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    Highlights—April 8, 2006


A Brief History of Cash Balance Pension Plans and IBM
In response to a question from another message board participant, Janet Krueger posted the following message on Yahoo!'s IBM Pension message board:
Did you just crawl out from underneath a rock??? Cash balance plans are NOT 401K plans.
Cash balance plans are a form of hybrid defined benefit plan invented by consultants about 15 years ago to help employers cut worker benefits without the workers understanding what was happening to them.
IBM converted to a cash balance plan in 1999 and in the process cut the benefits of many older workers by as much as 50%. This board was created in the wake of the outcry that ensued. Kathi Cooper filed a lawsuit against IBM because of the pension changes -- that suit is known as Cooper v IBM, and in it, a federal district judge ruled IBM's cash balance plan to be illegally age discriminatory. More information about the lawsuit is available at http://www.allianceibm.org/pensionlawsuitfaq
It should be noted that the IBM board of directors was fully informed, before the conversion, that cash balance plans were illegal. They gambled that employees being hurt would not file a lawsuit and that, if they did, Congress would rescue them with 'reform' legislation.
In August 2005, Judge Murphy finalized a settlement of that lawsuit. As stipulated in the settlement, IBM is appealing two points of law that were raised in the lawsuit:
  1. Cash balance plans are illegally age discriminatory.
  2. The starting balances were illegally age discriminatory, because younger employees received higher opening balances under a formula called "always cash balance."
If IBM wins the appeal, IBM employees and retirees will split $318 million. If IBM loses, IBM employees and retirees will split $1.7 billion.
IBM, of course, is not satisfied with playing by the current rules. That is why they have spent over $33 million lobbying in Congress to get cash balance plans legalized. And of course it is the lobbying dollars that have convinced people like Rep Boehner to introduce the Pension Reform Act of 2005 -- one of the express purposes of that act is to RETROACTIVELY legalize cash balance plans so that IBM can keep $1.4 billion that rightly belongs to their employees and retirees. The only way we can counteract IBM's lobbying dollars is to let our senators and representatives know that we VOTE and that we will scream loud enough and persistently enough to influence other voters.
There is a document on www.ibmemployee.com titled "CASH BALANCE LEGISLATION: MYTH VERSUS FACT" which does a great job of poking holes in the cash balance myths being spread on capital hill, one of which being that there is no difference between a cash balance plan and a 401K plan. PLEASE READ IT!!!
Let me echo the plea to the rest of you. PLEASE write to each of the members of the conference committee that have been assigned to merge the house and senate bills and let them know you will be outraged if they retroactively legalize cash balance plans, thereby reducing your settlement money and encouraging other companies to also cut promised pensions.
  • Yahoo! message board post by Janet Krueger. Full excerpt: Actually, on second thought, I'd be willing to bet that IBM wants to divert people from talking to Congress... While we did not convince either the house or the senate that cash balance conversions are nothing more than a scam to help employers cut promised pension benefits, we DID convince them not to legalize cash balance plans retroactively. Remember that if Congress legalizes cash balance plans retroactively, the Cooper settlement will be reduced by $1.4 billion!!!
    Several legislative staff people said last week that the continuous refrain from the corporate lobbyists that their employers need 'relief from the threat of lawsuits' has convinced their bosses that retroactive legislative is this only thing that will 'save' the american defined benefit system.
    Congress has either lost sight of the fact that many of their constituents vehemently object to legalized pension theft under the guise cash balance conversions and other reductions (which in some cases could even be used to reduce pension checks from retirees who are already collecting!!!) or they believe our memories are just as short as their memories, so retroactive legalization won't stop them from getting reelected in November.
    According to opensecrets.org, IBM has lavished over $30 million on lobbying Congress since Cooper was filed in 1999. There is a SERIOUS threat that money is drowning out our voices of reason.
    PLEASE, if you haven't contacted Congress in the last month, get the list of conferees on the pension reform bill and CALL each of their offices. Talking points are listed here: http://finance.groups.yahoo.com/group/ibmpension and a list of the conferees, with their phone numbers, is in the FILES area of that board. (Editor's note: The list of conferees and the talking points are also listed in the first item of the March 11th edition of these highlights.)
    If you haven't been paying attention to the discussions about what is going on, a good summary is available at http://www.ibmemployee.com/.
  • Wall Street Journal: Workers' Views On Retirement May Be Too Rosy. By Kelly Greene. Excerpts: Despite recent moves by large companies to freeze pensions and chip away at retiree-health benefits, Americans remain confident -- if dangerously naïve -- about their retirement prospects, according to new research.
    Many workers are counting on traditional pension plans to pay their bills in retirement, even though such plans are fast disappearing. Only 40% of working couples currently are covered by pension plans, but nearly two-thirds of surveyed workers -- 61% -- expect to get income from such a plan in retirement, according to the Retirement Confidence Survey, scheduled for release today by the Employee Benefit Research Institute, a Washington nonprofit, and others. [...]
    Most of the people surveyed "probably hadn't heard yet that IBM was freezing its pension plan," says Jack VanDerhei, a professor at Temple University in Philadelphia and co-author of the institute's report. "And they certainly hadn't heard about GM," which has diluted pensions for salaried workers and offered buyouts to unionized workers in the past few months. "Next year, my guess is that retirement confidence will go down as a result." [...]
    Just over half of workers ages 55 and older said that they and their spouse have accumulated less than $50,000 in retirement savings. Only one-quarter of workers ages 55 and older have saved more than $250,000 for retirement -- but 55-year-olds who live to age 90 are expected to need $210,000 (starting at age 65) for medical expenses alone.
