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- BusinessWeek: The
Rush to Shut Down Pensions. By Nanette Byrnes.
Excerpts: What a difference a year makes. Back in December, 2004,
when IBM announced its intention to close its traditional pension
plan to new employees, offering them the 401(k) plan instead, the company
made it clear it did not wish to become a poster child for the broader
demise of these old-fashioned retirement plans. Pensions already had
been a painful public-relations black eye for Big Blue, which had been
battling employees for years over changes made to the pension in the
1990s. More bad press was not what anyone wanted.
But on Jan. 5, IBM thrust itself back into the
headlines with its decision to go one step beyond its earlier move
close" those old plans. That means not only new IBMers, but people
who have been there for decades, would no longer be accruing guaranteed
benefits. Instead, they would be part of a more generous 401(k),
though any pension dollars already earned would still be theirs as
Employee activists are outraged. "It's difficult
to understand how they're doing this in the context of wanting to
be a world-class employer. You see companies of this stature, Verizon,
IBM, seemingly in concert, in a race to the bottom for the defined-benefit
system," says John Hotz, deputy director of the Pension Rights Center,
a Washington consumer organization focused on retirement rights. "No
matter what IBM wants to call it, it's a cut in employee compensation,
and it's the sneakiest kind of pay cut, one employees won't realize
the full impact of until they reach their retirement years." [...]
It's not just groups like the Pension Rights Center
that rue the changes in the pension universe. Matt Scanlan of Barclays
Global Investors notes that so-called defined-contribution plans like
401(k)s tend to underperform traditional defined-benefit plans by 2% to
4% a year. That could result in a difference of hundreds of thousands
of dollars to an employee over 30 years. "What companies like IBM
and their colleagues are doing is requiring their employees to be their
own chief investment officers, and our research shows that's not necessarily
a good thing," says Scanlan.
- Wall Street Journal: Tracking
the Numbers. Forecast: More Pension Freezes. By Ellen E. Schultz,
Charles Forelle and Theo Francis. Excerpts: Look for more companies to cut back on pension benefits as an unusual
alignment of financial conditions makes such moves more lucrative than usual. [...] Current interest rates offer
employers the possibility of a particularly big income boost if they freeze their pensions, effectively wiping
out part of a debt owed to future retirees. While assets in a plan still will be paid out when workers retire or
leave the company, benefits don't grow with additional years on the job.
There is no legal barrier to freezing a pension unless it is prohibited by a union contract.
Verizon, for example, unilaterally froze the pensions of its managers, but changes to pensions for its union
employees are subject to negotiations. [...]
When a company freezes its pension -- halting the buildup of additional benefits for employees
-- it is no longer obligated to make some of the payments it had planned. That allows the company to reduce the
value of the liability it was carrying on its books, which generates accounting gains that are counted as income.
Although this "income" isn't money that can be spent, it can affect the stock price and often management's
pay incentives. [...]
Short-term rates, which contrary to long-term rates have been trending higher in recent months,
offer the potential for even bigger gains to companies with so-called "cash-balance" plans, such as IBM,
Verizon, H-P, Sears and many other big companies. Under these plans, workers have hypothetical "accounts" to
which the employer credits interest each year, often tied to short-term rates. Higher short-term rates means higher
interest credits. That, too, raises the pension obligation, and in turn, the savings from reducing the obligation.
Thus, by freezing their U.S. plans at a time when both long- and short-term interest rates
are creating bigger liabilities, many companies stand to reap a bigger benefit by reducing their obligation.
The companies can lock in the savings today, even if, like IBM, the benefits won't stop growing for two more
IBM wouldn't break out the specific effects of freezing the U.S. pension, but says they account
for about a third of its expected savings from pension changes. Nor would it identify how much its projected
savings are offset by the estimated cost of increasing 401(k) contributions, which the company announced last
week as well. IBM officials said the company began examining a pension freeze in earnest sometime early in 2005,
and that the current interest-rate environment didn't play a role in the decision. (If link is broken, view Adobe
Acrobat version [PDF--24KB]
- iSeries News: IBM
Freezes Pension Plan Contributions. Excerpt: "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," said Lee Conrad, National Coordinator of the Alliance@IBM,
in a statement about the change. "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
- Binghamton (NY) Press & Sun-Bulletin: Workers'
reactions mixed on IBM's pension change. Some feel
betrayed, union organizer says. By My-Ly Nguyen. Excerpts: Many longtime IBM-Endicott workers are scrambling to
ensure they have enough money for retirement while sorting through feelings of betrayal toward an employer that
they say has broken its pension promises, a union organizer in Endicott said. "A lot of the senior employees
are very angry," said Lee Conrad, national coordinator of the Alliance@IBM, CWA Local 1701, in Endicott. "They
were promised these pension plans throughout their careers, through the good times and the bad times at IBM. Now
that they get to the end of their careers, they feel that the rug has been pulled out from under them." [...]
Conrad also cited increasing out-of-pocket expenses, such as utility bills and health care
costs, that will decrease the amount workers will have to allot to 401(k) investments. "Let's not forget that
IBM is a profitable company," Conrad said. "They have $48 billion in the pension fund. They made (nearly)
$9 billion in profit in 2004. This is not a company that needs to do this. Maybe the executives should start feeling
the pain that they're trying to pass off onto the employees. Maybe their retirement and perks should be cut."
- Open Source, A public radio show with Christopher
on Losing Pensions. Excerpts: We were looking for comments
by IBM employees after the pension announcement, and we found a message
board on Alliance@IBM, the website of the national IBM employee
union. Here are a few anonymous posts at that board... [...]
- biteme2b Says: January 9th, 2006 at 5:36 pm
26+ yrs with IBM, 14 hr days, missed and delayed vacations and less
than 4 yrs from full retirement. Judging by the web site it wasn’t worth
it. Before taking into account the approx. $14-16K I will get in additional
401K money, I will be short about 32.4% a month from what my planned pension
verses what it will now be. These are based upon IBM figures - not something
I cooked up from the air. An annuity purchased by me to make up the difference
- that 32.4% - assuming I retire at 30 years, would cost me about $325K….not
exactly pocket change. I’m caught in one of those anomalies where
I turn 55 after 30 years, so I am too late for early retirement calculations
before 12/31/2007, which would have made some difference… oh well….
I think I’ll leave soon after 12/31/2007, move myself and my assets
out of the US of A and leave the G. Bushies to enjoy their Corporate buddies
on the golf course as well as my citizenship and of course any taxes oweable
to the IRS. Living in Switzerland or Panama gets more intriguing all the
- lowcarb Says: January 9th, 2006 at 6:02 pm. 26
1/2 years with IBM. I’ll have 28 1/2 years when the deep freeze
hits. Even that close to a 30 year retirement date I’ll see my 30
year pension slashed by over 12%. Getting an extra 7% of my pay put
in a 401K for 18 months won’t be a spit in the ocean compared to
the thousands that are being stolen from me over the rest of my life.
If Social Security were cut by 12% everyone in
Washington would get replaced in the next election.. If the value of all
incomes fell 12% there would be riots. If the value of all investments
fell 12% the economy would crater.
But IBM executives decide to steal 12% from employee
pensions, while leaving themselves on a special fat cat executive only
pension plan, and it is just business as usual. They will get a bonus
for the savings they stole. They will get more stock options. IBM will
spend Billions on stock buy backs to insure that those options grow in
value. And employees try to deal without raises, with increased medical
premiums, with no healthcare in retirement and with cuts in their pensions.
When I joined IBM and nearly every year during
the first 20 years of my employment here I was told not to focus on
my salary alone. I needed to look at the value of the entire basket
of benefits I got in addition to my salary. A few years ago they stopped
stressing this during salary reviews.
Now when I look in the basket I see that a lot
of the things I counted on are no longer there. I counted on the value
of these benefits when I made my decision to work for IBM and as I continued
to ratify that decision by staring at IBM. Now, in the 11th hour of
my career IBM is raiding the basket and stealing the value out of it.
Value I will never be able to replace.
