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    Highlights—March 25, 2006

 

Update from the Pension Rights Center
Posted on the Yahoo! IBM Pension and Retirement Issues board by Janet Krueger. Excerpts:
As we wrote to you in our last message, this is recess week for Congress. It is very important for you to get in touch with your Senators and Representative while they are back home to express your views on the pension reform bills now being reconciled by the Conference Committee. It is particularly important to contact the Conferees - you should consider bombarding them with phone calls, faxes and e-mails. You can also arrange meetings with them if you haven't already done so.
Conference Committee: The conference discussions are just beginning and, because they are on recess, we hear they haven't really hit any of the tough issues yet. So this is a good time to remind them of the top issues:
  • Protect older employees in cash balance conversions by providing transition benefits.
  • Don't allow the cutback of already-earned subsidized early retirement benefits in multiemployer plans.
  • Support provisions that address inequities facing widows and divorced women.
  • Stop provisions that promote conflicts of interest in investment advice
  • Prevent the transfer of "surplus" assets out of pension plans
See below for an explanation of these issues.
Grassroots Action:
Summaries of Other Key Provisions in the Two Pension Bills: You've heard a lot from us about the cash balance provisions in bills now under consideration by the Conference Committee. If you read our letter to Conferees you know that there are several other important provisions in the bills. Below are summaries of a number of these provisions. If these provisions affect or would be of interest to anyone you know, please forward this message to them. Also, you can include these summaries in the letters that you write to members of the Conference Committee.
  • Asset Transfer Provisions: The Senate bill includes provisions that will allow companies to transfer more "surplus" assets out of their pension plans to fund retiree health insurance. Allowing companies to use pension plan assets for purposes other than pensions increases the likelihood that the plans may become underfunded in the event of a downturn in the stock market or other unforeseen event. The law already allows some "surplus" assets to be transferred out of company plans, but the Senate bill would allow them to transfer more, and would also allow transfers out of union-negotiated multiemployer pension plans. The Senate bill includes these bad provisions (S. 1783, Sec.1331). The House bill does not.
  • Red Zone "CUTBACK" Provisions" These provisions would allow certain underfunded multiemployer plans to eliminate subsidized early retirement benefits that have been earned by older, longer-service employees. These provisions affect hundreds of thousands of long-service carpenters, iron workers, laborers, pipe fitters, truck drivers, dock workers, hospital employees, and janitors, as well as employees in grocery stores, entertainment, and many other jobs, and their widows.
    The House bill includes these bad provisions (HR 2830, Sec. 202). The Senate bill does not. Please click the following link http://www.pensionrights.org/pages/policy_multiemployer.html to learn more about the Red Zone "Cutback" Provisions.
  • Remedies Provisions: Section 307 of the House bill includes provisions allowing plans to seek monetary damages against participants for ERISA violations, but does not extend a reciprocal right to participants if a plan or its administrators violate their fiduciary responsibilities. Current law restricts both plans and plan participants from collecting monetary damages for certain losses suffered when ERISA, the law governing retirement plans, is violated either by intentional or unintentional means. The proposed law would unfairly allow for only one side to benefit when ERISA is violated.
    The House bill includes these bad provisions (HR. 2830, Sec. 307). The Senate bill does not. Please click the following link http://www.pensionrights.org/PDFs/Remedies%20(6).pdf to learn more about the Remedies provisions.
  • Spousal Provisions" There are four provisions in the Senate bill that, if passed, would benefit certain widows and divorced women who now fall through gaps in protections in the laws regulating the railroad retirement and private pension systems. The provisions would also require private pension plans to offer a 75 percent joint and survivor annuity option in addition to those options that are currently provided.
    The Senate bill includes these good provisions (S. 1783, Sec. 901- 904). The House bill does not. Please click the following link http://www.nwlc.org/pdf/SpousalPensionProtections2006.pdf to learn more about the spousal provisions.
  • Prohibited Transactions Provisions" Section 305 of the House bill includes a number of provisions that could place retirement money at risk. Some of the provisions would reduce the "fiduciary" requirements for those responsible for the investment of retirement plan money. Others would eliminate protections against conflicts of interest. For example, one provision would increase the amount of retirement plan money that hedge funds can invest without being subject to the requirement that they act prudently and solely in the interests of plan participants. Another provision would allow brokers, consultants, lawyers and others to avoid Department of Labor scrutiny of potential conflicts of interest.
    The House bill includes these bad provisions (HR 2830, Sec. 305). The Senate bill does not. Please click the following link http://www.pensionrights.org/pages/prohibited%20transactions.html to learn more about the Prohibited Transactions provision.
  • Increased Contribution Limit "Permanence" Provisions: Among other things, these provisions would make increased limits for contributions to 401(k) savings plans permanent, costing taxpayers an estimated $20 billion over the next 10 years. These provisions would provide unneeded tax-breaks to higher-income workers without promoting or providing tax benefits for increased savings among low-and moderate-income wage earners. This provision would also encourage more companies to terminate their pension and profit-sharing plans. The evidence to date shows that the higher contribution limits are only being used by those who can afford to save for retirement without tax incentives. There is no need to increase these contribution limits for another four years.
    The House bill includes these bad provisions (HR. 2830, Sec. 901) The Senate bill does not. Please click the following link http://www.nwlc.org/pdf/TaxCutsInPensionBill2006.pdf to learn more about these Increased Contribution Limit Permanence Provisions.
Needless to say, there are many other provisions in the bills. If there are provisions that are of particular interest to you, please let us know. Keep up the good work and let us know what you've been up to!