    The finding shows "the incredible overestimate that younger individuals have of winding up in a defined-benefit plan," says Jack VanDerhei, a professor at Temple University in Philadelphia and co-author of the institute's report. After analyzing the results by age in more detail, he concluded that "it doesn't matter if you're above or below age 45 -- you still think you're going to have a 60% chance of winding up" with a pension.
    For example, International Business Machines Corp. said in early January that it will freeze its U.S. pension plan in 2008. Mr. VanDerhei predicts that "a number of large employers will follow suit. Once they saw that IBM was able to do it, they're probably going back and doing a much more detailed analysis on what [freezing their pension plans] would do for them."
  • USA Today: Optimism about pension prospects may not be realistic. By Sandra Block. Excerpts: Given the recent moves by General Motors, IBM and other major employers to slash their pension benefits, counting on a pension is like continuing to believe in Santa Claus after catching your dad putting presents under the tree. Yet, despite evidence to the contrary, 61% of workers expect to receive income from a traditional pension when they retire, according to a survey scheduled for release today by the Employee Benefit Research Institute. [...]
    A recent EBRI analysis looked at a hypothetical 50-year-old worker who was earning $70,000 a year when his pension was frozen. The analysis assumed the worker had been at the company since age 30, planned to retire at 65, received an annual raise of 3% and had a "final average" pension, which is based on the number of years worked and the worker's salary during his final years.
    A pension freeze would reduce his annual benefit to $13,596 from $35,989. The worker would need to save nearly $300,000 in his 401(k) to buy an annuity that would replace the lost pension benefits, the analysis found.
  • Washington Post Writers Group: The Collapse of Our Retirement System. By Marie Cocco. Excerpts: When it comes to pensions, it's time to think big. As in six-figure sums. As in, say, $300,000. That is roughly what a 30-year-old employee would have to save to make up for the monthly income lost when a corporation ``freezes'' a traditional pension that would have paid a higher -- and guaranteed -- benefit at age 65. Millions of Americans who were promised a traditional pension in rough exchange for lower pay throughout their working lives now see their pensions unilaterally ``frozen,'' even by -- sometimes especially by -- healthy companies looking to save a buck.
    At first they say they feel they've been kicked in the stomach, or left to contemplate retired life as a discount-store clerk. ``At least if I don't have any retirement, I still have your brand name imprinted on my back from where you left your boot print,'' a 20-year directory-assistance operator wrote on a Verizon employees blog after the profitable telecommunications giant said it would freeze contributions to its pension plan for nonunion workers -- thus slashing promised benefits. [...]
    Maybe there are millions of middle-class Americans who can save $300,000 while paying the mortgage, supporting the kids and putting gas in the car. But there's no evidence this is so. The median balance in a retirement account held by people between 55 and 64 is $60,000, according to recent Federal Reserve data analyzed by the Boston College Center for Retirement Research.
    For nearly three decades, we've been told there is a retirement crisis. For nearly as long, we've been offered one answer by the conservative Republicans who've dominated Washington: Do it yourself. Here's your 401(k). Good luck. A savings account is supposed to be the answer to a corporate culture that dumps workers' pensions as if they were industrial waste. And they are, in fact, just the thing for high earners who are able to save the most, and get the greatest tax advantage because they are in the highest tax brackets. [...]
    Much of official Washington still is blind to the imminent collapse of the current retirement system and its corruption from corporate greed. Americans see it all too clearly. They wait, now, for someone in power to view it through their eyes -- and finally act.
  • USA Today: Will your pension be there? Congress may raise risk. Excerpts: The Bush administration has been pushing for years to shore up the nation's increasingly shaky private pension systems. As Vice President Cheney put it at a Washington conference in March, "If you put in your hours, and do your part ... your promised pension will be there for you when you retire."
    Or will it?
    Congress now appears poised to deliver just the opposite, giving companies new leeway to fake their pension math. More pensioners would be placed at risk. Chances that taxpayers will be stuck with a huge bill would rise significantly.
  • Seattle Post-Intelligencer: Labor official notes pension disparities. By Bill Lester, Associated Press Writer. Excerpts: The AFL-CIO, pushing for more federal regulation of lucrative corporate salaries and pensions, released information Thursday about some of the sweetest executive retirement deals in the country.
    "As corporate America is slashing workers' pensions left and right, we think investors and the public should know about the huge pensions these CEOs are raking in," said Richard Trumka, secretary-treasurer of the AFL-CIO. [...]
    Trumka said average executive pay at a company on the Standard & Poor's 500 is already more than 400 times the average worker's wages. And many executives now get multimillion-dollar "supplemental executive retirement plans" at a time that many companies are cutting back on reliable "defined benefit" retirement plans for workers, he said. [...]
  • The Journal News (Westchester, Rockland and Putnam Counties in New York): AFL-CIO slams lavish executive pensions, including IBM CEO's. By Julie Moran Alterio. Excerpts: Samuel J. Palmisano, chairman, chief executive officer and president of Armonk-based IBM Corp., has the fifth-most generous pension benefit among top U.S. executives. Palmisano, 54, is set to take home $4 million a year when he retires, or nearly $77,000 a week, according to an analysis by the AFL-CIO. [...]
    IBM spokesman Clint Roswell said the 2008 pension freeze will affect Palmisano as well as average employees. However, the AFL-CIO noted that Palmisano, who joined IBM in 1973 as a salesman in Baltimore, will have accrued 34 years of pension service out of a maximum of 35 years by that time. Roswell defended Palmisano's retirement benefits by noting his long-term commitment to Big Blue. "This is a person who has labored hard and rose through the ranks and has given a large part of his life to this company. He has given a lot. He's earned his pension," Roswell said.