This isn’t the first time IBM has raided
the pension fund and it won’t be the last time they try to unless
what they are doing is made illegal. The fact that it is immoral is
something only T.J. Watson could have cared about. Lou Gerstner, Sam
Palmisano and their kind don’t even know who he was.
- kathicooper Says: January 9th, 2006 at 6:06 pm. My name
is Kathi Cooper of Cooper v. IBM. I sued IBM in 1999 for the changes
they made to their pension plans in 1995 and 1999. When IBM made
their pension changes back in the 90’s, the vapor profit generated
by that change boosted their EPS by billions of dollars. Now, in
2006, IBM announces they are freezing the same pension plan so they can
rape us even more and gain even more billions. I wouldn’t be surprised
if, in the near future, IBM terminates their pension plan to finish
the job off. Over one quarter of a million employees have been hurt by
a company that is VERY well to do. Griping about what IBM has done to
you will not change the outcome. Your pension is your rightful and legal
deferred compensation. Of course, IBM would say that they are only freezing
what you have already earned and there are no take-a-ways. But there are
take-a-ways! Thousands upon thousands of us are in the twilight of our
careers when our pension is just ramping up, as defined in law by ERISA,
and that ramp has just been removed. Take charge of this! Write congress.
Write opinions to your newspaper. Join The Alliance @ IBM. Attend with
IBM Annual Meeting in April. What IBM has done to us is horrifying. It
is wrong to do this to people.
- Yahoo! message board post
by "sby_willie". Full excerpt: I received a reply from IBM Pension
in Armonk that should be of some interest. Regarding will IBM executive retirement benefits and executive pension
plans like the SERP and LTIP (Long Term Incentive Plan) will be changed similar to the change and freeze to the
employee pension plans. I'll quote from the note I received:
"Thank you for your inquiry regarding IBM executive retirement benefits and executive pension plans and
the new 401(k) plus Plan. Future benefits will stop, just as they do for the employee plan. The SERP (Supplemental
Executive Retirement Plan) will also stop effective Dec. 31, 2007. IBM will establish a non-qualified excess
plan to ensure highly paid employees are still able to receive their fullest benefit. Information on this plan
will be available as the time gets closer. I hope that this information will be helpful..."
- New York Times: More
Companies Ending Promises for Retirement. By Mary Williams Walsh. Excerpts: Now, with the recent
announcements of pension freezes by some of the cream of corporate
America - Verizon, Lockheed Martin, Motorola and, just last week, I.B.M.
- the bell is tolling even louder. Even strong, stable companies with
the means to operate a pension plan are facing longer worker life spans,
looming regulatory and accounting changes and, most important, heightened
global competition. Some are deciding they either cannot, or will not,
keep making the decades-long promises that a pension plan involves.
I.B.M. was once a standard-bearer for corporate
America's compact with its workers, paying for medical expenses,
country clubs and lavish Christmas parties for the children. It also
rewarded long-serving employees with a guaranteed monthly stipend
from retirement until death. Most of those perks have long since
been scaled back at I.B.M. and elsewhere, but the pension freeze
is the latest sign that today's workers are, to a much greater extent,
on their own. Companies now emphasize 401(k) plans, which leave workers
responsible for ensuring that they have adequate funds for retirement
and expose them to the vagaries of the financial markets. [...]
Pension advocates said they were dismayed that
rich and powerful companies like I.B.M. and Verizon would abandon
traditional pensions. "With Verizon, we're talking about a company
at the top of its game," said Karen Friedman, director of policy
studies for the Pension Rights Center, an advocacy group in Washington. "They
have a huge profit. Their C.E.O. has given himself a huge compensation
package. And then they're saying, 'In order to compete, sorry, we
have to freeze the pensions.' If companies freeze the pensions, what
are employees left with?" [...]
Even skillful 401(k) investors can be badly tripped
up if the markets tumble just at the time they were planning to retire.
Mr. Schieber of Watson Wyatt ran scenarios of what would happen to a hypothetical
man who went to work at 25, put 6 percent of his pay into a 401(k) account
every year for 40 years, retired at 65, then withdrew his account balance
and used it to buy an annuity, a financial product that, like a pension,
pays a lifelong monthly stipend. He found that if the man turned 65 in
2000 he would have enough 401(k) savings to buy an annuity that paid 134
percent of his pre-retirement income. But if he turned 65 in 2003, his
401(k) savings would only buy an annuity rich enough to replace 57 percent
of his pre-retirement income.
When a company switches from a pension plan to
a 401(k) plan, the transition is hardest on the older workers. That is
because they lose their final years in the pension plan - often the years
when they would have built up the biggest part of their benefit. They
then start from zero in the new retirement plan.
jack VanDehei, an actuary who is a fellow at
the Employee Benefit Research Institute, offered a hypothetical example.
If a man joins a firm at 40, works 15 years, and is making $80,000 a year
by age 55, he might expect to have built up a pension worth $16,305
a year by that time, Mr. VanDerhei said. If he keeps on working under
the same pension plan, that benefit will have increased to $27,175 a year
when he retires at 65.
But if instead when the man turns 55 his company
freezes the pension plan and sets up a 401(k) plan, the man will get just
the $16,305 a year, plus whatever he is able to amass in the 401(k). It
will take both discipline and investment skill to reach the equivalent
of the old pension payments in just ten years, Mr. VanDerhei said.
For women, the challenge is even tougher. They
have longer life expectancies, so they have to pay more than men if they
buy annuities in the open market. It turns out the traditional, pooled
pension offered them a perk they did not even know they had.
- Monthly Review: US
Pensions: Capitalist Disaster. By
Rick Wolff. Excerpts: Private corporations initially established pensions
to enhance profits. They aimed to reduce the costs of employee turnover
by offering pensions to workers who stayed until retirement. In bargaining
with unions, many corporations offered workers less in wage increases
and more in pension "improvements." After all, pensions not
only reduced labor turnover costs immediately, but they would only
cost the corporations later when workers retired. Unions often accepted
labor contracts with less wage gains in exchange for pensions promising
security for retirement years. Of course, once pensions were established,
corporations sought to shift their costs to workers. Pensions arose
in and because of the endless struggle among employers and workers
over wages and profits. Pension benefits altered over the years as
that struggle continued under changed conditions. And, today, the same
struggle confronts workers with the prospect of employers ending pensions
It should come as no surprise that ERISA was full
of carefully crafted loopholes that allowed more, not less, corporate
underfunding of pensions -- nicely documented in Roger Lowenstein's "The
End of Pensions" in the New York Times (30 October 2005). So, today,
corporations have underfunded their pensions by hundreds of billions.
Therefore, their workers will suffer reduced support in their retirement
or else Washington will have to shift billions to the PBGC so it can pay
pensions for the corporations. If such billions are taken from other programs,
workers will likely suffer reduced social services. If such billions come
from higher taxes, we need to remember who will actually pay most of such
extra taxes. The fact is that US corporations have steadily shifted most
of their federal tax burdens onto US households, and that wealthy households
have likewise shifted much of their federal income tax burden onto middle
and lower income households.
Since the Bush regime leaders (and their Democratic
counterparts) refuse to demand pension reparations from corporations,
the private-sector pension disaster presents this choice: (1) cut pension
benefits and thereby condemn private-sector retirees to financial difficulty,
poverty, or becoming burdens on their families after a lifetime of labor;
or (2) give the vast majority of already stressed households reduced federal
programs and/or new tax bills. The corporations win either way; and the
working class loses either way. Sound familiar?
The neo-liberal age we are declining through displays
many new policies, programs, and laws pursued without regard to their
future social burdens. These include, alongside the pension disasters,
transforming the US from the world's major creditor into its major debtor,
despoiling the environment, working families taking on historically unprecedented
levels of personal debt, increasing the US trade deficit, and cutting
public services. Promoted as "components of an ownership society" or "efficiency-driven" or "required
to compete in the world economy," what these policies and programs
share is the short-run boost they provide to corporate profits and political
careers. The watchword of this age seems to be "grab it all now;
who knows or cares what deluge may follow."