  • Investment and Pensions Europe: IBM Austria pension chief steps down. Excerpts: The departure of Benesch from IBM’s Austrian Pensionskasse comes against the backdrop of the US computer giant’s campaign to slash worldwide pension costs. As 2006 began, IBM announced a freeze on its DB plan for US employees, which has an estimated $50bn (€41bn) in assets. Later in January, IBM announced proposed changes to its UK pension arrangements, including reductions in future benefits for DB-covered employees and an offer that those employees switch to DC.
    Meanwhile in Germany, the computer giant wants to switch 11,000 employees there from DB schemes to a DC one in a bid to reduce pension costs by several hundred million euros.
  • New York Times: Major Changes Raise Concerns on Pension Bill. By Mary Williams Walsh. Excerpts: As a result, the bill now being completed in a House-Senate conference committee, rather than strengthening the pension system, would actually weaken it, according to a little-noticed analysis by the government’s pension agency. The agency’s report projects that the House and Senate bills would lower corporate contributions to the already underfinanced pension system by $140 billion to $160 billion in the next three years. [...] “It takes a better economist than me to understand how reducing contributions by that much is going to protect benefits and put the system on a sounder footing,” said Jeremy I. Bulow, an economist at Stanford University.
  • John Boehner (R-OH; U.S. House Majority Leader): Fact Sheet: Why the IBM Pension Ruling (Cooper v. IBM) Is Flawed (July 7, 2004). Excerpts: On July 31, 2003 , the U.S. District Court for the Southern District of Illinois issued the Cooper v. IBM decision stating that IBM’s hybrid plans violate the age discrimination rules under ERISA. The reasoning behind the decision, however, is economically unsound, flawed, and contrary to a large body of other federal court rulings. The judge in this case found the plan design to be inherently age discriminatory because equal pay credits for younger workers have a longer period of time to earn interest and accrue benefits before retirement than the same pay credits for older workers. In other words, the judge ruled the concept of compounding interest to employee accounts, taking into consideration the time-value of money, is discriminatory. [...]
    The Cooper decision is contrary to the legislative history of the 1986 amendments to the federal age discrimination statute. The legislative history is clear the intent of Congress was limited to ensuring employers are prohibited from cutting back or reducing any pension benefits that have been earned by employees once they vest in their pension plan.
  • Home News Tribune (New Jersey): Assault on pensions bad news for America. Excerpts: I suppose the good news for some employers of New Jersey and around the country is that in the future there will probably not be a shortage of workers for low-skilled, low-paying, menial jobs. Of course, the drawback is that many of the people working those jobs will be in their 70s, 80s and 90s and as a result of corporate America's newest attack on working men and women in our country — the destruction of the pension.
    The latest company to seize the opportunity of breaking its promise to employees is the once proud Big Blue, that is IBM. In January, IBM announced that it would freeze all of its pension plans at their current levels. The result would be that no additional pension contributions would be made for those employees covered by pensions and apparently no new employees would be enrolled in any type of corporate pension whatsoever. [...]
    At the end of the day, the result of the continuing assault on working men and women in our country means there won't be working men and women in our country. Just the working poor, who may be unmotivated, certainly will be unhappy. And these pension-busting activities will not save it, as some would have us believe. Not so fast, guys. Try looking beyond the next quarter.
  • Bloomberg News: UPS Uses Political Clout to Press for Cuts in Pension Benefits. Excerpts: For 15 years, United Parcel Service Inc. has spent more money on U.S. elections than any other company. Now UPS, which has gotten its way on everything from federal highway programs to expanded routes to China, is seeking a new return on its investment.
    The world's largest package-delivery service wants Congress to allow employers to cut pension benefits already promised to some workers in plans funded by multiple companies. Atlanta-based UPS says the plans can no longer afford to pay full benefits because so many companies that used to pay into the pool have gone out of business. As the number of contributors shrinks, remaining companies are obligated to fund the retirement plans. [...]
    The House of Representatives passed broad pension legislation in December that would require companies to pay more into multiemployer funds. It included a UPS-backed provision that would allow the plans' trustees -- which include company and union representatives -- to cut benefits by an unspecified amount for workers retiring early if the plans are less than 60 percent funded. The Senate has not approved such a provision.
    "This is all part and parcel of companies backing off their pension requirements,'' says Senator Tom Harkin, an Iowa Democrat. "They want to let pensions crash."
    UPS and companies such as Overland Park, Kansas-based YRC Worldwide Inc., the biggest U.S. trucking company, say they are targeting early-retirement benefits -- even those already being paid out -- to ensure that people who stop working at 65 can get full benefits. [...]
    Lobbying Power: UPS, whose workforce of 407,000 makes it the U.S.'s fourth- largest corporate employer, spent $1.3 million during the first half of 2005 successfully lobbying for the Central American Free Trade Agreement and legislation that provided more highway funds.
    House Majority Leader John Boehner, an Ohio Republican and the sponsor of the pension provision in the House, has been the fifth-biggest recipient of UPS campaign donations among U.S. lawmakers since 1990, getting $76,700, according to the Center for Responsive Politics, a Washington-based research group that tracks campaign donations.
  • Washington Post Writer's Group: The Real Pension Crisis? By Marie Cocco. Excerpts: What could be worse than a pension crisis that already has left millions of Americans without the retirement benefits they've earned? The congressional effort to fix it.
    n an unusually rapid response to the demise of traditional defined-benefit pensions -- and the corporate dumping of pension obligations into the lap of the government insurance program that's supposed to act as an emergency safety net -- lawmakers are in the final weeks of deciding no less than this: Who will have a pension? And how much power will Wall Street have to decide this? Nobody comes right out and puts it this way. [...]