    Palmisano's pension benefits will be challenged at the company's annual meeting on April 25 in Tulsa, Okla., said Burlington, Vt., resident Ralph J. Montefusco, an organizer for the Alliance@IBM, a group of current and former employees trying to unionize IBM workers. "His $4 million annual pension isn't surprising," Montefusco said. "People who have given their lives to IBM are seeing their pensions cut, medical insurance dissolved, jobs eliminated and their communities devastated. This is a prime example of the corporate greed which is leading to the destruction of our middle class."
  • AFL-CIO: IBM Case Study. Excerpts: IBM CEO Samuel J. Palmisano will receive an estimated annual retirement benefit of $4,000,000 when he retires. Under IBM’s Supplemental Executive Retention Plan, Palmisano’s yearly pension benefit is calculated based on his average annual salary and bonus of his five highest consecutive years of compensation.
    While Palmisano can look forward to a guaranteed annual pension for the rest of his life, many IBM employees will not be so lucky. IBM recently announced that it will freeze all its workers’ pensions beginning in 2008. The company said this move will help make pension costs “more predictable” and save up to $3 billion over the next few years. [...]
    When IBM’s expected pension freeze goes into effect in 2008, Palmisano will have earned approximately 34 years of pension service out of a maximum of 35 years. This is not the first time that Palmisano has had fortuitous pension timing. Palmisano’s pension formula also was exempted from IBM’s pension changes in 1999.
  • Huntington (West Virginia) Herald-Dispatch: New pension laws must be based in reality. Excerpts: Experts in the field of retirement planning must live in a parallel universe, one that never intersects with the reality of living in places such as West Virginia. [...]
    Jack VanDerhei, co-author of the study, told The Associated Press that people would save more if they took the time to project what their costs in retirement are likely to be. Workers should set aside at least 15 percent of their earnings toward retirement, he said.
    That sounds logical in some areas, but not in all. According to the Census Bureau, about half the households in West Virginia have incomes of $32,589 a year or less. That's the least in the nation. A 15 percent cut of $32,589 is just short of $5,000 a year. That's a pretty big cut out of a limited household budget.
    How are people living on less than $40,000 a year supposed to set aside $5,000 to $6,000 for retirement when the cost of energy keeps rising? When the basic cost of raising a family keeps going up? When they want to help their children through college, even as tuition and other costs rise 8 percent or more per year?
  • Employee Benefit News: Sponsors need to plug the plusses of pension plans. By Steve Davolt. Excerpts: It is definitely not the best of times for defined benefit pension plans, and plan sponsors and participants know it. But for those plans that remain intact and solvent, some experts are saying it is high time to promote their value to workers.
    In the meantime, benefit experts believe businesses haven't done enough to promote extant DBPs as tools for recruitment and retention. "There has not been a lot of proactive communication on the value of pension plans," admits Buck Consultants principal Don Sanford. "Defined benefit plans are the most misunderstood, least communicated and highly valuable benefit that an employee can have. We don't think it's got the kind of spotlight it should have relative to employee engagement."
  • Yahoo! News: Judge Allows Lawsuit Against Fleet Bank. By By Adam Geller, AP Business Writer. Excerpts: An employee of the former Fleet Bank can move ahead with a lawsuit accusing her company of discriminating against thousands of older workers when it switched to a new type of pension plan, a federal judge has ruled. The preliminary ruling by U.S. District Judge Janet Hall in Bridgeport, Conn., focuses on cash balance plans. Many large companies embraced cash balance as an alternative to traditional pensions in the late 1990s, before controversy erupted over whether the plans unfairly penalized workers with many years of experience. [...]
    Hall's ruling, dated March 31 and entered Monday, will likely be closely scrutinized because the case against Fleet — now owned by Bank of America Corp. — largely echoes a widely publicized case against IBM Corp. In that case, IBM has agreed to settle for up to $1.4 billion should it lose on appeal. Ironically, Bank of America is credited with creating the nation's first cash balance plan, back in 1985. [...]
    Fleet designed a plan that was so complex many of those workers might not realize they were short-changed, said Thomas Moukawsher, the Hartford attorney representing Richards. "She (Richards) has three master's degrees and she couldn't figure out how this plan worked and that is one of the things about cash balance plans is that they're extremely difficult for people to figure out," Moukawsher said.
  • Yahoo! message board post by "scall0way". Full excerpt: Well the layoffs are starting in my organization. The ADM group had a meeting back in December, and they were told 50% of them would be gone by the end of July - replaced by Indians whom they would be expected to train before getting the axe.
    Some of the Indians are here. They are being brought over here for 4-6 months to learn the ropes, and then will be going back to India to do the job. The first ones have been here a couple months so far. I understand that a number of people have been given 30 days notice this week. They were told they can't look for another job within IBM, and they will get a flat 2 weeks pay, and that is it. No sure of severance pay or package at all.
  • Houston Chronicle: DeLay can get pension as soon as he resigns. He is eligible for $67,000 a year, which would be unaffected by state convictions. By Samantha Levine. Excerpt: The Sugar Land Republican, who will turn 59 on Saturday, would get a total of about $1.3 million in pension payouts in the next 20 years alone. DeLay also will be eligible to participate in the health plan available to all federal retirees.
  • New York Times: Looking at the Free Market, and Seeing Red. By Randall Stross. Excerpts: LOU DOBBS is a master of the sinister tease. Last month, he was in top form. Previewing a story, he told viewers of his nightly CNN newscast that when the State Department seeks secure network communications, it "turns to Communist China," and thus renders the United States "perhaps more vulnerable than ever."