- Yahoo! pension board post
by Janet Krueger. Full excerpt: Btw, another change in the HR 2830 (pending
legislation in the U.S. House of Representatives) that could have very negative consequences is a change in the
interest rate requirements for lump sum distributions... Right now, ERISA requires lump sum distribution calculations
to be done using the 30-year treasury rate. The house bill gives companies the option of using a shorter term interest
rate which tends to be higher, creating a much lower lump sum amount. SO, when companies offer someone a lump sum
instead of an annuity, in addition to eliminating the early retirement subsidy, they can a calculation to give
even less money.
Also, there is a long section allowing the administrators of multi-employer plans that are
underfunded to completely eliminate early retirement subsidies from their calculations... These plans will be
able to eliminate subsidies without going through the work of a cash balance conversion! It is not inconceivable that
the conference committee could allow this change in all plans, rather than restricting it to underfunded multi-employer
From what I hear, the conference committee to merge the house and senate bills will be appointed
in late January and early February... I can only imagine how egregious the final bill might be... PLEASE tell
congress you care about pension laws and do not want ERISA weakened. They need to use the provisions in the senate
bill, NOT the provisions in the house bill or the even worse provisions corporate lobbyists are asking for...
- Yahoo! finance board post by "samneedsnewglasses".
Full excerpt: The comments have been interesting. I nearly have 27
years of service with IBM. The recent news was neutral for many, good
for many and not so good for those of us that wanted to get out at
30 years of service, although new communication from IBM indicates
that it won't be as bad as estimator tools produce.
I do find it interesting that their is such a
lack of sensitivity to employees who get the short end of the stick. People
need to put this pension issue in proper context. No doubt that new employees
at nearly all companies do not have pensions. But understand that within
IBM, we were reminded year after year about IBM's total compensation policy.
Managers looked at us eye to eye and justified why we were paid lower
than industry averages because of our total compensation package. Total
compensation means factor in vacation, medical, salary and yes, PENSION.
So to come to us in the 9th inning of our careers and dramatically reduce
the number when the pension was used as a justification of lower pay early
in our careers is I think, a valid reason for some bitterness on our part.
And comparisons to airline industries or Enron or whoever else are simply
not valid. IBM is healthy financially and should live up to past promises.
There's also some assumption that those of us
in this age group are dinosaurs and don't work hard. To the contrary,
I average 60 hours of work every week, have not taken more than three
consecutive days off in five years, work on that random day when I claim
a vacation day. And my work ethic is very typical of those in this demographic
What is bothersome is that many of us in this
group had several opportunities to leave when IBM nearly looked like we
were going bankrupt, but most of us love this company and wanted to contribute
to the turnaround and made a conscious decision to stay because we are
loyal. The issue today is that it appears that loyalty is not a two way
street and the sad fact is that IBM is no different than any other company
- Employee Benefit News: Benefit
math: With DB, 1+1=3.
By Tom Terry. Excerpts: Here's a brute fact. The DB plans of larger
enterprises outperform DC plans by 125 basis points. On a dollar in/dollar
out basis, retirees in DB plans simply get more. How about another
fact? It's no accident that many of the "100 best companies to
work for" are some of the most successful companies in the country.
And where knowledge work is becoming more important than bricks and
mortar, employee attitude and identification with the mission of the
enterprise becomes a bigger and bigger factor in success-in making
1 + 1 = 3.
Furthermore, employee benefit programs are probably
the most significant place where a company can define its culture. Through
benefits, we identify common interests and mutual obligations that make
it this company and not some other. And while transparency can permit
a company to identify and think hard about what kinds of tradeoffs between
members it wants to make, reducing everything to a simple account for
each employee will severely limit its ability to define itself.
Which is at least partly why, for instance, American
Airlines, probably the most successful of the legacy airlines, remains
committed to its traditional DB plan. Why, all over the country, there
are enterprises that are doing the same.
Some companies are successful operating in a "what
have you done for me today" culture where, at the extreme, short-term,
cash-is-king thinking and employee churn are valued. But others depend
on long-term employee commitment. These are companies where training and
experience today pay huge dividends tomorrow. For them, pensions will
remain a critical element of company strategy.
message board post by "ibmmike2006". Excerpts:
Corporations have spent a lot of money to get the "Corporate Congressmen" established
to get to that huge pot, the pensions, and they are usually Republican
but there are some "long in the tooth" Democrats also who are "Corporate
Congressmen". It is takes a while to figure out who is "for
the people" and who is "for the Corporations". We know
that Bush is a "Corporate President", I can name a few Congressmen,
like Grassly and Hatch who are "Corporate Senators" but when
it comes to the "People Senators", I am hard pressed to name
one. The only one that comes to mind is Paul Wellstone but unfortunately
he died. [...]
The pensions have been under attack since the
late 80's and this is just another in the series of Corporations broken
promises. I bet ol' Randy McDonald, the "Bald headed Monk of Armonk",
can't wait to cash in his other stock options. As with Sam, looking forward
to his $8 million a year retirement for life. Remember, the law prevents
Sam from taking more than $165,000 a year from the Qualified Defined Benefit
Pension Plan, with the difference coming from the NON- qualified Defined
Benefit Pension Plan known as the Supplemental Executive Retirement Plan
(SERP) that will come from the General fund of IBM. If you were an IBM
executive, knowing that in Sam's case, only $165,000 out of $8,000,000
is going to pay his pension, what kind of incentive does Sam have to keep
putting $4 Billion annually to fund, those peon, lazy, hanger oners who
built the company when he was still in diapers? Why not take the $48 Billion
and set it aside to boost profits?
Now with $48 Billion sitting there in the IBM
DB fund, and IBM being able to reduce the amounts they have to pay retirees
or increase the cost of medical and that means with reduced DB expense,
the surplus in the trust will be funneled to the General Fund, and 'ol
Sam and Randy will be OK and be able to get their $8,000,000 a year for
When Gerstner established the SERP for all the
IBM executives removing them from the same pool of funds of every other
IBM employee received their pension from, the stage was set. That was
in 1994 I think.
But, doesn't mean you can't fight back, once
you figure it out but it takes more than sitting in a chair and looking
at a computer screen. It takes courage of the likes of Janet Krueger and
Kathi Cooper and an organization. I like the IBM Alliance because they
are organized, not grass roots because they are affiliated with a national
organization and if they have leadership with a wide range of ages. Other
grass roots organizations usually fade away when the leadership dies or
gets sick but the Unions seem to have a better chance of making things
happen. I think we have to put aside the bad press the "Corporations
and Corporate Congressmen" have laid upon those Unions. Corporate
Greed is driving this latest IBM Pension heist. It will not stop until
they "have it all".
- Wall Street Journal video: IBM's
head of human resources J. Randall Macdonald comments on the company
move from a pension plan to a 401k plan.
comments. Full excerpt: I watched the "Bald
Headed Monk from Armonk" and he has responded to 1,000 emails
or was it employees in a single day? Wow, what a Super man. I also
noticed his stuttering and his fluttering eye contact. You can tell
when Randy is lying, his eyes flutter.
- The Register (United Kingdom): IBM
shatters the American dream. Golden Pond drained. Excerpt: IBM, the bastion of capitalist
surety, has downgraded its employee pension plan again. The last Big
Blue pension retreat applied only to new employees and employees below
a certain age, as though recognizing that though society is in a state
of flux, only the younger generation need get used to the idea of an
uncertain future. Click Here Many existing IBM employees kept their
fixed guarantee of a nest egg when they retired - until now, that is.
[...] Even those blue fools who spent decades expectantly slogging
themselves half to death in the pay of the man have to swallow the new
terms. This means that if the pensions funds get caught with all their
eggs in one basket by another red herring boom, their wards can help
them carry the loss.
- World Socialist Web Site: New
US pension rules to cut benefits for millions of retirees. By Shannon
Jones. Excerpts: The Bush administration is preparing to end a moratorium
on the implementation of so-called cash balance pensions plans. New
pension rules proposed by the US Treasury Department could result in
substantial benefit reductions for millions of future retirees, with
companies phasing out traditional plans. The rule changes meet a major
demand of US corporations, which have made lifting the moratorium one
of their top priorities. A spokesman for the Pension Rights Center
said he expected a rash of protests from workers as a result of the
changes, which threaten the already precarious retirement security
of millions of American families.