    If this all sounds like a lose-lose proposition for millions of workers, that's because it is. The big winners could easily turn out to be the lobbyists who've managed to get congressional conferees to consider one self-interested idea after another.
    Such as this one: How about letting Wall Street's hedge funds manage some pensions -- and do so without any of the current federal rules that require managers to act only in the financial interest of beneficiaries? This remarkable gift is included in the House version of the legislation. "We are talking about having millions of workers having their pensions managed by people who don't have to be bound by any rules we now have on how you manage pensions," says Shaun O'Brien, assistant policy director of the AFL-CIO. Some protection. [...]
    Meanwhile, lawmakers want to make it legal for companies to convert traditional pensions to less costly ``cash balance'' retirement plans, a switch that already has left thousands of middle-aged and older workers with reduced benefits -- and several age discrimination lawsuits. The Senate would, at least, require employers who convert their pensions to offer older workers a variety of safeguards to shield them against dramatic benefit cuts; the House would not.
  • People's Weekly World: Perfect pension storm revisited. By John Case. Excerpts: Some time ago this paper surveyed the approach of a “perfect storm” of economic assaults on the U.S. private pension system. Not entirely unmindful of the weather, the U.S. Republican-controlled Congress, under the leadership of Sen. Chuck Grassley (R-Iowa) and new House Majority Leader John Boehner (R-Ohio), constructed companion bills promising to restore the U.S. pension system to stability.
    The result of their efforts resembles FEMA’s preparations for Katrina. The pathetic legislation now being completed in a House-Senate conference committee, rather than strengthening the pension system, would actually weaken it, according to a little-noticed analysis by the government’s pension agency. After numerous changes, exceptions and blandishments pressed by airline, manufacturers and other lobbyists, the agency’s report projects that the House and Senate bills would lower corporate contributions to the already under-financed pension system by $140 billion to $160 billion in the next three years. [...]
    Anyone who has ever watched the very brief moral struggle taking place behind the eyes of a CEO balancing quarterly profits against 30-year possible liabilities or, heaven forbid, a social responsibility, will not be surprised at this sorry outcome. The corporate-owned Congress, despite the threat of ruin for millions of workers, will also grieve but briefly, trusting that their preferred but largely discredited “private savings account” philosophy will now take root as the replacement for private pensions. A blizzard of blame directed at unions “excessive demands” will no doubt be the song these cowardly varlets sing to deflect the judgment they richly deserve.
  • The Record (Troy, NY): Two GE retirees sue over pension fund. By James V. Franco. Excerpts: Two retired General Electric employees filed a class action lawsuit in federal court claiming the multi-billion dollar corporation violated the Employee Retirement Income Security Act by not being proper stewards of the pension fund. In the lawsuit, retirees Umberto Cavalieri and Floyd Miklic claim GE's stock was inflated from 1997 to 2001 because the company counted as earnings money that should have gone into the reserves - money in the bank to pay out claims - of the Employers Reinsurance unit of the company.
  • AARP: Older Workers' Pensions in Jeopardy. Excerpt: Congress is considering a bill that could lead to lower pension benefits for millions of older workers. This bill would allow employers to convert their traditional pension plans to cash balance plans without safeguarding the benefits that workers were promised. Email your members of Congress today and urge them to protect older workers.
    The U.S. House of Representatives and the Senate have both passed separate pension bills that allow these cash balance conversions. However, the Senate version protects older workers, while the House version does not. If the House version becomes law, older workers could see their rightfully earned pensions reduced.
    AARP is very concerned about the significant legal and age discriminatory issues surrounding cash balance conversions. We believe cash balance plans can have a role to play in the private pension system if - and only if - they are designed to protect the millions of older workers who have given up wages in exchange for traditional defined benefit pensions. AARP opposes any bill that prevents older workers from receiving their rightful pension benefits when they retire.
  • Know Your Pension is an independent organization committed to providing you with the tools, resources and information you need to insure the health of your pension funds. One of the biggest domestic problems facing Americans today is the integrity of our pensions in the face of accounting misconduct, lack of disclosure, and outright abuse of the current system. As a pension holder, you should actively protect yourself.
    Our mission is to educate you about how to safeguard your retirement savings. As a pension contributor, you have a right to know where – and how – your funds are being used. Most important, you should know whether your retirement accounts are safe . . . or in trouble.
    We'll provide you with the tools you need to help secure the survival of your retirement savings. Failure to take action could result in a retirement that's far less comfortable than what you've been led to expect. Don't let this happen. Be Proactive! Get engaged today!
  • Yahoo! finance board post by "idoubtitagain". Full excerpt: Garce, if you are in IBM management, then you and the rest of the bunch in Armonk very carefully need to consider that in the press recently, a indication was given that stock buybacks are indicating areas of manipulation, related to EPS boosts. It also is being noted, that executives that receive stock options, are promoting buybacks. The buybacks at IBM are well in the billions of dollars range. The inference and perception is at dangerous levels. Once again corporate transparency, honesty and integrity at all levels are crucial, to avoid Enrons.
    A company cannot tell its employees on w3.ibm.com that they "missed" quarterly targets and that as a result employees will receive reduced variable pay, at the same exact time indicating externally that they are doing well. To do so indicates transparency, honesty and integrity issues.