    The story turned out to be another Lou Dobbs exercise in bashing immigrants, or, more precisely, bashing a single immigrant: Lenovo, the PC maker originally based in China that last year acquired I.B.M.'s PC division and is now based in Raleigh, N.C. Lenovo recently won a competitive bid to sell the State Department $13 million worth of personal computers. Mr. Dobbs, like some politicians on Capitol Hill, suggests that those PC's could provide shadowy spooks in the Chinese government with an ideal means of conducting espionage.
  • New York Times: Big Gain for Rich Seen in Tax Cuts for Investments. By . Excerpts: The first data to document the effect of President Bush's tax cuts for investment income show that they have significantly lowered the tax burden on the richest Americans, reducing taxes on incomes of more than $10 million by an average of about $500,000.
    An analysis of Internal Revenue Service data by The New York Times found that the benefit of the lower taxes on investments was far more concentrated on the very wealthiest Americans than the benefits of Mr. Bush's two previous tax cuts: on wages and other noninvestment income. [...]
    The analysis found the following:
    • Among taxpayers with incomes greater than $10 million, the amount by which their investment tax bill was reduced averaged about $500,000 in 2003, and total tax savings, which included the two Bush tax cuts on compensation, nearly doubled, to slightly more than $1 million.
    • These taxpayers, whose average income was $26 million, paid about the same share of their income in income taxes as those making $200,000 to $500,000 because of the lowered rates on investment income.
    • Americans with annual incomes of $1 million or more, about one-tenth of 1 percent all taxpayers, reaped 43 percent of all the savings on investment taxes in 2003. The savings for these taxpayers averaged about $41,400 each. By comparison, these same Americans received less than 10 percent of the savings from the other Bush tax cuts, which applied primarily to wages, though that share is expected to grow in coming years.
    • The savings from the investment tax cuts are expected to be larger in subsequent years because of gains in the stock market. [...]
    Because of the tax cuts, even the merely rich, making hundreds of thousands of dollars a year, are falling behind the very wealthiest, particularly because another provision, the alternative minimum tax, now costs many of them thousands and even tens of thousands of dollars a year in lost deductions.
  • Der Spiegel (Germany, English edition): Interview with Nobel Laureate Joseph Stiglitz: "The War Is Bad for the Economy". Nobel Prize winning economist Joseph Stiglitz, 63, discusses the true $1 trillion cost of the Iraq conflict, its impact on the oil market and the questions of whether the West can afford to impose sanctions on Iran.
  • New York Times: Off to the Races Again, Leaving Many Behind. By Eric Dash. Excerpts: In 1977, James P. Smith, a shaggy-haired 21-year-old known as Skinny, took a job as a meat grinder at what is now a ConAgra Foods pepperoni plant. At $6.40 an hour, it was among the best-paying jobs in town for a high school graduate. Nearly three decades later, Mr. Smith still arrives at the same factory, shortly before his 3:30 a.m. shift. His hair has thinned; he has put on weight. Today, his union job pays him $13.25 an hour to operate the giant blenders that crush 3,600-pound blocks of pork and beef.
    His earnings, which total about $28,000 a year, have not kept pace even with Omaha's low cost of living. The company eliminated bonuses about a decade ago. And now, almost 50, Mr. Smith is concerned that his $80,000 retirement nest egg will not be enough — especially since his plant is on a list of ones ConAgra wants to sell. "I will probably have to work until I die," Mr. Smith said in his Nebraskan baritone.
    Not so for Bruce C. Rohde, ConAgra's former chairman and chief executive, who stepped down last September amid investor pressure. He is set for life. All told, Mr. Rohde, 57, received more than $45 million during his eight years at the helm, and was given an estimated $20 million retirement package as he walked out the door.
    Each year from 1997 to 2005, when Mr. Rohde led ConAgra, he was awarded either a large cash bonus, a generous grant of stock or options, or valuable benefits, such as extra years' credit toward his guaranteed pension.
    But the company, a food giant with more than 100 brands, struggled under his watch. ConAgra routinely missed earnings targets and underperformed its peers. Its share price fell 28 percent. The company cut more than 9,000 jobs. Accounting problems surfaced in every one of Mr. Rohde's eight years.
    Even when ConAgra restated its financial results, which lowered earnings in 2003 and 2004, Mr. Rohde's $16.4 million in bonuses for those two years stayed the same.
Exciting News Today from the Pension Rights Center
The following news from the Pension Rights Center was posted on the Yahoo! IBM Pension board by Janet Krueger. Full excerpt:
Late this afternoon, Representative George Miller (D-CA) introduced a Motion to Instruct the House pension bill conferees to adopt the cash balance provisions of the Senate bill that protect older workers in cash balance conversions. The motion passed 248-178!
In an impassioned and effective statement, Representative Miller said that the House provisions provide older workers with "very little opportunity to recover retirement nest eggs that...were unilaterally ripped away from them."
There were several strong speeches on the Floor both supporting and opposing Mr. Miller's Motion. Several key Representatives, Democrat and Republican, spoke out in favor of the motion to instruct, including Representatives Dennis Kucinich (D-OH), Robert Andrews (D-NJ), Bernie Sanders (D-VT), Gil Gutknecht (R-MN), and John Tierney (D-MA). However, there were some Members, such as Stephanie Tubbs Jones (D-OH), who supported the Motion but also left the door open for some kind of retroactivity. Everyone who spoke up for EMPLOYEES should be thanked, especially Congressman George Miller who led the charge on your behalf.