- The Register: 300
Scottish jobs to go at ex-IBM plant.
By Tim Richardson. Excerpt: Sanmina took over the Greenock plant from
IBM three years ago as part of an outsourcing deal with the computer
giant. At the time 650 IBM employees transferred to Sanmina but over
the last three years staff numbers have dwindled
- US News and World Report: Birthday
Bash! Boomers are
about to find out whether their 401(k)'s are such a sweet deal. By
Paul J. Lim. Excerpts: His idea, of course, turned out to be the 401(k),
the first of which was established at Benna's own firm on Jan. 1, 1981.
A quarter century later, these employer-sponsored retirement accounts
have become as ubiquitous in the workplace as E-mail and corporate
downsizing. Yet it may take another 25 years before 401(k)'s can be
deemed a success or a failure. This may sound silly, since around 43
million workers have already stuffed more than $2 trillion into these
But older baby boomers, the first generation to
have climbed the corporate ladder in the 401(k) era, are just now
turning 60. This means that boomers have only begun the long and
anxious transition from work life to retirement. And since many boomers
are expected to live well into their 80s, it's too early to say whether
401(k)'s have encouraged a sufficient level of saving to fund a full--and
The average 50-something has less than $130,000
saved up in his or her account. Workers 60 and older aren't doing much
better: They have only slightly more than $136,000 in their 401(k)'s,
on average. That's barely enough to generate $6,000 to $7,000 a year of
income during retirement, assuming they withdraw no more than 5 percent
of their account each year. What's more, these are just averages, which
can be skewed by wealthier workers with large balances. The median 401(k)
balance for those 65 and over is only about $53,400, according to the
Vanguard Group. "It's pretty scary," says Mark Kenison, president
of Kenison Financial Services, a planning firm near Charlotte, N.C. "If
it were me, and I only had $50,000 in my 401(k), I'd be terrified."
- Yahoo! message board post: Medical
coverage costs for retirees. By "madinpok". Excerpts:
The following are the FHA (Future Health Account) monthly rates for
employee only and employee+spouse:
Retiree plus Spouse
|IBM EPO - Aetna
|IBM PPO/HSA - Aetna
|IBM High Ded. PPO - Aetna
|IBM Med Ded. PPO - Aetna
|IBM Low Ded PPO - Aetna
Note that it is probably cheaper to get COBRA
rates for 18 months after retirement and then switch to FHA. You will
have to pay the COBRA rates out of your own pocket rather than the FHA
account. But you will probably have to pay out of your own pocket eventually
anyway, so you may want to take advantage of the lower COBRA price while
you can get it. The risk is that in the meantime, IBM might eliminate
the FHA completely and you'd lose out on that money.
finance board post by "ibmaccountant". Full excerpt:
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
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.
finance board post by "ibmaccountant".
Excerpts: The employees who trusted this management team and did not
spend the time to use their IBM employment as a training ground to spring
elsewhere are the ones paying the price. Every IBM employee who distrusted
management and used IBM instead of IBM using them is doing well and prospering,
even beyond age 45.
Anyone who works over 6 hours a day toiling for
this management and doesn't think about one's self first needs to change
ASAP or they'll wind up in the dustbin. Every time a manager asks you
to do something, think about what's in it for you? What can YOU not IBM
get out of it and what can you take, rather than doing "one for the
team" or the "good of the company". Seek assignments and
opportunities good for you, not good for the company.
message board post by "bits_bytes_and_bugs".
Excerpts: You aren't the only one and no, it's not you. Probably 40%
in IGS have had stagnant pay over the last few years due to the moving
of the skew for PBC ratings, the miserly salary plans, the tightly limited
number of promotions and the lack of any significant variable pay. Net,
achievement is not rewarded. What a (f**ked-up) company! If you really
want to get upset, factor in the increased medical coverage premiums
and disability premiums you paid. You're probably making LESS now than
you did then.
I WAS planning to stay until I had 30 years of
service and perhaps a bit longer if I wanted, but with the stagnant pay,
no opportunity for promotion, a series of low-ball PBC ratings due to
biased management, and lack of recognition/appreciation of my business
results, I'm planning to leave shortly after I turn 55. Life's too short
to stick with a bum deal. I'm working on preparing for my next career
in an field of large expected future demand (no I won't tell you the field,
so don't ask).
- Yahoo! message board post: "From
an IBM employee" by
"hootswithowls". Full excerpt: Here's what's really going on in IBM.
IBM is bloated, very top heavy with so many damn managers and people
pushing papers, there's nobody left to innovate. For example, I don't
report to a manager but rather I report to about 6 managers right now,
all of which push paperwork and drone on the business processes which
involve code counting (bean counting) and ticky mark check-offs in a
development process that's incredibly expensive and is total overkill.
We have hired a whole bunch of project managers just to manage the damn
development process, which makes IRS tax forms look like child's play.
It's a huge waste of money, and we have a huge number of project management
types spinning wheels just to manage it. And the result of all of this
is a tiny web site that we produce. It takes an act of God to make a
tiny little change to the web site. It's completely idiotic and ridiculous,
and all of these POS middle managers who developed this process are protecting
themselves and each other. IBM has so damn many middle managers making
$200K and not doing a damn thing, it's f-ing pathetic.
- "used2work4ibm" comments. Full excerpt: I worked for IBM and was
laid off on June 30th. Ironically none of the aforementioned project
managers were let go. Just functional employees - those actually
doing real work. My job was viewed, incorrectly, as easily farmed
off to India or China. However I support a free market economy and
if they really can save money sending my job offshore, then power
to them. I have moved on. But I still own IBM stock and when I read
this message I had to toss in my 2-cents worth. IBM has become infatuated
with processes. It's all about process and not results.
They pump mediocre employees thought their PM
training and then sanctify them as if they could now walk on water.
They are completely fat in middle management. Why? It’s billable.
Results have an end point and cease to be billable. But processes go
on and on and on. Simple changes take incredible amounts of paperwork.
And every one had to have the same paperwork. Almost all of it completely
useless except to the PM’s that thrived on it, because it justifies
their job, their very existence on the contract. They perpetuated each
other. It truly was unbelievable to watch. It was like cancer.
Even our client referred to the PM’s as ‘email
forwarders’. Even they saw the waste. Over the long run, when
their clients believe they are killing more trees than fixing production
problems, they will not renew and may even cancel existing contracts
with IBM. And that will ultimately have an impact on this stock price.
- EE Times: Think
tank, House eye H-1B abuses. By Debra
Schiff. Excerpts: Embarrassingly low wages are just the tip of the
iceberg when it comes to employer abuse of the H-1B temporary-visa
program, new legislation and other data have revealed. Discrimination
on the basis of immigration status, the loss of "at will" employment
rights, the use of "body shops" and outright fraud have also
surfaced, resulting in at least one class-action lawsuit.
Legislation now before the U.S. House of Representatives
targets a range of abuses, from fraud to discrimination on the basis
of immigration status. Still, the hot-button issue of wage discrepancies
between visiting workers and their American counterparts remains
at its heart. As if to underscore the point, on the heels of the
bill's introduction in mid-November, the Center for Immigration Studies
(CIS) released a controversial report that measures a $13,000 difference
between what employers typically pay American employees vs. visiting
Shah's experience is that the wage estimates in
the CIS report err on the conservative side. "I am an Indian American
with a lot of family members who have been brought to America on
H-1B visas," she said. "The salary discrepancies they experienced
compared to the prevailing American labor market were far in excess
of $13,000 — closer to about $50,000. In some cases it was even
more than that."
For employers who abuse the program, it isn't
strictly about salaries — it's about exercising ultimate control
over their work force. "The H-1B visa defeats at-will employment," said
Shah. If an American finds a higher-paying job, he or she can pursue
the opportunity. But an H-1B visa worker is tied to the company that
sponsored the visa, with no legal recourse. The employer controls
the worker until the end of the visa's term. "The salaries are just
one aspect of it," Shah said. "The idea of an indentured work
force is the primary benefit." [...]
