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    Highlights—June 24, 2006

  • Wall Street Journal: As Workers' Pensions Wither, Those for Executives Flourish. Companies Run Up Big IOUs, Mostly Obscured, to Grant Bosses a Lucrative Benefit. The Billion-Dollar Liability. By ELLEN E. SCHULTZ and THEO FRANCIS. Excerpts: To help explain its deep slump, General Motors Corp. often cites "legacy costs," including pensions for its giant U.S. work force. In its latest annual report, GM wrote: "Our extensive pension and [post-employment] obligations to retirees are a competitive disadvantage for us." Early this year, GM announced it was ending pensions for 42,000 workers.
    But there's a twist to the auto maker's pension situation: The pension plans for its rank-and-file U.S. workers are overstuffed with cash, containing about $9 billion more than is needed to meet their obligations for years to come.
    Another of GM's pension programs, however, saddles the company with a liability of $1.4 billion. These pensions are for its executives.
    This is the pension squeeze companies aren't talking about: Even as many reduce, freeze or eliminate pensions for workers -- complaining of the costs -- their executives are building up ever-bigger pensions, causing the companies' financial obligations for them to balloon.
    Companies disclose little about any of this. But a Wall Street Journal analysis of corporate filings reveals that executive benefits are playing a large and hidden role in the declining health of America's pensions. Among the findings:
    • Boosted by surging pay and rich formulas, executive pension obligations exceed $1 billion at some companies. Besides GM, they include General Electric Co. (a $3.5 billion liability); AT&T Inc. ($1.8 billion); Exxon Mobil Corp. and International Business Machines Corp. (about $1.3 billion each); and Bank of America Corp. and Pfizer Inc. (about $1.1 billion apiece).
    • Benefits for executives now account for a significant share of pension obligations in the U.S., an average of 8% at the companies above. Sometimes a company's obligation for a single executive's pension approaches $100 million.
    • These liabilities are largely hidden, because corporations don't distinguish them from overall pension obligations in their federal financial filings.
    • As a result, the savings that companies make by curtailing pensions for regular retirees -- which have totaled billions of dollars in recent years -- can mask a rising cost of benefits for executives.
    • Executive pensions, even when they won't be paid till years from now, drag down earnings today. And they do so in a way that's disproportionate to their size, because they aren't funded with dedicated assets. [...]
    But for executives, the percentage of pay replaced is itself higher. Compensation committees often aim for a pension that replaces 60% to 100% of a top executive's compensation. It's 20% to 35% for lower-level employees. [...]
    Companies that restrict regular pension plans often point to the 401(k), some noting that they've enhanced their match of contributions. Unlike pension plans, 401(k) plans don't create a corporate debt or liability, since employees provide most of the assets and firms are typically free to halt any contributions of their own. Companies generally are also free to alter, freeze or end regular employees' pension plans, unless a union contract is involved. But executive pensions often are protected from management interference by employment or other contracts.
    By curtailing pensions for regular workers, large companies have reduced pension obligations to them by billions of dollars in recent years. So pension obligations to regular workers are stable or shrinking at many companies while those for executives rise. At BellSouth Corp., for example, the obligations for pensions for ordinary workers have edged down 3% since 2000. The liability for pensions for executives is up 89% over the same period. A BellSouth spokesman noted that, like many executive pensions, the benefit could be lost in the event the company becomes insolvent. [...]
    Pension Pyramid: Companies sometimes offer several tiers of pensions for the highly paid. The structure at IBM illustrates this. Its chairman and CEO, Samuel Palmisano, is due a yearly pension of about $4.7 million in retirement after age 60. He's now 54. IBM's liability today for this is about $50.3 million, according to an estimate by Katt & Co.
    Another IBM pension plan, which last year covered eligible executives earning $351,000 or more, had a $204 million liability at year-end, company filings show. And for a third plan covering a broader group of the well-paid, IBM had obligations totaling $1.1 billion. IBM declined to say how many are covered by these plans, saying only that it is "thousands."
    To put the figures in perspective: The liability for IBM's regular U.S. pension plan, covering 254,000 workers and retirees, was $46.4 billion at the end of 2005.
    An IBM spokesman described the estimate of its liability for Mr. Palmisano's pension as high but declined to provide another figure. He said Mr. Palmisano's pension from 32 years at the company will replace about 45% of his compensation, which the spokesman called below average for heads of major companies. [...]
