year labor cost comparisons, but there are a few other metrics that might be more important to a premier Business Consulting Services company!
  • "Essentially Correct" by "Dose of reality". Full excerpt: Depending on the distance, flight availability, and client requirements, you may have to fly out on Sunday. Other than that your assumptions are correct. Car rental may be included, but you will be expected to share a car. We get reimbursed dollar for dollar from the clients, plus we get a kickback from the "preferred" airlines and hotels that we take into income, so we actually make money on the deal. Shhh! don't tell the clients or they may get upset! Of course, what that means for you is that you will be required to take multiple connection flights and stay at marginally acceptable hotels that are a long distance from the office so we can be sure to use the "preferred" vendors!
  • "STG meeting cancelled" by "20yribmvet". Full excerpt: Now that those in the ivory tower have pillaged my retirement by $300,000, they are continuing their cost cutting by canceling the annual STGU in Las Vegas. Everyone's plane tickets have been expensed in December and that IBM will spend millions at this point to NOT have a meeting. Is the financial outlook of the company worse than they are letting on? There is no vision for this company. Watson is spinning in his grave...
  • "Little Mary Sunshine with a Brown Nose" by "Frank_Reality". Excerpt: I've NEVER seen the IBM executive ranks make any significant cuts to their benefits and compensation, while forcing non-executives to repeatedly suffer cut after cut after cut.
    • Ever hear of the concept of "leadership by example"?
    • Ever hear of the concept of "equality of sacrifice"?
    • Ever hear of the real "golden rule"? The golden rules the execs live by are two:
      1. He who has the gold makes the rules.
      2. He who makes the rules gets the gold.
    It's a vicious never-ending cycle of executive greed and arrogance at the expense of the employees and the customers of the company. BTW, I've done the math. Others have too. For some of us, it's a substantial cut in the future accrual and a very disruptive change which we have insufficient time to make adjustments.

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 Job Cuts Status & Comments page:
    • Comment 1/03/06: As per the entry below about IBM letting you go and then hearing about how they need your skills. I was let go also and even if offered a job back with them, starving and on the street I'd rather go take fork lift training and get a job doing that than ever ever ever go back to IBM no matter what they are offering. Now if the company that outsourced us in the first place (Manulife Financial) were to come calling then I would be there but sure as hell not for IBM!!
  • From the General Visitor's Comment page:
    • Comment 1/01/06: Have you heard about ZeroChaos, IBM's new vendor for hiring contract positions. Check out BlueDirect on IBM.com/employment. As IBM sells out more full-time workers they will continue to replace these jobs with contractors, some experts estimate the new IBM workforce will include 25% contractors. Why doesn't IBM just transfer these workers to IBM Supplemental or direct contract status vs. the current humiliation of classifying IBM workers as redundant and then firing them! Steve, Alliance Rep@Large for MA. -Steve-
    • Comment 1/01/06: What IBM really market's is what it does to it's own workforce. Comes up with immoral scams that cheat employees out of their pensions they may have worked decades for. IBM commits and sells mass age discrimination scams. IBM Endicott and the EIT deal is a good example of one of IBM pension ripoff scams as are IBM offshoring scams..internally and sold as a service by IBM. -Anonymous-
    • Comment 1/03/06: Let me see if I understand this "outsourcing to other countries".We take away jobs from Americans who make the money that can afford purchasing of the products and give it to other countries who pay their people a very small salary, who cannot purchase the product.They ship it back to America, who now are unemployed and can no longer afford to purchase things. Sure sounds like a plan to me. Hmmm!! I think I got it. -Anonymous-
  • From the Pension Comments page:
    • Comments 01/05/06: Pension plan is being phased out effective with 2008. Expect to see webcasts to give more information. Big long glowing letter today telling how wonderful it will be. Little chart at the end that I do not even understand. New name is 401(k) plus. I wonder if any of the execs are getting less stock options or other perks? Even the small pension was still better than nothing. -Anonymous-
    • Comments 01/06/06: Well now we know how IBM will react to losing the Cooper Lawsuit. At best we gain a few bucks due to reverting to old calculations but this kills any and all long term benefit. God bless those that brought the suit because at least now we all see IBM's hole cards. They will slash and burn to deny us our paltry 20 grand a year pensions and medical benefits , cheat the stockholders with paltry dividends, then shower executives with bonuses and stock options for taking away from us little guys. Come on fellow IBMers. Wise up and sign up. Live better, work union. -Anonymous-
    • Comments 01/06/06: Over 25 years with IBM and 50+ years old and they pull this on us. Now, I will admit I haven't seen details or taken this to anyone to figure out the effect but I am sure IBM is the one gaining and I, along with many others, will be on the losing end to this move. Everybody knows you make the biggest gains in your pension between years 25 and 30. Ironically, this is announced on the same day that my department was told that due to market pressures our whole group would need to work extensive OT for the unforeseen future. Keep taking away and asking for more in return and there won't be anyone left to work the extensive OT. What a slap in the face to the veterans of IBM!. -Anonymous-