John Miano, author of "The Bottom of the
Pay Scale, Wages for H-1B Computer Programmers" report from CIS,
an immigration think tank, said the program is generally discussed at
a very superficial level — the focus is on the need for "the
world's best and brightest to come to the United States," he said.
But according to Miano and Shah, a closer look at who is actually coming
in on this program suggests that it's not the world's best and brightest.
The report lists consultancies, known as body shops, that hire thousands
of H-1B workers to perform IT or back-office tasks for U.S. companies
on a contract basis, said IEEE-USA's Hira. Though paid by the body shop,
the visa holders work on a daily basis in the contracting company's facilities.
Furthermore, to depress the prevailing wage even further, the body shops
do not employ American workers at all. These consultancies protest lowering
the cap on the H-1B law as a hindrance to trade, said Hira.
- BusinessWeek: The
Benefits Trap (July, 2004). Old-line companies have pledged a trillion dollars
to retirees. Now they're struggling to compete with new rivals, and many can't pay the bill. Excerpts: UAL workers
are about to find out what other airline employees already know: The cost of broken retirement promises can be
steep. Captain Tim Baker, a 19-year veteran of US Airways Inc. (UAIR ), was one of several union representatives
sorting through that airline's complicated bankruptcy negotiations in March, 2003. Of the airline's many crises,
the biggest was the pilots' pension plan, a sinkhole of unfunded liabilities. Baker reluctantly agreed to back
US Airways' proposal to dump the pension plan on the Pension Benefit Guaranty Corp. (PBGC), the government agency
that is the insurer of last resort for hopelessly broken plans. It's a move that practically guarantees that retirees
will receive less than they were promised, in some cases less than 50 cents on the dollar. [...]
Company-sponsored health care, which generally covers retirees not yet eligible for Medicare
and supplements what Medicare will pay, is likely to disappear even faster than company pensions. Subject to fewer
federal regulations, those benefits are easier to rescind and companies are fast doing so. It's much harder to renege
on pension promises. So instead, many profitable companies are simply freezing plans and denying the benefits to new
finance board post by "exgis1". Excerpts: The company is full of managers (above level 10s)
that are driven by a desperate need to get their annual bonuses. They will do and/or say anything to get these
bonuses, as a result, many have hidden agendas that make no sense. [...]
I once worked at a site where IBM was providing IT services to a large pharmacy. The second
last IBM principle exec at the site was a former department store (that went bankrupt) IT manager who had also been
divorced six times. This individual told outright lies to the IBM troops, many of them gullible weaklings, such as
the idiots who had graduated from MIS programs only three years before, yet managed to become second line managers.
- PBS News Hour with Jim Lehrer: Changes
to Pension Plans. IBM, long a leader in can finding the relationship between
companies and employees in American corporate life last week became part of a new trend, ending its traditional
pension plan. The company announced it will freeze its current plan as of January 2008. Pension benefits accrued
before then will not be lost, so current retirees will not be affected. [...]
That left many longtime workers like Charlie Mitchel scrambling to make ends meet. NewsHour
correspondent Tom Bearden spoke to him last October. [...] They took away approximately 25 percent of the pensions,
plus you lost your health care benefits that now we have to pay for. And that is a chunk of money that you were
planning on for your retirement years. I mean back to work now, have to work probably until I'm 65 now. You know,
and I was hoping that I would be able to just piece things together. Yeah, I'm bitter. [...]
KAREN FRIEDMAN: Well, it's certainly a dangerous precedent. Here you have two profitable companies
that are announcing that they are freezing pensions; and we've heard over the last two weeks since Verizon first
froze its plan from hundreds of workers who are saying things to us like this is a devastating situation. We
feel like we've been kicked in the stomach. We feel like it is a death in the family -- because these workers
had an expectation and they feel that expectation is broken. They feel betrayed by the company.
Here are people who worked years and years for these companies with the expectations of getting
a full pension based on all the years of work, and based on final pay, and suddenly the company is pulling the
rug out from under them. They are getting much, for older workers in particular, they are going to end up with
thousands and thousands of dollars less than they expected. And they say to us, what are we supposed to do --
this is really unfair. [...]
KAREN FRIEDMAN: From the point of view of employees, they look at this as just an out and
out betrayal, especially IBM employees. IBM last year froze its plan for new workers. And they said at the time,
you know, we're committed to our defined benefits system; we're committed to our defined benefit plan. And now workers
are calling us and saying, you know, the company isn't keeping its promises to us.
JEFFREY BROWN: Do you think that the workers really think of this as a promise from the time
they were hired until they retire?
KAREN FRIEDMAN: We are getting letters from management employees. We just got a letter recently
from a single mom who said to us that when she took the job, Verizon said you are not just getting wages from us,
are you also getting a pension. And there is an expectation that as long as they meet their end of the bargain, they
do their work, their loyal to the company the company is healthy, that the company is going to meet their end of the
What's different about IBM and different about Verizon is these are leaders in their industries.
These companies can well afford their pension plans. And workers really do feel like they are going to end up
with much, much less. In fact, what is -- Jim is right. People are going to get exactly what they earned as of
the date of the freeze. But workers are going to end up losing thousands and thousands of dollars of expected
benefits if the plan had continued. And that's what people have stayed with the companies for. So you know, they're
feeling like, especially with Verizon and IBM, these have been companies that should be leading the way to the
top, not leading the race to the bottom. [...]
KAREN FRIEDMAN: Well, let me respond to that in two different ways. First I want to go back
to the whole situation of IBM. IBM is saying that we're freezing the plan but we're putting in this very generous
401(k) plan for our employees. But I was just reading in the New York Times today, by an economist,
there is no way that that new 401(k) plan is going to meet -- make up for the expected losses that thousands
and thousands of older employees of that company are going to be faced with.
- Yahoo! finance board post: "An
Observation" by "eddyshimmy". Excerpts: Given that IBM can afford
to buy back up to $5 Billion (with a B) of their stock.... it seems this money could have been used to exit the
pension structures they have created over a longer time period and avoid the significant screwing that they will
be giving to a significant number (albeit a minority) of the employees.
If they will screw the 5% (a guess) of their folks who are 45 to 52... then they will screw
others in the future as well. They could simply have closed their retirement plans to new participants, reduced
the 401K contribution to save money on those who opt to stay in their existing plan (or raise the 401K for those
who abandon their current plan). Over time they would be extricated from the retirement plans; short term they
would save money; and they wouldn't hose a bunch of employees which... in the long run... can be bad for business
let alone the wrong thing to do.
- Fortune, courtesy of CNN/Money: 100
Best Companies to Work For, Health Care. Excerpt: Fourteen companies on this year's
list pay 100% of their employees' health-care premiums. (Editor's note: Included in this list is Microsoft and
the SAS Institute. IBM is not included).
- Fortune, courtesy of CNN/Money: 100
Best Companies to Work For, Best Benefits. (Editor's note: IBM is not included in any of the "best benefits"
- Yahoo! IBM Pension board
post by Janet Krueger. Full excerpt: Based on my observations, I would
agree that IBM's post-retirement "discounted" rates are overpriced -- I believe that IBM has converted
retiree health care into a profit center, and isn't even coming close to spending their published 'average ceiling'
on the retiree pool. That is especially true when you factor in the 'refunds' they are getting from the federal
government based on the Medicare drug bill, where they can be reimbursed for retiree health expenses that the retirees
The problem with switching to an individual policy is that you and your wife become a pool
of two people. As long as you both stay reasonably healthy, you will be able to purchase that insurance for very competitive
rates. However, the year after you or your wife become 'expensive', your insurance costs will go through the roof.
It is a little bit like what happens to your car insurance after you have an accident, but the problem is that once
your medical risk goes up due to cancer, heart problems, diabetes, or other long term issues, it seldom goes back
down again and it becomes almost impossible to find affordable insurance unless you can get yourself into a pool that
includes other people who are healthier than you are.
The key question to ask, as you are seeking quotes, is whether there are any ceilings on year-to-year
price increases on the policy, and whether there are any conditions that would prevent you from renewing.