  • BusinessWeek: How Much Are Execs Really Paid? Even when companies are more forthcoming, the total haul can be elusive. Excerpt: What did Jerald Fishman, president and chief executive officer of Analog Devices (ADI ), earn last year? A table in the Norwood (Mass.) semiconductor maker's recent proxy statement shows $2.35 million in salary, bonus, and "other" compensation. But if you dig through the fine print and crunch some numbers, you'll see that the $2.35 million is just part of a total package worth as much as $12.7 million, depending on the method you use to compute it.
  • WashTech News: Congress Considers Massive H-1b Visa Expansion, Gates Tells Congress It’s Microsoft’s Top Priority. By Marcus Courtney. Excerpts: Congress is contemplating legislation that would allow up to 600,000 skilled professional guest workers to enter the U.S. in a single year. This would be the biggest one time expansion of the controversial H-1b visa program ito date. This increase comes after the high-tech industry is just beginning to recover from the economic recession of 2001, as a small demand for workers has been noticed. Sen. Arlen Specter (R-PA) is drafting an immigration reform bill that contains the expansion of the H-1b visa program. Sen. Specter chairs the Senate Judiciary Committee, which has jurisdiction over immigration matters.
    Microsoft's Bill Gates is spending his own personal political capital on this issue. He was in Washington D.C. last week lobbying for the changes. According to Washington Post columnist David Broder, “Gates told me the "high-skills immigration issue is by far the number one thing" on the Washington agenda for Microsoft and for the electronics industry generally "This is gigantic for us." The article went on to say, “So great is the demand for such skills in the burgeoning high-tech world,” However, government studies have dismissed the notion the industry is facing a worker shortage.
    Last week, WashTech News released information showing that wages at Microsoft have been stagnant for several years in the majority of pay scales. If a real skill shortage existed, as Mr. Gates claims, pay should be increasing not stagnating at his company.
  • Wall Street Journal: Dell to Double Work Force in India. Excerpt: Dell Inc. plans to double the number of its employees in India to 20,000 in three years, Chairman Michael Dell said, in what appeared to be the personal-computer maker's bid to beef up its presence in one of the world's fastest-expanding markets.
  • Yahoo! finance board post: "Managing/Working with Indians" by "idoubtitagain". Excerpts: Usually, in my experience, implementation projects fail due to errors on the business end during the requirements phase of the project. The business analyst does not deliver the requirements correctly as to specifications, the lack of requirement specification is then passed on to development.
    Once developed, the business during UAT starts screaming bloody murder, indicating that what the business wanted was not delivered, then points fingers at development, usually the root cause analysis indicates that development delivered exactly what the business analyst indicated and documented during the requirements phase.
    In the mean time the budget is blown all to hell due to cost overruns, due to rework iterations required to meet the actual business requirements, rather than the incorrect original business requirements indications that were documented during the requirements phase of the project.
    This kind of thing occurs at IBM and all other large transnational companies that split project team resources into multiple geo locations, it especially occurs on highly complex project work when project members associated with cross tower teams in multiple GEO's that are part of required interlocks during project phases.
  • New York Times: Bogus Bush Bashing. By Paul Krugman. Excerpts: Meanwhile, the continuing allegiance of conservatives to tax cuts as the universal policy elixir prevents them from saying anything about the real sources of the federal budget deficit, in particular Mr. Bush's unprecedented decision to cut taxes in the middle of a war. (My colleague Bob Herbert points out that the Iraq hawks chose to fight a war with other people's children. They chose to fight it with other people's money, too.)
    They can't even criticize Mr. Bush for the systematic dishonesty of his budgets. For one thing, that dishonesty has been apparent for five years. More than that, some prominent conservative commentators actually celebrated the administration's dishonesty. In 2001 Time.com blogger Andrew Sullivan, writing in The New Republic, conceded that Mr. Bush wasn't truthful about his economic policies. But Mr. Sullivan approved of the deception: "Bush has to obfuscate his real goals of reducing spending with the smokescreen of 'compassionate conservatism.' " As Berkeley's Brad DeLong puts it on his blog, conservatives knew that Mr. Bush was lying about the budget, but they thought they were in on the con. [...]
    So where does the notion of Bush the big spender come from? In a direct sense it comes largely from Brian Riedl of the Heritage Foundation, who issued a report last fall alleging that government spending was out of control. Mr. Riedl is very good at his job; his report shifts artfully back and forth among various measures of spending (nominal, real, total, domestic, discretionary, domestic discretionary), managing to convey the false impression that soaring spending on domestic social programs is a major cause of the federal budget deficit without literally lying.
    But the reason conservatives fall for the Heritage spin is that it suits their purposes. They need to repudiate George W. Bush, but they can't admit that when Mr. Bush made his key mistakes — starting an unnecessary war, and using dishonest numbers to justify tax cuts — they were cheering him on.
  • New York Times: Deficit Demagogues. Excerpts: Less than a week after he denounced the "wayward path" of deficit spending to a gathering of 2,000 Republican Party stalwarts, Senator Bill Frist, the Senate majority leader and would-be president, was busy presiding over business as usual in the Senate. Last Thursday, Mr. Frist, 49 of his fellow Republican senators and one Democrat approved a $2.8 trillion budget for 2007. The budget vote came just hours after Mr. Frist and 51 other Republicans voted to raise the nation's debt limit for the fourth time in five years — this time by $781 billion, to nearly $9 trillion. All of that increase will be needed to pay for earlier tax cuts and spending increases, and, if the Republicans get their way on taxes, to pay for future deficit-financed tax cuts. [...]