    A result of these trends is that executive pensions make up a significant portion of total pension liabilities at many companies: 12% at Exxon Mobil and Pfizer; 9% at Metlife Inc. and Bank of America; 19% at Federated Department Stores Inc.; 58% at insurer Aflac Inc. [...]
    A Debt and Its Cost: Perhaps the most significant effect of the limited disclosure is to make it difficult, or impossible, to evaluate company statements about their retirement burdens and the need to cut benefits. To see this, it's necessary to understand a bit about how pensions are accounted for. Pension plans, whether for executives or for others, are obligations to pay. In other words, they're debts. And like any debt, they have what amounts to a carrying cost. That carrying cost is part of a company's pension expense.
    In the case of pensions for regular employees, the expense is partly or wholly offset by investment returns on money the company set aside in the pension plan when it "funded" it. Executive pension plans are different. They're normally left unfunded. They have no assets set aside in them. That means there is no investment income to blunt the expense. The result is that obligations for executive pensions create far more expense for an employer, dollar-for-dollar, than pensions for regular workers. A company's pension expense is something it has to subtract from its earnings each quarter. The cost of executive pensions, having no investment income to cushion it, hits the bottom line with full force. [...]
    An Outsize Impact: [...] At AT&T Inc., the pension liability for executives was a modest 3.8% of the company's total pension obligation at the end of last year. Yet these promises to 1,000 or so highly paid people generated more than 45% of AT&T's pension expense. The expense for them came to $113 million last year, and reduced AT&T's 2005 earnings by that amount. The other 55% of pension expense? It covered 189,000 regular employees. [...]
    There's often another reason executive pensions are more costly. The expense of regular pensions can be offset not just by investment returns on the assets but also by gains that result when companies cut benefits. Cutting a benefit naturally cancels part of an employer's liability. Under accounting rules, a canceled liability equates to a gain. That gain reduces pension expense from the regular workers' plan. So thanks both to investment returns and to gains from cutting benefits, regular pension plans are less costly than those for executives. [...]
    Whose Expense? These accounting effects may sound technical but they matter, because companies that curtail ordinary workers' benefits often cite their pension "costs" or "expense" as the reason.
    In January, IBM said it will freeze the pensions of all U.S. employees and executives. The move reduced its pension liability by $775 million. IBM cited pension costs, volatility, and unpredictability. It didn't mention that a quarter of its U.S. pension expense last year resulted from pensions for several thousand of its highest-paid people.
    The numbers: $134 million of pension expense was for the well-paid; $381 million was for all active and retired employees, more than a quarter of a million people. An IBM spokesman confirmed the numbers but said the expense for its executive plans came to only about 1% of pretax earnings from continuing operations.
    Lucent Technologies Inc. has pointed to retiree benefits as a burden and has cut benefits in a number of ways. For instance, for various retirees in recent years, Lucent has used a less-generous pension formula; eliminated dental and spousal medical coverage and death benefits; and raised retiree health-insurance premiums. In a recent filing, the Murray Hill, N.J., telecom-equipment firm said, "Lucent's pension and postretirement benefits plans are large...and also costly."
    Yet the pension plans for regular Lucent employees and retirees, who number about 230,000, are overfunded. In fact, they're so full of cash that the investment return on their assets not only erases the pension plan's expense -- it adds to earnings. In the fiscal year ended last Sept. 30, these pension-plan assets pumped $973 million into Lucent's bottom line, accounting for about 82% of the company's profit.
    They would have pumped in still more, save for an unfunded pension plan for Lucent's highest-paid people, which had a liability of approximately $422 million last year. Lucent confirmed that pensions for its executives and those earning more than $210,000 in 2005 reduced net income. It declined to say by how much. A spokeswoman said Lucent follows U.S. pension accounting and disclosure rules and that if the expense for retiree medical plans were subtracted, its overall retirement benefits contributed $718 million to income.
  • Wall Street Journal: Deferring Compensation Also Creates A Company Debt to Executives. By THEO FRANCIS and ELLEN E. SCHULTZ. Excerpts: Besides pensions, most large companies owe their executives another retirement debt: deferred compensation. While that might seem unlike an executive pension, it's similar in critical ways.