You might think that the state or federal government will step in with Medicaid if your situation
becomes desperate, but most states will only finance long term care after you divest yourself of almost all of your
assets -- and the newest round of laws forces you to divest your spouse of all his/her assets as well. I think it
is outrageous that someone should have to sell his/her home in order to get their spouse needed nursing home care,
but that is how the laws are being set in this country we live in.
- IBM: IBM Systems and Technology:
STGU has been cancelled. Excerpt: Dear Colleague, This is to inform
you that IBM has decided to cancel the Systems & Technology Group University (STGU) event scheduled for later
this month in Las Vegas. After much consideration, we determined that this global event did not support the requirements
of a new model based on lowering the center of gravity and driving sales execution at the region and country level.
We are instead creating a new, more localized model for STG sales education and community building.
- Yahoo! message board post
by "madinpok". Excerpt: In the meeting Randy held today with the PCF group
of employees in Poughkeepsie, he was pretty up front about who was being hurt by the changes. He said everyone
in the room would be hurt, by an average 13% loss in their pension. He said those who would become retirement eligible
before the freeze would be hurt the least and those farthest away from being retirement eligible would be hurt
the most. What he didn't explain was why he thought it was ok to hurt one fairly large group of employees more
than everyone else.
- Yahoo! message board post: "Randy came to town" by "madinpok".
Full excerpt: Randy MacDonald came to Poughkeepsie today and held three meetings to discuss the pension changes.
The first was with managers. The second was with employees in the PCF plan and the third was with employees in
the C-B plan. Since there wasn't room for everyone, people were selected at random to receive invitations to the
Much of what Randy said we've heard already in the e-mails, webcast and news interviews. One
very interesting thing, though. Randy said the SERP for executives will be frozen at the end of 2007. No new executives
will be covered by the SERP and those who are already in it will have their benefits frozen.
- "outsourcegwb" elaborates.
Excerpts: Presenters were Don Riley from HR and Bob Zapfel, GM, IT Services Americas. Same format there also.
Mostly Q & A for 1 hour. Was surprised that the cafeteria was mostly filled. Also
surprised how many people had no clue as to their Pension benefits and were wasting time with stupid questions.
It also appeared that some HR "plants" were in the audience and given the microphone to ask "friendly" questions
- where execs could spin answers that sounded like this change was not so bad and emphasized the people who
would actually benefit from it (people who hit 30+ years before 2008. Their monthly Pensions would not be going
up anyway and then will get the benefit of the added money put into the 401k.
- I think it was Zapfel who said "Netbenefits (online pension calculator for the old plan) continues to work
and is accurate up to 1/1/2008. After that, figures are not correct." (Since when did this happen? I have been
running monthly figures for myself and they all seem to be the same as ones I ran months ago)
- A new tool will be available in 6 to 8 weeks for the new plan.
- For a previous query by FHAWONTCUTIT > The old plan is fully funded and will remain fully funded until the
last old-plan person dies. There is $48 billion in the fund and obligations is $46 billion. (So the fund
is $2 billion in the black) So how does help our competiveness since it is overfunded by $2 billion? Zapfel - "Well,
there wouldn't be a problem for the next couple of years, but a few years down the line, IBM would have to put in
$9 billion a year. (No idea where the hell they came up with that garbage).
- Under the old plan, IBM contributes 15% of your salary each year to the pension fund. So the new plan saves IBM
5% on most employees (and the higher paid employees). Actually should be 8%, since they are already contributing
3% to our TDSP now. I am assuming they are using 15% minus 10% they will be putting into the 401k plan to come up
with the 5% savings.
Also, did not notice except for a guard checking our badges on the way in to the cafeteria,
but afterwards was walking behind 5 other outside hired security guards who were complaining because they had to
stay for the other 2 meetings in the afternoon.
- Greenock Telegraph (Scotland): Sold
down the river. Excerpts: Sacked Sanmina workers slammed bosses
for refusing to break the news face to face. As the drama unfolded yesterday morning, US chiefs sent in supervisors
to tell the workforce that the company was pulling production out of Greenock — with the loss of 370 jobs in
total. Sickened staff were then told by management they had three months left and there was a job still to be
done. Within minutes of the briefing employees headed for the exit door and were told to return next week. A
worker, who asked not to be named, said: "The senior management couldn't even face us. They left it to our supervisors.
He was among the 700 staff transferred to Sanmina three years ago from IBM when they pulled
out of manufacturing. He added: "I am angry with Sanmina and I am angry with IBM. They have sold us down the
Another employee said: “Electronics manufacturing in Greenock — as in IBM — is
now going to cease after 50 years. “IBM washed their hands of Greenock after all the good times and came out
lily-white. “A lot of people are very bitter.”
- Houston Chronicle: Oblivious
on pension issues? Better wake up. Excerpts: In the past few weeks,
profitable companies like IBM and Verizon Communications announced they are freezing their pension plans in an
effort to cut costs. That means that the plans, which provide monthly checks to employees when they retire, will
no longer allow workers to accumulate credit for their years of service or increase in annual income.
The upshot? When employees retire, their pension checks will be significantly lower than
they expected. And depending on specific circumstances, such as age and income, it could turn a champagne retirement
into one that affords only cheap beer.
Karen Ferguson, director of the Pension Rights Center, a consumer advocacy group in Washington,
knows how hard it is to get people interested in the details of their pensions. With their formulas and complicated
rules, pensions can be obscure, Ferguson said. People have no idea what their pensions are worth, and employers haven't
done a good job of explaining their value. Retirement is also far into the future for many, she said. Many assume
Social Security will be enough to cover retirement expenses and don't realize the average monthly check provides just
a little more than what someone would earn working for minimum wage.
And what of 401(k)s, which have been pitched as a great way to save for retirement? "Average
employees, when left to their own devices, make all the wrong decisions," said Wehner, who is a big fan of traditional
pension plans. "They don't put enough money into the plans, they take money out at the wrong time, and they make
the wrong decisions on investments." In a pension plan, he points out, the company typically makes the contributions
and hires professional money managers to handle the fund.
- Wall Street Journal: SEC
Upgrades IBM Investigation. Inquiry's Formal Status Relates to April Disclosure Of Stock-Options Expensing. By Charles Forelle. Excerpts: The Securities and Exchange Commission has
upgraded its probe of International Business Machines Corp.'s April 2005 disclosure of stock-options expensing
to formal status, the company said. In a formal investigation, the agency authorizes its staff to use subpoena
power if necessary to examine documents. IBM previously said in June that the SEC was informally looking at the
matter. Questions arose after IBM said on April 5 that it would begin accounting for the expense of stock options
and other stock-based compensation well before the deadline to do so under new federal requirements. The move,
disclosed in a hastily arranged conference call, took analysts and investors by surprise.
- BusinessWeek: The
Heat Rises Under IBM. By Steve Hamm. The SEC has escalated
an inquiry into first-quarter 2005 earnings announcements. Did Big Blue try to mislead Wall Street? Excerpts:
Corporate-governance experts say investors should take the matter very seriously. The switch to a formal investigation "signals
that they have gone from asking general questions to asking more specific questions. It's not a fishing expedition," says
Nell Minow, executive director of corporate-governance advisory firm The Corporate Library. Typically, when an
SEC investigation becomes formal, it means the agency has the power to use subpoenas to seek documents and other
Minow believes that in situations like this, boards of directors should convene a special
committee of independent directors to do their own internal investigation. "I want to see evidence that the
board is paying extremely careful attention," she says. IBM's Barbini declined to comment. [...]
OBFUSCATING? The hammer came down nine days later. IBM's earnings came in at 84 cents per
share, 6 cents below estimates and way below the original estimates. At the same time, IBM said the impact
of its stock expensing was 10 cents per share rather than 14 cents. Analysts, stung by the miss, raised the concern
that IBM may have used the stock-expensing announcement in an attempt to soften the blow of its earnings miss. Minow
says that would be an outrage. "You're supposed to tell the truth and be open and transparent and candid about
your prospects -- not obfuscate," she says.