    If leading Republicans were serious about the deficit, here's what they'd be saying: Let the tax cuts expire as scheduled in 2008 and 2010 unless the budget improves significantly before then. Republicans want voters to believe that the deficit is the result of spending increases alone — not tax cuts. That's false. The swing from a $236 billion budget surplus in 2000 to a $371 billion deficit today is a huge deterioration in the nation's fiscal balance, equal to 5.3 percent of the economy. Of that, fully 62 percent is due to lower tax revenues.
  • New York Times: George Bush's Trillion-Dollar War. By Bob Herbert. Excerpts: George W. Bush's war in Iraq was never supposed to be particularly expensive. Administration types tossed out numbers like $50 billion and $60 billion. When Lawrence Lindsey, the president's chief economic adviser, said the war was likely to cost $100 billion to $200 billion, he was fired. Some in the White House tried to spread the fantasy that Iraqi oil revenues would pay for the war. Paul Wolfowitz, the former deputy defense secretary and a fanatical hawk, told Congress that Iraq was "a country that can really finance its own reconstruction, and relatively soon." The president and his hot-for-war associates were as wrong about the money as they were about the weapons of mass destruction.
    Now comes a study by Joseph Stiglitz, a Nobel Prize-winning economist at Columbia University, and a colleague, Linda Bilmes of the Kennedy School of Government at Harvard, that estimates the "true costs" of the war at more than $1 trillion, and possibly more than $2 trillion. "Even taking a conservative approach and assuming all U.S. troops return by 2010, we believe the true costs exceed a trillion dollars," the authors say. [...]
    In an interview, Mr. Stiglitz said that about $560 billion, which is a little more than half of the study's conservative estimate of the cost of the war, would have been enough to "fix" Social Security for the next 75 years. If one were thinking in terms of promoting democracy in the Middle East, he said, the money being spent on the war would have been enough to finance a "mega-mega-mega-Marshall Plan," which would have been "so much more" effective than the invasion of Iraq. [...]
    It's not easy to explain just how much money $1 trillion really is. Imagine a stack of bills worth $1 million that is roughly six inches high. (Think big denominations — a mix of $100 bills and $1,000 bills, mostly $1,000's.) If the six-inch stack were enlarged to the point where it was worth $1 billion, it would be as tall as the Washington Monument, about 500 feet. If it were worth $1 trillion, the stack would be 95 miles high. Ms. Bilmes said that the $1 trillion we're spending on Iraq amounts to about $10,000 for every household in the U.S.
  • New York Times: State Department Is Criticized for Purchasing Chinese PC's. By Keith Bradsher. Excerpts: A State Department purchase of more than 15,000 computers built by the Lenovo Group of China is starting to draw criticism in the latest sign of American unease about the role of foreign companies in the American economy. The computers, worth more than $13 million, are coming from factories in Raleigh, N.C., and Monterrey, Mexico, that were part of the personal computer division that Lenovo purchased from I.B.M. last May. Sean McCormack, a State Department spokesman, said at the department's daily media briefing on Wednesday that the computers were intended for unclassified systems and would be serviced by the former I.B.M. division.
  • New York Times: Letter to the Secretary. By Paul Krugman. Excerpts: Dear John Snow, secretary of the Treasury: I'm glad that you've started talking about income inequality, which in recent years has reached levels not seen since before World War II. But if you want to be credible on the subject, you need to make some changes in your approach. [...]
    Now think about what happened in 2004 (the figures for 2005 aren't in yet, but it was almost certainly more of the same). The economy grew reasonably fast in 2004, but most families saw little if any improvement in their financial situation. Instead, a small fraction of the population got much, much richer. For example, Forbes tells us that the compensation of chief executives at the 500 largest corporations rose 54 percent in 2004. In effect, Bill Gates walked into the bar. Average income rose, but only because of rising incomes at the top.
    Speaking of executive compensation, Mr. Snow, it hurts your credibility when you say, as you did in a recent interview, that soaring pay for top executives reflects their productivity and that we should "trust the marketplace." Executive pay isn't set in the marketplace; it's set by boards that the executives themselves appoint. And executives' pay often bears little relationship to their performance. [...]
    According to the nonpartisan Tax Policy Center, once the Bush tax cuts are fully phased in, they will raise the after-tax income of middle-income families by 2.3 percent. But they will raise the after-tax income of people like yourself, with incomes of more than $1 million, by 7.3 percent. And those calculations don't take into account the indirect effects of tax cuts. If the tax cuts are made permanent, they'll eventually have to be offset by large spending cuts. In practical terms, that means cuts where the money is: in Social Security and Medicare benefits. Since middle-income Americans will feel the brunt of these cuts, yet received a relatively small tax break, they'll end up worse off. But the wealthy will be left considerably wealthier.
  • ZD-Net: Photos: A time capsule of computing. Excerpt: What's this pile of Legos? It's the first storage system ever used by Google. Co-founders Larry Page and Sergey Brin built it themselves. Hard drives at the time maxed out at 4GB, and they piled 10 into this Lego motel. Google took it offline in 1999 and gave it to Stanford University. Gates Hall at Stanford, one of the central buildings for the school's department of Computer Science, houses a collection chronicling 80 years of computing machines. This Google storage system is part of the display.
News and Opinion Concerning Health Savings Accounts and Medical Costs
  • CFO.com: The Case Against Health Savings Accounts. Asking employees to pay more for their care can be a plus on balance sheets but a minus on medical charts, say critics. By David M. Katz. Excerpts: But the strongest argument for HSAs, their advocates say, is that they encourage employees to be more cost-conscious medical consumers. Employees who lose their own money on medical care of their choice, the reasoning goes, will be more prudent about spending it than if an insurance company foots the bill. Such employees, therefore, could help shift market power from the supply side (that is, health-care providers) to the demand side (patients) and let some steam out of the relentless rise of health-care costs.