The opposition was led by Congressman Buck McKeon (R-CA). Others who OPPOSED Congressman Miller's Motion include Congressman John Kline (R-MN), who is a conferee, and surprisingly, Congressman Earl Pomeroy (D-ND), who was the only Democrat to oppose the motion. You should definitely get in touch with Congressman Pomeroy's office and let him know that you are surprised that he OPPOSES worker protections for older employees.
We will get you the full list of how Representatives voted on the Motion to Instruct tomorrow. You should keep in mind that the motion originally failed on a voice vote, but when members will asked to put their votes on the record, they knew they had to vote in YOUR favor.
The Pension Rights Center had drafted a press release http://www.pensionrights.org/pages/40606.htm supporting the Motion to Instruct.
Congress on Easter Recess Next Week Next week: Members of Congress will begin on their two week Easter recess, which will last from April 10 to April 21. Just as with the last Recess, this is the perfect opportunity for everyone to let their Senators and Representative know that they should protect older workers as they consider the pension reform legislation (H.R. 2830 and S. 1783). This is particularly true if your Senators or Representative are on the Conference Committee that is considering the pension legislation. YOU SHOULD TRY TO GET MEETINGS WHILE YOUR REPRESENTATIVES AND SENATORS ARE HOME. They need to hear from employees, especially on the cash balance issue and on the Red Zone amendments. We've attached a list of several key issues in the two pension bills.
To find contact information for House members in their district offices, visit http://www.house.gov/ and enter your zip code. To find contact information for Senators in their district offices, visit http://www.senate.gov/ and select your state from the drop-down menu in the upper-right hand corner.
Lott says "No" to Defined benefit plans. A Reuters article yesterday said that Senator Lott believed "the goal should be to give employers a way to freeze and then pay off the underfunding in defined benefits plans so they could move to defined contribution plans." His direct quote, "You've got to get away from defined benefit plans."
Those of you from Mississippi may want to write to Senator Lott and ask him if he's willing to get rid of HIS good congressional pension plan and switch to a 401(k). Although we haven't yet computed Senator Lott's pension, the Congressional Research Service reports that a Member of Congress with 22 years of congressional service who retired in 2004 would get a nice pension of $84,847 a year. Trent Lott has been in the Senate for over 30 years and still has a few years to retire. He'll certainly retire with a healthy pension. We wonder how he would feel if suddenly his pension was changed to a defined contribution plan. Senator Lott, as far as we know, is supporting the cash balance provisions of the pension bill.
We'll get you more information early next week, including new strong message to send to the conferees. It is going to be more important than ever that we keep the pressure on conferees. As the debate on the Floor showed today, we can put pressure on Republicans and Democrats alike to support employee and retiree pension rights!

News and Opinion Concerning Health Savings Accounts, Medical Costs and Health Care Reform
  • New York Times: Massachusetts Set to Offer Universal Health Insurance. By Pam Belluck. Excerpts: Massachusetts is poised to become the first state to provide nearly universal health care coverage after the state legislature overwhelmingly passed a bill today that Gov. Mitt Romney says he will sign.
    The bill does what health experts say no other state has yet been able to do: provide a mechanism for all of its citizens to obtain health insurance. It accomplishes that in a way that experts say combines several different methods and proposals from across the political spectrum, apportioning the cost among businesses, individuals and the government. [...]
    Individuals who can afford private insurance will be penalized on their state income taxes if they do not buy it. Government subsidies to private insurance plans will enable more of the working poor to be able to afford insurance and will expand the number of children who are eligible for free coverage. And businesses with more than 10 workers that do not provide insurance will be assessed a fee of up to $295 per employee per year. [...]
    In particular, Mr. Romney pushed the idea of the "individual mandate," requiring people who can afford health insurance to buy it, in the same way that drivers are required to have auto insurance. The bill makes it possible for employers to enable many of those people to use pretax dollars, saving them 25 percent or more.
    One element that Mr. Romney and some legislators did not want was the fee for employers who do not provide health insurance. For several months the bill seemed stalled because the state House and Senate leaders could not agree on the issue of charging businesses or on how much to charge them. One proposal of an $800-per-employee charge was reduced to a maximum of $295 that will be reduced as more and more people become insured, Mr. Travaglini said.

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:
  • "advice?" by "eng909". Full excerpt: I am an entry level new hire who joined BCS in November of last year. Lately I have become more and more concerned about my career progression. My issue is as follows: I came into this practice with a fairly in depth grasp of several deployable skills, which I had hoped to sharpen through addition practical application(WebSphere, J2EE), and perhaps in the process pickup new ones. The resource deployment process however, appears to be one of "first and quickest fit", where there is not much correlation between the project role and your skills inventory/career track. For instance, I was staffed into my current role because I spoke a foreign language, although in a somewhat fragmentary fashion. The job requires no functional/technical expertise, and as opposed to learning new skills, my existing ones have atrophied due to lack of use. I have tried to demonstrate my additional competencies in order to obtain an expanded role on the project, but my project manager aggressively attempts to prevent the flow of my time onto other focus areas, which while I understand is a natural reaction on her part to preserve the health of her project, it pigeonholes me into a fairly trivial role.
    So my concern is this, if we are not able to get onto project roles where we can expand/establish our skill sets, and there is not much formal training available, where is the career progression? Is this a perpetual burn cycle where entry level hires are placed into entry level roles, and mid career professionals are placed into skilled roles, and each are then locked into that level and worked until they burn out or realize that their natural intuition about career progression isn't really in effect here?