- MarketWatch: Website
Gives Voice to Verizon Employees Angry Over Pension Loss. Excerpt: The Communications
Workers of America and the Pension Rights Center have created a new website to give management and non-represented
workers at Verizon Communications a way to voice their outrage about Verizon's assault on their retirement security,
and to keep public attention focused on this disastrous decision. The goals of the campaign are to direct media
and public attention to Verizon's action and to help Verizon employees express their concerns and mobilize to persuade
the company to reconsider the terms of its decision.
Through the site, http://www.verizonretirementwatch.com
Verizon employees and their supporters will be able to tell the world how the company's action threatens their
future by betraying the promises Verizon made to thousands of employees. The site includes information on executive
pay and benefits -- the supplemental plan covering executives that will not be frozen -- and sets up an ongoing
forum for employees and others to talk together and send a message to the company. It also provides specific
information as to how the changes will affect employees of various ages and service. [...]
CWA President Larry Cohen called Verizon's action, like that of IBM and others, "a chilling
signal not just for current workers who have lost their retirement security, but to the future generation of workers
who will be 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. Today, 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," he said. "That profitable companies like Verizon, with fully funded
pension plans, can freeze benefits is outrageous, even by the 'Gilded Age' standards of today's executives," Cohen
- Washington Post: United
CEO Could Get $15M in Incentives. Excerpt: United Airlines CEO Glenn Tilton
could receive stock and options worth $15 million, base pay of more than $600,000 annually and a bonus that could
double his salary when the carrier emerges from bankruptcy next month, according to company documents. Tilton
would get 545,000 restricted shares and 822,000 options, or just more than 1 percent of the $1.9 billion in equity
United intends to issue, if a bankruptcy judge approves. Overall, United plans to set aside 8 percent of the
equity it plans to issue _ at a value of around $152 million _ for about 400 salaried and management employees.
Overall, United plans to set aside 8 percent of the equity it plans to issue _ at a value of around $152 million
_ for about 400 salaried and management employees. [...]
Unions representing workers at United, a unit of Elk Grove Village, Ill.-based UAL Corp.,
criticized the potentially lucrative equity programs Wednesday, noting that United workers have agreed to millions
of dollars of pay cuts to help restore the airline to financial health. "Such compensation for executives is
outrageous considering the sacrifices other employees have made," said Joseph Tiberi, a spokesman for the International
Association of Machinists and Aerospace Workers. "Our members alone will have sacrificed more than $4.6 billion" in
wages, benefits and pensions.
- CIO Magazine (Australia): Backsourcing
PAIN. By Stephanie Overby. Excerpts: When David Rosario
got the official notice at the end of 2002 that his job would be outsourced to IBM, he was not surprised. Rumours
had been circulating for months at JPMorgan Chase, where he had worked as a network engineer since 2001, that
the company would be signing away much of IT to an external services company. The $US5 billion IBM-JPMorgan contract
was heralded at the time as the largest outsourcing deal on record, and it received a great deal of publicity
in the mainstream and trade press as the wave of the future. JPMorgan itself had trumpeted the deal as a "groundbreaking" partnership
that would cut costs, increase innovation and benefit its IT workers.
But Rosario and other employees soon discovered that they would have to reinterview at IBM
for their positions. During that process, Rosario was told that his job at IBM would be secure for the foreseeable
future. Others, however, were not so lucky. They were told by Big Blue that their jobs would likely be gone
within a year or two. As a result, some left as soon as they could. Rosario stayed. But his sense of security
didn't last. Rosario watched as IBM cut the pay of most of the consultants working for the bank and then eventually
let many of them go. And with IBM's well-publicized penchant for sending work offshore, he wondered if - as
a full-time employee - he would be next. [...]
Rosario is just one of thousands of employees affected by JPMorgan's decision to outsource
to IBM and its subsequent move to bring the work back in-house. And he is not the only one who suffered such
whiplash. In interviews with a number of current and former employees, CIO repeatedly heard stories of diminished
morale and decreased productivity over the past several years. [...]
Some workers had been hit by the outsourcing where it hurt even more - in their paycheques.
Though many employees (such as Rosario) saw only the company name on their paycheques change, others (typically
consultants) took significant pay cuts by moving to IBM. "The five people in my group [all consultants] - which
included network, systems and database administrators - were all told that they had to reapply for their jobs," says
Scott Kirwin, who worked as an independent consultant for JPMorgan in New York from July 2002 until April 2003. "A
lot of them did, but they were hired at salaries that were 20 percent less." [...]
Meanwhile, productivity at JPMorgan took a hit, according to several former and current employees. "For
more than a year, there were a lot of people not getting any work done. They didn't know where they were going
to be, they didn't want to commit to projects, and they started slacking off," says a former consultant who
used to manage server support for JPMorgan. (He has since secured another full-time IT position at a major
company.) Among the projects not getting done were server migrations, data centre upgrades and network patches. "When
people aren't productive, the company loses money," he says. [...]
The same thing happened with JPMorgan during its time with IBM, say several employees involved
in that outsourcing deal. According to the former consultant who worked for the bank in New York before and after
the outsourcing relationship, "IBM caused tremendous headaches for JPMorgan and the company's infrastructure,
nickel-and-diming to control their own costs." Others saw the same things at other IT locations. During the
21 months when IBM was in charge, "Things that used to get done no longer got done," says a database administrator
who was hired by IBM from JPMorgan in Columbus, Ohio. In fact, it seemed that even ordinary office products were
hard to procure in a timely manner. "Even office supplies had to be approved two levels above my boss," Rosario
says. "[IBM] even delayed getting batteries for our pagers, and some project managers had to go and buy their
own reams of paper at Staples." Rosario adds that during the last six months of the JPMorgan outsourcing deal,
IBM halted all projects. An IBM spokesman declined to comment, citing contractual obligations.
|Vault Message Board Posts
- "The third's
the charm" by "Frank_Reality". Full excerpt: I agree, we're watching the slow demise
of IBM right before our eyes - death by executive induced anorexia. It is fundamental that cutting costs
will NEVER result in a prosperous company. Within a decade if IBM lasts that long, there will be only
two groups - short term contractors with minimal pay and no benefits and exorbitantly compensated executives.
I'm working my exit plan - are you?
- "Simple" by "ancientblueconsultant".
Full excerpt: You travel, travel and travel and eventually you find out your family has left you and you're
stuck with an irreconcilable AMEX bill as big as your unexpected severance check. After a few years, you
have some 401(k) money (if you had the time to fill out the forms and bear the "process", no family,
huge alimony payments, no close friends and colleagues to get a job from and a huge hole in your pocket.
See you at the Admiral's Club or Crown Room. Mine's paid for by my company, as is Ginny's.....but your's
come out of your hide.
but" by "wonderaboutibm". Excerpts: t's really quite sad, but IBM has instituted some
really stupid personnel policies -- looks as though some finance idiots took over resource planning in
the bad old days of 2002+. Employees were reduced to "skill sets" and if your profile was the
wrong set, or if you couldn't be placed within a few weeks of being sent to the bench, you were tossed
out like a used candy wrapper. Of course, this NEVER seemed (or seems) to happen to band D and above executives,
and not commonly to b10's either, so Dose is probably safe unless his Vault cover is blown ...
And.. if you still believe BCS in particular and IBM in general is a "good" place
to work, then just peruse some of the intranet talk shows with IBM executives that have recently been posted
on w3. One exec (can't remember which) admitted on stage that in a recent employee survey, fully half of
the employess in his division would jump ship, and for only an equivalent outside offer at that. Other
execs made similarly startling admissions. They are scared stiff. This is not a place full of "happy" employees.
Should it surprise you that IBM doesn't seem to be making the lists of "100 Best Places to Work For" anymore?
on the Alliance@IBM Site:
- Alliance@IBM: Attention IBM employees:
IBM is blocking e-mail to and from the Alliance@IBM e-mail address email@example.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.
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."