    Deferred-compensation plans let executives put off receiving large chunks of their salary and bonus until retirement. The plans have often let executives defer other pay as well, such as gains from exercising stock options. The deferred sums grow tax-free. Sometimes they increase at an above-market interest rate guaranteed by the company. Some companies also add to the balances with contributions from time to time.
  • "How much I really lost" by "ibnotamused". Full excerpt: I still have the documents IBM used to give out back when Opal and Akers were in office. I'm talking about the white plastic sleeve with the "About your financial future" booklet, the IBM insurance claims booklet, the vacation plan booklet, and a smaller sleeve called "Supplemental Material" that was meant to house your yearly Personal Benefits Statements.
    Just for grins, I looked at my personal benefits statement from 1989. I had been with the company for several years by then. In the retirement income section there is a table that lists my estimated annual retirement income based on retirement age and estimated salary growth (three sections - 0% growth, 4%, 6%). I did a few calculations, and 6% average salary growth is just about dead-on accurate to my salary today. So I looked at the 6% section of the table.
    It only contains single-life basis numbers, but that's OK because the new estimator only gives you single life numbers (so far).
    If I were to retire and begin receiving benefits at age 60, my 1989 statement estimated my annual retirement income from IBM from the retirement plan (NOT including TDSP or Social Security or any other income source) would be $84,000. $7000 per month.
    This is interesting because when I get on the new estimator and look at my estimated retirement income, assuming I get 2.75% annual pay increases (doubtful) and 5% annual bonuses (not credible) between now and when I retire, my "new" income rounded to the nearest hundred is $3500.
    Exactly half.
    I know there are a few discrepancies that make this not quite apples to apples - old table age was 60, new estimator age is 58, old table assumed 6% raises till I'm 60, new one estimates 2.75% from now till I'm 58, no performance bonuses in the old tables...
    But even correcting for these, there wouldn't be much difference (I would have more than 30 years in at either age 58 or 60). And in fact I expect that in reality I would get even less than what the new estimator is telling me now.
    This is just a stark reminder that it has not been just one or two actions that have slightly reduced your pension. Take 1991, 1995, 1999, etc. and total them up, and you will see that you have lost a whole lot. I lost half, if not more. The additional $400-500 a month I may get if the 401K actually brings in 8% per year growth (seen the returns there lately?) hardly makes up the difference.
    In my early days with the company, I expected that if I did a good job and was loyal, I would get a good pension when I retired - $7000 a month is pretty good, eh? And the company was sending out yearly reminders of that pot of gold at the end of the rainbow to incent us to excellence. Till about 1991, when they started emptying the pot. Then those reminders stopped. Don't want all the leprechauns finding out how much gold is missing from the pot.
  • "Re: How much I really lost" by "madinpok". Full excerpt: And when you consider the value of what you lost in retirement health care benefits and add that into the equation, you'll find that you're only getting 25 to 30% of what IBM promised you back in 1989.
  • CNN/MarketWatch: Broken compact. Pensions are going, going, gone: Here's why you should be worried. By Andrea Coombes. Excerpts: Financially-strapped companies are axing them, healthy companies are freezing them, and more than half of U.S. workers will never even get near one: It's the traditional pension, and it's not long for this world. Financially-sound companies, such as IBM, Verizon and Sears, are freezing their pensions even as the struggling airline industry follows the trend first forged by the steel industry earlier this decade by dumping its pension-plan responsibilities.
    Another worry for workers everywhere: The pension implosion may signal a change in overall salary trends, Munnell said. "Companies are freezing pension plans [because] they don't like uncertainty, but it could also be they want to cut compensation" to compete in a global market of cheaper labor, she said. Hewlett-Packard and IBM pointed to the need to stay competitive when they froze their plans, according to a report on why healthy companies freeze pension plans, co-authored by Munnell, on the Center for Retirement Research's Web site. In recent pension freezes, "the savings from shifting from a defined benefit plan to a 401(k) plan are not being offset by higher cash wages, so total compensation is reduced, at least in the short run," the report said.
  • Atlanta Journal-Constitution: Delta asks to cut pilot pensions. By Rusell Grantham. Excerpts: Delta Air Lines says it plans to seek bankruptcy court approval to scrap its traditional pension plan for pilots, a change that would cap a dramatic overhaul of pilot compensation at the carrier. In a widely expected move, Delta said Friday it will tell the Pension Benefit Guaranty Corp. on Monday that it plans to terminate the pilot pension plan, shifting responsibility for further benefit payouts to the quasi-federal agency. [...]