    This is only my first project, and I hope that I'm merely overreacting, and what my PDM said is true and not some standard company spill, that this is just to get my feet wet, and other projects will be different. I'm not so sure though. Any practical feedback? I have been told that additional certifications would help, which I'm currently pursuing. What are you guys thoughts? Whoa long rant. ok back to work!
  • "You're too smart to stay here" by "Dose of reality". Full excerpt: Your post belies perception and analytical skills that tells me that you don't belong here. The truth of the matter is that our approach to staff management is strictly focused on the expedience of meeting project needs. That applies to staff assignment, skill development, compensation, and as you observed, tactical project management. Your needs are not even considered in the equation.
    There is nothing that you can do to change that, short of finding one of the rare partners that understands what needs to be done to build a practice - build up the individuals in the practice.
    The easier answer is to find a firm that consistently manages its resources in this manner.
    My advice to you is the same as to anyone else that works here under the current regime and culture. Execute an exit strategy ASAP
  • "Dose is right" by "mogrits". Full excerpt: You're obviously too intelligent to work at the Blue Pig. Move on as quickly as you can. There has been no career enhancements available at IBM for the last several years and I don't see that changing, EVER.
  • "An additional point" by "Dose of reality". Full excerpt: Another aspect about SO (strategic outsourcing) that I find distasteful from the perspective of a consultant is that they always seem to be playing defense. They oversimplify the technology and backfill the client business processes to fit it, and then make the processes restrictive to keep execution costs down. Then they back it up with volumes of contractual limitations to keep the clients in line. They are the antithesis of customer service. It is indeed "on demand", but IBM is the party that is allowed to do the demanding.
  • "Ah yes" by "Frank_Reality". Full excerpt: Ah yes, the old "out of scope" tactic customers here. SO also uses a "scorched earth" strategy which quickly eliminates the client's staff such that the customer no longer has a viable option of bringing the work back. Meanwhile, the account managers can't understand why customer satisfaction is so low.
  • In a series of seven posts, "DM Bingham" provides a very interesting history of IBM Global Service's Strategic Outsourcing organization:
    • SO - the early years
    • SO - 2001
    • SO - 2002
    • SO - 2003
    • SO - 2004 Excerpt: In late 2003, the SO Management had decided that their current business could not support the staffing then on board. The 20 % headcount reduction was applied to most areas including the Delivery proposal development organization. In January, the Sprint Deal was announced with great fanfare; Palmisano gave himself a $ 5 M bonus and awarded $ 1 M to Zapfel. This news, followed as it was by Joyce's sleight of hand Variable Pay reductions, demoralized the troops and still does today. JJ invented a new performance measurement called GIM, whose exact calculation has never been made public, to reduce bonus payments. This trick is still in place today. No one knows how to tailor their behavior to meet it and everyone fails to achieve it.
    • SO - 2005
    • SO - 2006
  • Editor's note: "DM Bingham's" history evoked a lengthy discussion on Vault. To read the entire thread, go to the main IGS board, then look for the topic "Strategic Outsourcing group..." in the left-hand column. (You may need to change the drop-down menu at the top of the left-hand column to display 50 items).
  • "Near term future of SO - my guess" by "DM Bingham". Full excerpt: Our win rate in 2005 for Deals worth more than $100 M stayed about the same as in 2004. Which was < 20 %. Since the same morons are running things as did last year and since there was a concerted effort to screw all the worker bees out of their compensation and since no magic bullets have been molded to change the paradigm in which we work, I'd say that 2005, 2007 is all same. At best we'll see only break even performance with significant contract wins at least balanced if not more so by contract cancellations.
  • "A year late and $20,000 short" by "Dose of reality". Full excerpt: We definitely have a whipsaw approach to compensation and resource management. Back when the industry was down, other firms were giving modest bonuses, and we stiffed everyone. Now that that the industry is up, we are giving small - modest bonuses, and the rest of the industry is giving free agency salary bumps and attention-grabbing bonuses.
    To make matters worse, this increase in the compensation advantage of the competition is set against a backdrop of a lot of PO'd staff who have spent a few years working at high utilization levels without having received any reward. This is the "overhang" that I talked about over a year ago. Momentum is a powerful force in the employment market, but IBM HR has always been in denial about it. They can't look past next week when it comes to setting policy. Congratulations on your new job!
  • "You're very welcome!" by "Dose of reality". Excerpts: I like your description of HR - "self-perpetuating business". They are really nothing more than an extension of finance. There is a competition between the two groups to see who can come up with the next great cost cutting initiative. They have abandoned their role as ombudsman for the needs of staff; that is if they ever performed that role to begin with.
    There is a reason why companies are comprised of a variety of functional disciplines. They are supposed to provide checks and balances for each other. Here, we have unfettered sales guys that climb over each other to maximize revenue without regard for overall corporate profits, HR, finance, and procurement that are all looking for the next great cost cutting opportunity with no regard for the operational ramifications, a marketing empire that still thinks they need to create brand awareness and wastes hundreds of millions to do it, R&D who are incentivized to just sit back and churn out patents that nobody needs, legal that plays defense and cleans up the messes, and a few vision-challenged executives that are incapable of anything except spin.
    The really sad thing is that there is still a lot of potential in the company. We are just not structured for corporate success. It is a disjointed feudal system, and the king is just happy to milk his position for as long as he can get away with it! Enough philosophical ranting…. Best of Luck to You!
  • "Is anyone here impacted by this?" posted by "loyal lemming". Full excerpt: 4 April 2006. In the spirit of straight talk, I wanted to let you know about an action we are taking across IBM A/NZ (Australia/New Zealand) this quarter to maintain the competitiveness of our business.