Cuts Status & Comments page
- From the General
Visitor's Comment page:
- Comment 1/13/06: Can anyone tell me if IBM still does the annual employee satisfaction survey? And if so, do
the employees still get to see the results? The last one I participated in was in the mid 90s, and I was subsequently
told by some of the old-timers that our area got the lowest rating at the site, our department got the lowest
rating in our area, and our first-line got the lowest rating in our department, but I don't remember actually
seeing these results. I think we were allowed to see a sanitized summary view, but somehow I don't remember it
being printable. Would a union make this kind of transparency possible once again? -Anonymous-
- From the Pension
- Comments 01/06/06: I have been with IBM 10 years, 2 in management. I can no longer be a manager. The company
has no "respect for the individual" The pension was frozen this week, and today they cancelled STGU.
No employee on commission gets paid correctly with the failure known as FMS. Sam can't grow the business
so he is squeezing every penny out of the employee. A focus needs to be placed on unionizing the call centers,
those people are miserable. -Anonymous-
- Comments 01/06/06: It's just not the long-term workers. It has really hit hard on those
of us who came in as professional hires in the past 10 years or so and are in our 40s. We have retooled
our careers to have that cash-balance plan, wagering that it would be there so we could put our kids through
college and other long-term financial commitments. Now I must totally rethink things. IBM has this
arbitrary date of 1999 to differentiate between 10% and 8% on this new 401k -- do they think everybody hired
since then is a college hire? With plenty of time to make up the difference? NOT! The most blatant age discrimination
is for those caught right around this hire date who will continue to be cheated with this new 401k
caste system. This may be IBM's biggest exposure legally -- the extension of decreased contributions based
on the inception of the cash balance plan. Plus -- check out the Insider Trading on Yahoo financial or the
NY Times under the IBM stock ticker. Executive stock sales for all VPs, GMs, Directors, and C levels are
listed. Warning: not for the faint of heart. They have made 10s of millions of dollars! -Anonymous-
- Comments 01/07/06: We need to be clear on this. IBM executives, like politicians, only care
about their own pockets. People can moan and groan here all they like and the execs don't give a damn.
So, why not hit them where it hurts? Write an open letter to IBM to your local newspapers asking how Sam can
justify receiving (I won't say earning) more in one year than it would take some people a millennia (1000 years!)
to earn. Is he really 1000 times better/smarter/kinder than these people? And as people have mentioned here,
get them to make a CLEAR public statement about how the executive pension plans are going to be affected by
this. I cannot express my contempt for these people that greedily stuff their own bank accounts with more money
than they could spend in a lifetime while nickel and diming the very people that are bringing in the money
to fund their packages. Tom Watson must be turning in his grave over what these thieves have done to his company.
- Comments 01/07/06: False Promise ! When I first was hired at IBM back in '84.During a employee's
orientation meeting.We received benefit package that included detailed information on IBM's long term pension
plan,which graphically showed how IBM's pension plan, benefits its employees with accrued years of employment
service.Now again with the outcoming pension change. I am asking myself! Why didn't I take that State position
with union benefits and a clear cut pension plan? Time to bring back the Rat to all IBM's entrance locations.
Contact your elected official's regarding this violation on our promised retirement. Who needs a pension plan
that is is based on the stock market? You have a better chance of wining Lotto! -Anonymous-
- Comments 01/07/06: I'm 47 with 27 years of loyal service with IBM. In 1999, I was in the population
of employees given a choice between the old and new pension plans (only after the age discrimination question
was raised I might add). Like many of my peers, I was provided financial tools and contacts by IBM to aide
in determining which plan would be the best match for me. My decision was based on the "cross over" period
between plans weighed against my planned retirement date. The retirement mapping from IBM indicated the new
plan would in fact surpass the old plan benefit after 36 years of service. Given my age and plans to work well
beyond the 30 years with IBM anyway I reluctantly opted for the new plan. My decision was based on the financial
retirement information provided by IBM, so how can IBM legally freeze these benefits now?? As usual, our incompetent
executive team continues to insulate itself from financial actions at the expense of it's workers. -Anonymous-
- Comments 01/07/06: Welcome to "The Family, You're set for life." I was told by an
IBM 'er and personal family member when I joined IBM in 1978. He is probably rolling over in his grave today.
Years of rotational shift, working Thanksgiving and Christmas, forced overtime, 3AM call outs, low pay, micro
managing health care, Execs with fat heads on ego trips. Excuses instead of raises for too many years even
as a 2 and 2+ performer. First thing I'm doing is dumping ALL my IBM stock, no more 10-12 hour non exempt work
days or working thru lunch on conference calls. You get what you pay for if your lucky and IBM you don't pay
squat or respect us in the morning. -Anonymous-
- Comments 01/07/06: In the 1980's, while IBM's competition was paying higher salaries, IBM's
response was "you
have to consider the entire compensation plan, including medical and pension benefits". Hearing that,
I, and many others like me, chose to stay with IBM. Had we known better, we could have left the company,
made more in salary and probably be better off today. Obviously, the current IBM Management team (including
past CEO Gerstner)have some trouble with the concept of keeping promises. We are not an airline about to go
out of business. We are a thriving company whose pension plan is fully funded. In fact, during the 1990's,
IBM did not put a nickel into the plan because the stock market performed so well. Gerstner raided our plan,
and took excess money out of it to prop up IBM's profits, and hence, allow him to walk away with hundreds of
millions in bonuses and options. -Anonymous-
- Comments 01/07/06: If all the people that have written comments on all the comment sections
on this web site, signed up with Alliance@IBM and followed through by talking to their co-workers and getting
them to sign up, I bet you'd be a hell of a lot closer to a vote. Then we would see just what can really happen
when people act instead of complain, whine, and tell stories of the moment when they "woke up" and
discovered that IBM will NEVER go back to the way it was 30 years ago.. Sign-up for Alliance@IBM and get off
yer butts and DO SOMETHING! -Anonymous-
- Comments 01/10/06: This is nothing but flat out greed. A $100B company saves $2.5B over FIVE
years. Not one year, in FIVE years or $500M a year. Why don't we try something novel, like driving
top line revenue and cutting out the costs associated with bloated processes and bureaucracy? At some point
(very soon), the back door approach to solving the profit picture is going to run out of gas. Minimal pay increases,
variable pay is on the way out, employee benefit contributions continue to escalate and now the yanking of
the pension plan. How any top executive with a conscience could have sat in a conference room and not reject
the idea of destroying the pension plan for the older employees is beyond comprehension. This is truly a disgrace.
- Comments 01/10/06: Speaking of pensions, I have been getting my IBM pension (I call it a pittance)
since late 1997. I would just like to get a freaking cost of living adjustment now and then, but we
who are getting pensions will never get one. Thanks. -Anonymous-
- Comments 01/10/06: After hearing about the pension freeze. A manager sent an E-mail to a co-worker
asking him what request he had regarding new projects for the upcoming new year. In a fit of rage responded
with his note "Respect for the individual". He did take a lot of flak for doing so but at least he
got is point across! As tempers rise, we're noticing people are not focused on their job assignments.This in
the long run could seriously affect overall production, safety, quality, and output! What an environment!!
- Comments 01/12/06: It's no mystery to many that IBM is absolutely the worst company they have
ever worked for. I enjoy reading the comments on your website knowing that I am not alone in my feelings. Workers
must change their mindset and realize that IBM is now the enemy. No loyalty should be shown to a company that
mistreats its workforce the way IBM does. Fight back in any way you can but do not think that things will ever
improve. I will personally badmouth IBM wherever i go and to whomever i meet. Spread the word! -Anonymous-
- Comments 01/13/06: From Rep. Bernie Sanders Sept. 10, 2001 speech: ..."Frankly, I do
not believe the founder of IBM, Tom Watson, Sr., were he alive today, would stand for this outrageous level
of corporate greed. As many of you know, Mr. Watson told his employees that “IBM's constant purpose is
to relieve its people of fear for the care of themselves and their families.” Unfortunately, Tom Watson’s
IBM is not Lou Gerstner’s IBM. Concern for the workers and their families has been replaced by same approach
that exists today throughout corporate America - outlandish benefits and compensation to the people at the
very top, while squeezing the average worker as hard as you can." Five years later it's still the same.