    But will short-term cost cuts be followed by larger longer-term expenses? Critics are arguing with increasing fervor that employees who control their own HSAs may be so cost-conscious that they delay medical care that they really need, only to incur greater costs when their conditions worsen. Indeed, new research confirms that ailing employees who have higher out-of-pocket requirements also end up in the hospital more often. [...]
    Another criticism is that by encouraging "adverse selection," HSAs would unravel the employment-based insurance system as a whole. HSAs "are attractive to healthier individuals, who will be tempted to opt out of company plans, leaving less healthy individuals behind," wrote Paul Krugman and Robin Wells in the March 23 issue of The New York Review of Books. Since the employees who remained in traditional plans would be less healthy, on average, insurers would have to charge higher rates to cover their increased risks.
  • New York Times: Illogical Cutbacks on Cancer. By Bob Herbert. Excerpts: The federal government has a national breast and cervical cancer early detection program, run by the Centers for Disease Control and Prevention. It provides screening and other important services to low-income women who do not have health insurance, or are underinsured. There is agreement across the board that the program is a success. It saves lives and it saves money. Its biggest problem is that it doesn't reach enough women. At the moment there is only enough funding to screen one in five eligible women.
    A sensible policy position for the Bush administration would be to expand funding for the program so that it reached everyone who was eligible. It terms of overall federal spending, the result would be a net decrease. Preventing cancer, or treating it early, is a lot less expensive than treating advanced cancer.
    So what did this president do? He proposed a cut in the program of $1.4 million (a minuscule amount when you're talking about the national budget), which would mean that 4,000 fewer women would have access to early detection. This makes no sense. In human terms, it is cruel. From a budget standpoint, it's self-defeating. [...]
    This is just one program in a range of cancer services that rely on support from the federal government. As if immune to the extent of human suffering involved, President Bush has proposed a barrage of cuts for these programs. "What's really amazing," said Mr. Smith, "is that the president cut every cancer program. He cut the colorectal cancer program. He cut research at the National Cancer Institute. He cut literally every one of our cancer-specific programs. It's incomprehensible." A bipartisan movement is under way in the Senate to block the president's proposed cuts. How that ultimately will fare is unclear.
  • New York Times: The Doctor Will See You for Exactly Seven Minutes. By Peter Salgo. Excerpts: The problem has been sneaking up on us for almost two decades. As health-care dollars became scarce in the 1980's and 90's, hospitals asked their business people to attend clinical meetings. The object was to see what doctors were doing that cost a lot of money, then to try and do things more efficiently. Almost immediately, I noticed that business jargon was becoming commonplace. "Patients" began to disappear. They were replaced by "consumers." They eventually became "customers."
    This may seem a trivial matter, but it is not. You treat "patients" as if they were members of your family. You talk to them. You comfort them. You take time to explain to them what the future may hold in store. Sometimes, that future will be bleak. But you assure them you will be there to help them face it.
    You treat "customers" quite differently. Customers are in your place of business to purchase health care. You complete the transaction such a relationship suggests: health care for money. And then they aren't your customers any more. Taken a step further, you can make the case that the less time you spend with your customers, the better your bottom line will be. This gets everyone's attention.
  • Chicago Tribune, courtesy of Blue Cross, Blue Shield Health Issues: Chrysler gives employees a new lease on work and life. By Jim Mateja. Excerpts: Last week we learned that the salaried workforce will pay health-care premiums according to their earnings starting Jan. 1. So executives who rake in the most dough will have to shell out the most for medical coverage, while the lowest paid workers won't pay $1 more for coverage. It's Chrysler's way to reduce health-care costs without the lowest paid having to suffer.
  • Atlanta Journal-Constitution: Too many eyes on personal health data. By Bob Barr. Excerpts: The most endangered species on the planet? It's not the snail darter. Or the Calabasas County jumping field mouse. No; it's the privacy of your medical information. In one of the worst examples ever of the federal government creating a problem, purporting to solve the problem and then making it much worse, the Congress and the Bush administration have made it all but impossible for you to maintain the confidentiality of your most personal information.

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. Some sample posts follow:
  • "IBM Pretty bad" by "pork". Full excerpt: I have a co-worker who recently left IBM as a band 8 and joined Towers Perrin ERP practice. The utilization target is 1600 hours per year. Any hour you bill over 1600 will be matched dollar for dollar to your hourly rate (internal) and that's your bonus. Seems pretty fair huh?
  • "let's do the math" by "sapgod". Full excerpt: Based on the current BCS 90% ute target and Dose' 25% payout: in BCS, work 2000 hours, 100% ute, 5% bonus (maybe) = 5k (tip) in the other place, 400 extra hours, * $200/hr rate, * 25% payout = $20k (now that is a bonus).... nothing to brag about, but a reasonable payout for the 2000hr/year effort.
  • "And from the other side" by "Dose of reality". Full excerpt: IBM gets an additional $80k in clear profit, for which it only had to pay $20k. That's a 300% return. Of course it isn't necessary, because once you've worked the extra 400 hours we have already gotten the $80k in profit. Now when you don't get rewarded for the extra effort, you will naturally leave and be replaced by another poor sap that will work on spec for a year or two.
    However, even in the short term, and presuming we can rehire like-for-like on paper, it is still not good policy, since it probably costs $20k in ramp up time, recruiting costs, salary bump, and risk that the replacement will not be able to produce like the previous employee.