    As a large solutions and services business operating in a globally competitive market, we need to continuously rebalance the skills of our workforce to remain competitive and meet the changing needs of our clients. A detailed review of how our skill sets and capabilities align to market demand has indicated that we need to take action to re-align and rebalance a number of areas of our business. We are working to help affected employees to find other roles within IBM, however we expect there will be redundancies.
    We are communicating directly with all affected employees and they are being supported by their People Managers, Resource Managers and HR Managers. In addition, they have access to the services of an outplacement company and the Employee Assistance Program. If you have any concerns or questions at this time, please speak to your Sector or Service Leader.
    In addition to constantly balancing available skills with market demand, our business success also depends on us better leveraging IBM's Global Solutions Delivery model. This will affect some roles within the Package Delivery Organisation, and this team is being briefed about this.
    Overall, less than 3% of IBM A/NZ's workforce will be impacted. It is never easy to deliver news like this. Please support your affected friends and colleagues during this difficult time.
    Regards, Ian Ball, Managing Partner, Australia/New Zealand IBM Business Consulting Services
  • "Larry, Larry, Larry......be leary........." by "deep_eye". Excerpt: No one is being rude to you, you are missing the point. The travel policies in BCS/IBM are draconian to say the least. They are just barely adequate - if you were a citizen of the former Soviet Union - I am deadly serious. You will take the most asinine flight patterns and layovers to save IBM literally pennies. Ditto the hotels and meal allowances (which I assume, are based on 1970s forecasts for food and lodging). Re Dose's point - the fine print is a tangential non-issue. If your career decision rests on which organization has the better travel policy, I do indeed feel sorry for you. (Editor's note: This post is the continuation of a thread on IBM's travel policy. Other posts in this thread are available in the Vault section of last week's highlights.)
  • "Putting 2 and 2 together" by "Dose of reality". Full excerpt: There is a reason why the travel policy and other administrative documents are posted on a controlled-access site, and not on IBM.com. They are not considered public domain.
    Good luck trying to get any information from your hiring manager. The recruiting strategy here is to keep you in the dark. The only hard documentation you will get prior to joining will be materials that were developed for recruiting purposes. The travel policy is based on restrictions that control staff spend. It just doesn't play well as a recruiting brochure!
    Howard already gave you all the information you need to know in the second post in this thread. If you have spent any time reading this board, you would know what the general culture is like. From there it isn't too much of a leap of faith to deduce that the travel policy will not be employee-friendly. Like you said, it is a big part of the economics in this industry.

New on the Alliance@IBM Site:
  • This just in: Effective April 3rd, CSO in RTP and Atlanta hit with "redeployment". Jobs being sent to Brazil. Employees NOT receiving severance pay and will have to train Brazilian replacements. Affects all brands and bands from National Missions, Maintenance and National Services Support Organization. Please send Alliance@IBM any documentation and number of employees affected to endicottalliance@stny.rr.com from your home computer (IBM is blocking e-mail sent to and from us from inside IBM).
  • **Attention!** Anyone that is part of the Qualxserv transition, we need your name. An SSR is in the process of speaking with an attorney about filing a class action suit on behalf of all 300, full time employees. The 100 supplemental employees may be included as well. If anyone has a complete list of SSR's being sold to Qualxserv please send to endicottalliance@stny.rr.com Also contact us if you are interested in a potential suit.
  • From the Job Cuts Status & Comments page:
    • Comment 4/04/06: Farewell IBM...given this company so many good years, and fell into this "redeployment" action (aka "resource action"...by not calling it "resource action", IBM has found a loophole NOT to pay affected employees severance...what a great company IBM has become...IBM has hit NSSO, National Missions, Maintenance in RTP, NC (all CSOs)...and they will not stop, this is the beginning of the end, whomever is left, those people are going to begin training Brazil to do their jobs, how sorry of a company IBM has become. Hey CSO, wake up and stand up, this legal way of power checking your employees by telling them "find another job in 3 months" and not offering severance, is a simple benefit to IBM, we (the ones affected) get to help you make your numbers for second quarter and train some brazilians, then, we get the door and nothing else...thanks for nothing. I can't give numbers, however, it was a large number of employees who took this cheap shot by IBM. -Anonymous-
    • Comment 4/05/06: Another 55 IBM'ers gone with IBM's selling of their Surfaid department in Dallas to Coremetrics: http://www.coremetrics.com/news/media/2006/pr06_04_03_surfaid.html. Supposedly all 55 will keep their job at Coremetrics. http://www.clickz.com/news/article.php/3595991 -Anonymous-
    • Comment 4/05/06: IBM continues to sell out US employees once again! Effective 4/3, the CSO in Atlanta and RTP have been hit with a "redeployment" of selected employees. I am unsure of the exact total. This action affected all brands and band levels, from National Missions, Maintenance, to National Services Support Organization (NSSO). I was told this was not a "resource action", but a "redeployment" and that IBM had "defined the word redeployment". Do they think we're stupid? This redeployment will continue through out the year. Personally I disagree with IBM's choice. As unemployment continues, who will have the funds to patron IBM? Then what? Move the jobs back to the US? Geez, that really makes a lot of sense. I wonder how the power people sleep at night and live with themselves? They've sold their souls to the devil. -Anonymous-
    • Comment 4/05/06: CSO's take a stand, do NOT train your Brazilian replacements. Go about your new job of seeking new employment before IBM has the last laugh on you. Meanwhile join A@I and work towards a common goal, contracts with a company whose word can Not be trusted. CSO's in Brazil word to the wise: Organize and seek contracts with con-company IBM.. -Anonymous-