    • Comments 01/06/06: I have almost 26 years invested in this company. This is the third time they are screwing us on this pension plan - 1995, 1999 and now 2006. With the pension being frozen as of YE2007, that most likely means the early retirement subsidy that is kicked in at 30 years will be lost. I've done my calculations on NetBenefits, and that bump is $495/month for me. You think that 7% adder to my 401k for 1 1/2 years would amount to a 495/month annuity? Not even close. Thanks, IBM. What are the executives sacrificing for the benefit of competitiveness? -Anonymous-
    • Comments 01/06/06: What Bush wanted to do with Social Security, IBM has effectively done to employee pensions. Now to even come close to even the cash balance pension rate of return you have to gamble your future retirement benefits with riskier investment choices in this "new 401(k) plan. IBM future retirement is now something you can't take to the bank but rather it has turned into a walk in a casino... -Anonymous-
    • Comments 01/06/06: I'm 51, almost 25 yrs service, my best years of pension earnings are ahead of me, yrs 28, 29, 30. This broken promise affects all of us that were hired on in early 80's. Is this not age discrimination?? Why did they pull the plug now, could they have done it so it would not affect all of us that are approaching our later years. What a BROKEN promise and a screwing we got working for this company all these years!!! -Anonymous-
    • Comments 01/06/06: There is a special place in hell reserved for the likes of J.R. MacDonald. Destroying the fabric and legacy of a once great company that prided itself in its Basic Beliefs. I guess the only belief that these mercenaries now hold is to wring as much money out of a dying company as they can before its inevitable failure. -Anonymous-
    • Comments 01/06/06: For many that were still under the old pension plan (me being one of those employees), that pension plan was the carrot that kept us from looking outside of IBM for opportunities. With this latest move to save money, (mark my words) IBM, over the next 5 years, will see a healthy level of voluntary attrition of experienced and skilled professionals (management included) since there really isn't much to stick around for any more. By their own admission they are only looking to run with the pack with regard to benefits and pay, and to that extent they have certainly succeeded - IBM is no better or no worse than others in the industry. It continues to boggle the mind that the company's idea of financial security is back-dooring the profit equation by continuing to hammer at employees and employee benefits. When is this company going to sell its way to better financial performance? There is something significantly lacking when we can't seem to move the mark on aggressively growing the revenue piece of the equation. There's a reason why the stock only hovers at $80 something a share. Very disappointing to say the least. -Anonymous-
    • Comments 01/06/06: IBM is now just a sweatshop. If management is so focused on the short term, I wonder if they will mind if I am too? -Anonymous-
    • Comments 01/06/06: Pensions are simply deferred pay. They are no surprise to managers, so it's entirely mendacious to claim otherwise ("cost pressures" and all that bull). Every department's headcount overhead certainly fully accounted for pension costs, you can be sure. This announcement is a pay cut, plain and simple. Pensions work because a large group (employees) collectively can spread market downturn risks much more effectively than individuals can. Corporations have that size and risk pool advantage, and, by sharing some of that advantage, they can attract and retain talented employees (who want predictable, stable, secure pension benefits -- not the "predictability" of contributing something, hoping for the best, and hoping they don't live "too long"). Now we have managers who haven't a clue that pensions were one of the few distinguishing workplace characteristics that allowed IBM to recruit and to keep talent -- the assurance that every IBMer with at least some service could retire in dignity instead of in cat food. Pensions took an IBM advantage (size) and turned it into a talent recruitment advantage -- a win-win. These changes will undoubtedly cause some of the most talented people -- the ones snapped up by Google, Microsoft, etc. -- to leave, further eroding IBM's revenue growth potential. IBM breaks its (deferred) salary promise and slides into corporate mediocrity. "We're just like HP, just like Dell, just like Sun." How sad. A union would do a better job securing IBM's long term growth than IBM's own managers. -Anonymous-
    • Comments 01/06/06: When I hired on in IBM in the late 1970's I was told part of my compensation was a pension. I was NOT told it was a kind gift from IBM. I was presented with a compensation PACKAGE that included pay, medical benefits, and a pension. The pension being a deferred form of COMPENSATION. It's mine. A promise made to be kept when I went to work for them. Now 27 years later I face one cut after another. In my opinion it equates to THEFT pure and simple. If I was going to stay and work for IBM I would join a union, but I don't want to work for IBM in any way shape or form. I have had it. I'm going to work my way down to zero as my work ethic has been destroyed. They can fire me and I'll collect unemployment and start my own business as I will NEVER work for a company ever again. I'll be my own boss. Drop dead IBM. -Anonymous-

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