    Add in what it does for the average effort of the rest of the rank and file, and the stupidity of our compensation policy is clear.
  • "Well there is always cannon fodder" by "wonderaboutibm". Full excerpt: There are always the saps you talk about. These are the eager beavers who really do work insane hours to get very high utilization, without realizing there is little in it for them. But maybe the sap pool is starting to dry up.
  • "Fodder quality" by "Dose of reality". Full excerpt: Unfortunately, there is a natural floor to the number of saps. There will always be ineffective job seekers, mistreated staff in other firms that are too anxious to make a move as quickly as they can, and plain run of the mill bottom feeders. We are rapidly becoming a magnet for them all. It is more likely that the quality issues provide the catalyst for change than a total drying up of the pool. All we can effectively do here is warn the otherwise employable.
  • "from outside looking in" by "sapgod". Full excerpt: One thing comes to my mind frequently is why so many people know how much profit IBM is sucking out of them and yet they are so dependent on the comfort zone and refuse to do nothing... we all see the billing rate we put in the time sheet and it takes less than 30 seconds to figure out IBM takes a BIGGER cut than anybody else out there.... The other big shops pay better, the smaller shops pay better, and contracting middlemen pay much better (i.e. takes a much smaller cut).
    With the posted Towers Perrin payout structure, $ for $ (how much is the "internal" rate for a band-8 equivalent?) The total payout is reasonable considering the today's environment with no corporate loyalty and job security.
  • "More thoughts" by "Dose of reality". Excerpts: Problems at BCS are not isolated to compensation. Our utilization rate targets (% of annual work hours that you should charge to clients) are at 90% or above and well above the industry norms. What that means is that there is always tremendous pressure for you to take whatever project that needs you when you become available, regardless of career fit, or geography. After a few weeks of bench time, you will never be able to make your targets. At those utilization levels, there are generally very few staff on the bench, so the odds of finding a good fit are very slim.

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.
  • From the Job Cuts Status & Comments page:
    • Comment 3/17/06: Lenovo has announced that it is making layoffs. According to an article in the News & Observer, "Lenovo will start notifying the affected employees next week and will finish by the end of the month" and "Some of the layoffs will be effective immediately". This means that at least some of those who will be laid off will go without their March 31st bonuses, too - as an extra slap in the face. -Anonymous-
    • Comment 3/18/06: I worked for IBM Endicott when it was sold off to EIT. If you were not with in a year of being 55 or with 30 years of service, you did not get the full IBM pension. What make you think it will be different with the Qualfuserve deal? -Anonymous-
    • Comment 3/18/06: There is a planned cut in ITS United States, because Delivery is not making its numbers. Microsoft practice is consistently brought up in conversations as a group with low utilization that will be hit hard. Does anyone have more info into ITS cuts, and in specific the Microsoft Practice? It used to have the highest utilization few years ago and seems like it is out of favor now. Any Layoffs? -Anonymous-
    • Comment 3/21/06: Dear Future Alliance@IBM Dues Paying Members: I've been researching the IBM/Lenovo deal since 12/8/04. I hope that at least one current Lenovo employee will send in to the Alliance@IBM a copy of the severance package, resource action or whatever it will be called. IBM has retained at least an 18% share in Lenovo unless that interest has been sold. Please let the Alliance know or me if that has changed. "As a company, we must continue to ensure that our business conduct and relationships remain consistent with what we write and say." Quote from IBM Executive. Steven Bergeron Alliance@IBM. uvm2000@aol.com. MA Rep @ Large
    • Comment 3/21/06: I am requesting that an IBM employee affected by the QUALxSERV transfer, please send in to the Alliance, any paperwork you've received from IBM. Are you being allowed to look for jobs internally? Given options to retire or bridge, how are your benefits affected with the transfer? The Alliance needs to study this transfer of IBM jobs. Steven Bergeron Alliance@IBM. uvm2000@aol.com. MA Rep @ Large
  • From the General Visitor's Comment page:
    • Comment 3/19/06: Good luck to Sam, for surely there will be justice on this earth. What a person sows so shall he reap. As one who was suddenly marched off the premises after a PBC of 2 and 25% annual bonus for good performance, I can only say I hope Sam has nightmares over the thousands of desperate families whose children, possibly parents, and entire lives have been ruined by IBM (eating cheap food with no nourishment, staying sick with no money to pay doctors, committing suicide due to no money to pay mortgage, divorced due to stress and being away from home whilst employed by IBM). I hope the "happy shareholders" are aware of these devastated families. For the current IBM employees, please try very hard to pay off your debt and save - you could be thrown out as trash at any time. Sometimes I wonder if the drainage of finances from the "Christian" countries to the non-Christian ones, is a precursor to the microchip and Armageddon! -Anonymous-
    • Comment 3/20/06: If you are planning to retire at the end of the year, you might want to take advantage of going into the next year and front loading the 401k. You are allowed to put as much as 80% of your salary into the IBM Savings Plan (TDSP). If you can afford to do that, you can make a big contribution in a short time early in the year, and then retire. You would not maximize the employer match, but you could make one last big splash before leaving. In addition, be aware that a rollover to an IRA means converting all your holdings to cash (inside the plan) first. Since you have no control over the actual timing of this conversion, you might force it ahead of time by moving funds from (say) the large cap stock fund to money market. Do it on an up-market day and the stock fund is likely not to drop. You have to submit the move before one PM eastern; and you can see the result around 9 or 10 the same night. It might be smart to move 10% at a time to protect yourself against an afternoon market drop. -Anonymous-