    • Comment 4/05/06: I just read your web page article on 'work to rule'. I've got an idea for you. If you work at a site that is ISO certified, then you can use the 'work to rule' very effectively. I know from my IBM work experience that ISO documents are IGNORED once the outside auditors do their walk through audits. I also know that if everyone followed the ISO documents to the letter, that things would slow down VERY quickly. I've seen some of the ISO documents in the past, that have been written and became immediately out of date. That's because everyone wanted to take 'shortcuts' so that they could work faster. Enforcement would mean doing extra things that really don't have any 'value add'. I've seen many engineers get frustrated because they had to write procedures that conformed to ISO rules and documents. The frustration was the extra 'process' requirements that were part of ISO but not conducive to productivity. Hey, it's an idea...-ISO God-
    • Comment 4/06/06: NSSO/CSO....cheap cheap powershot, if you can't read between the lines, let me help....this is the start of what is to come, if you survived this first bout of layoffs....OOOPS, I meant..REDEPLOYMENT (give me break!), your day is soon to come, stand up and be heard NOW. -Anonymous-
    • Comment 4/07/06: Attention all EUS techs, ad hoc or dedicated to deskside accounts. The writing is on the wall. You are next for Qualxserve by years end if not before. This is coming from a very reliable source in upper management, that is one of the few left who have morals, or care about their employees. Wake up folks!! Talk to your colleagues. Tell them about the Alliance. Stand up and be proud, don't lie down and let this happen. Just like when they spun this unit off as TSS, they eventually brought it back. But this time there wont be anything left to bring back. -Anonymous-
  • From the General Visitor's Comment page:
    • Comment 4/04/06: I urge each of you to consider the position you are in. With most of us that are left after each of these resource actions, less and less of us are able to talk to our old colleagues let alone a group of them. IBM has used divide and conquer and its worked very well. If Big Blue means that much to you, stand up, join the Alliance, voice your opinion, and be HEARD.
      In so many situations very few long timers are left. The new ones coming in from contract have no idea as to what is coming, nor are they of the same opinion you are. This alliance will NEVER work unless we can find a way to get around the resourcing and divide and conquer method IBM is using. Also, if you think for a minute that the company is going to stand by you through thick and thin, re think that. I was told that I had to leave town for a commitment, and my job would be on the line if I didn't go. I was home to close on my house and dang near lost a lot of money because of their stunts.
      Build a network around you, use it, and think of each day that you come into work could be your last. Build your skills, and get ready folks. Break Fix was first for Qualxserv, any SSR whether it be ad hoc or steady state DSS work is next. IBM does not want to be in the services business, yet its amazing how much rev we generate for them. Raise your hand if you got less than half on last years variable pay, AND got dinged on your PBC rating for stupid stuff. This came from a very reliable source, but all managers were told they had to give a certain number 2's and 3's and to look for any angle to use so that they could meet their "quota". On top of the fact that variable was only targeted at 6% this year, most of us got less than 3%. The only ones who skated on this one to a degree were contract rebadges if their old managers came with them, otherwise they got shafted too. Am I the only one who is really pissed about what Big Blue claims and then does? Am I the only one who knew what working for IBM used to mean? -Anonymous-
    • Comment 4/05/06: I've heard, in the past, and now recently that people in the southern states of the USA, like North Carolina have been told that unions are illegal in their state. Just for all of your information; unions are LEGAL in EVERY state of these United States of America! I refer you to the Wagner act of 1938, also called the National Labor Relations Act. Notice the word 'National'. It means the whole USA. You all need to wake up from the sleep you've been put to. You need to know that you CAN join a union and you can stand up for your rights as an American worker. Get it through your heads, will ya? -Anonymous-
    • Comment 4/06/06: Wonder if this will be the next IBM Management quality statement: I've done my duty to do my best, to steal from others and cheat the rest. -Anonymous-
    • Comment 4/07/06: Since I really had no option, but to take early retirement in 1987 there has been one cost of living adjustment to my pension. When I retired I was informed that my health care coverage would continue at no cost. Several years later IBM deducted such care from my pension to the point that it took away 30% of my pension. And this happened when Lou G was being paid $100 million and setting himself up to reap millions when he retired at the age of 60. All I can say now is that I hope a majority of IBMers see why they should be fully supportive of Alliance@IBM's efforts. -Anonymous-
    • Comment 4/07/06: IBM management is the worst I have ever experienced. They harassed and intimidated me for years. I finally got forced out (i.e. laid off, fired, screwed, however you want to define it) and quickly got a job with another company. I then discovered how "normal" managers behave. What a relief. IBM's downfall will be the result of the evil, backstabbing, cold, calculating managers they produce. Support the Alliance and help form a union to bring some sane management back into IBM that respects the employees doing the real work. -Anonymous-
    • Comment 4/07/06: For the life of me I don't understand why anyone cares about IBM beyond the receipt of money paid for work performed. The entity referred to as IBM does not care about you, never did and never will. I became an IBMer following an outsource and it has been the most miserable experience of my life. I've only stayed as long as I have because at my age finding new employment is tough and I figure I can handle it until IBM lets me go or I can "retire". -Anonymous-
    • Comment 4/08/06: I overheard my third line saying he had 5 houses on the East and West coasts in some of the most expensive areas in the US. Another told me that he had more wealth than he ever dreamed of. Pretty cold in a time of continuous layoffs for cost savings. We don’t work for a technology company but a support structure for the pay, perqs and power of our leaders. -Anonymous-
  • Pension Comments page

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