    • Comment 3/20/06: I am leaving the company because of the travel. While she may not be a trophy wife, my spouse takes care of the kids and me pretty well. Because of my being away, she has added extra locks and barricades to the doors. After too many times leaving home on Sunday afternoon and returning late Friday night; and getting phone calls from the kids on weeknights asking for help with their homework, I realized that I was doing something wrong. I was preferring the lure of money over time with my family. We won't be able to travel to Europe like we used to, but we will deal with that homework face-to-face every night. -Anonymous-
    • Comment 3/21/06: I'm tired of giving more and more to this company and getting less and less. How come the executive compensation keeps increasing and mine keeps decreasing? I feel I am lucky to still have a job considering all the layoffs but how much abuse should we take while the executives earn more? I'm just about fed up with this poor excuse for a company. -Anonymous-
    • Comment 3/23/06: I've been reading the comments on this message board and feel like I am not alone in the abuse I've had with IBM. I feel like this company has abused me beyond belief. This company needs a union to fight back. I am joining the Alliance and urge all IBM employees to do the same. Let's get the IBM that we all love back into the employees hands and out of the abusive executives. -Anonymous-
    • Comment 3/23/06: IBM seems to have major issues in the hiring department when it comes to entry level positions. Any horror stories that can be used in defense of major ongoing trial please email to jed@consultant.com
    • Comment 3/24/06: Employees can't talk to Media?!?!?! Pardon my English, but F*$K that. Who do they think they are? -Anonymous-
  • Pension Comments page

Modern-Day Robber Baron Corner
Today's highly compensated executives face many difficulties, including figuring out how they can possibly spend all of the rich rewards they've earned on the backs of ordinary workers. Take a look at the insider trading of many of our IBM executives—spending the cash from all that stock "acquired at $0 per share" must be a real challenge! Or, imagine the difficulty IBM CEO Sam Palmisano will face spending his $10,000 a day pension when he retires!
As a way of helping out our beleaguered, modern-day robber barons this site will periodically feature "spending opportunities" that the "upper crust" of our society may want to take advantage of!
  • BusinessWeek: A Rich Market for Decadent Digs. Wealthy buyers are snapping up trophy homes at a record pace -- and now, they're looking beyond the sunny states. By Janie Ho. Excerpts: Imagine this: You're bored with the pristine white terrace of your New York loft and flee to a historic villa on the French Riviera. Or maybe you've got your heart set on a glass-enclosed penthouse in Australia -- or a waterfront mansion in Barbados. Can't decide? Such is the enviable plight of many people around the world: They can't decide which luxury home to buy. "There's an extraordinary amount of wealth out there," says Corcoran Group CEO Pamela Leibman. According to Liebman, there's "no limit on what people will spend on trophy real estate."
  • New York Times Magazine: Vacation-Home Hunter: Club Med for the Multimillionaire Set. By Susan Dominus. Excerpts: Yellowstone Club World, as Blixseth envisions it, will provide housing and staff at nine luxury resorts for the several hundred members whom he hopes to start signing up in August. As many as 150 members of the club will pay initiation fees ranging from $3.5 million to $10 million; in addition, current members of the Yellowstone Club will be able to join for a lower fee. In exchange, members will have access, whenever they want, to the club's various vacation properties, all of which, Blixseth says, must have enough rooms and space to afford ample privacy if guests overlap, but also have what he calls "the wow factor" — some feature so lavish that even the extraordinarily wealthy would be impressed. A private golf club located just down the road from Scotland's St. Andrews, the historical home of the sport? That qualified for Blixseth, who purchased the club in late August. A sprawling 14th-century chateau half an hour outside Paris with amenities that include four dining areas, a fully functioning spa, a 75-foot-long pool and 1,000 acres of land? That multimillion-dollar property qualified, as did a stretch of Pacific coastline in Mexico, a resort property for which Blixseth says he paid more than $40 million. He has also purchased a resort in the Turks and Caicos islands, a famous fly-fishing lake near Cody, Wyo., and 647 acres of land near his own home in Palm Springs. [...]
    The number of Americans worth more than $30 million jumped by 10 percent last year, and according to the Mendelsohn Affluent Survey, which tracks the spending of various income groups, most millionaires splurge more on their second homes than on their first homes, frequently spending twice as much. "There's this huge appetite for families to spend quality time together and it's not happening in their primary residences," Blixseth says. Vacation, he contends, is the time when people want the home cinema, the guest house for friends, the vast common spaces and game rooms and hot tubs.
    As the number of millionaires increases, it cuts into the exclusivity of high-end, but ultimately public, hotels like the Four Seasons or the Ritz. And with privacy at a premium, the desire for a truly secluded spot has only grown. Perhaps as a result, the number of people owning three or four homes has increased in recent years, as has the number of exclusive private residence clubs like Yellowstone Club World, although Blixseth's is by far the most extravagant one formed yet. (A club called Legendary Retreats, for example, charges a membership fee of $1.5 million and offers members access to homes worth an average of $8 million.)

"The test of our progress is not whether we add more to the abundance of those who have too much; it is whether we provide enough for those who have too little." — Franklin D. Roosevelt
This site is designed to allow IBM Employees to communicate and share methods of protecting their rights through the establishment of an IBM Employees Labor Union. Section 8(a)(1) of the National Labor Relations Act states it is a violation for Employers to spy on union gatherings, or pretend to spy. For the purpose of the National Labor Relations Act, notice is given that this site and all of its content, messages, communications, or other content is considered to be a union gathering.