    In Delta's $280 million-a-year concession deal with the Air Line Pilots Association, reached in April, the union agreed not to oppose the airline's efforts to terminate the plan. In exchange, Delta agreed to give pilots a $650 million IOU after the airline emerges from bankruptcy as partial compensation for pilots' loss of benefits. [...]
    George Leatherbury, a 61-year-old retired Delta pilot, said his annual pension dropped from nearly $80,000 to about $25,000. He thinks it will drop to about $15,000 if the pension agency takes over the pilots' plan. "I'm just so disappointed. Delta was the finest in the nation 15 years ago," he said.
    But the former Boeing 767 captain, who lives in the Atlanta area, said he'll weather the change better than most; he retired with a lump sum and savings totaling about $2 million. "The guys that are still working are getting the brunt of it," he said.
  • Reuters: US Energy Dept halts pension plan change. Excerpts: Bowing to criticism from lawmakers, the U.S. Department of Energy said on Tuesday it had suspended for a year its decision to stop reimbursing contractors for traditional pension costs for new hires. The department had explained the April decision as a cost-cutting measure. But some lawmakers saw it as an attempt to undermine the traditional pension system, and in May the House of Representatives voted to block it for a year. [...]
    The Energy Department had planned to reimburse contractors only for costs of 401(k)-style retirement savings plans -- not defined-benefit plans -- for new hires after March 2007. DOE contractors have 100,000 employees in jobs ranging from running facilities at the Los Alamos laboratory to cleaning up nuclear waste sites. Lawmakers who had criticized the Energy Department for the policy praised the retraction. Massachusetts Democrat Sen. Edward Kennedy had introduced legislation to block the policy in the Senate
  • Workforce Management: Ex-PBGC Chief Labels Migration From Defined-Benefit Plans ‘Shortsighted’. Bradley Belt is concerned companies “are putting all their eggs in the DC basket” and will have a lot of 65-year-olds who won’t have enough savings to retire. Excerpts: Abandoning defined-benefit plans for defined-contribution plans will economically hurt U.S. companies in the long run, says the former chief of the PBGC. Bradley Belt, in an interview with Pensions & Investments on his last day as executive director of the Pension Benefit Guaranty Corp. in Washington, D.C., said one of his chief concerns is that corporations will use pending pension reform and potential changes to the Financial Accounting Standard Board’s Rule 87 as excuses to switch to defined-contribution plans. [...]
    "The real tragedy is that when companies terminate their pension plans, there are real-world impacts. When a plan gets terminated, there are workers and retirees who have their expectations of retirement security dashed," Belt said. "You also have companies that have acted more prudently in terms of managing their pension plans that may be on the hook to pay higher premiums as a result of the pension plan terminations, and ultimately, if premiums are not the answer, then taxpayers would be called upon to rescue the insurance program.
  • MS-NBC: Government workers feeling pension pressure. Unions battle to retain fixed monthly checks instead of individual accounts. By Martin Wolk. Excerpts: The promise of a lifelong monthly retirement check, with all the security that implies, has always been one of the biggest attractions of government service, from sanitation workers to members of Congress. Now police officers, teachers, public health workers and the unions that represent them in many states are scrambling to defend the treasured benefit — one that the vast majority of them still enjoy but is rapidly disappearing from the corporate world.
    For the most part they are winning, arguing successfully that providing a traditional pension plan for public workers is a cost-effective investment of taxpayer dollars, helping to attract and retain a higher-quality workforce. [...]
    The push to defined-contribution plans is a worrisome prospect to people like Doris Sutherland, 78, of Grand Junction, Colo., who retired from her job as a secretary for a state agency in 1988 and now lives mostly on her $2,300 monthly pension. Sutherland gets no Social Security benefit from her many years of public service because state and local government workers in Colorado, along with several other states, are exempt from the system.
    Sutherland contributed up to 11 percent of her pay into the state's public-employee pension plan over the years and now is vigilant against any attacks on it, acting as an advocate for retirees in her union, the Colorado Association of Public Employees.
  • Motley Fool: The End of Retirement. By Robert Brokamp. Excerpt: Tired of reading about America's retirement woes? Then I have an alternative for you: Watch a TV show about them. Heck, you don't even have to move to your TV -- you can watch it on your computer, from the comfort of your own desk chair. The particular program I'm talking about is an episode of the PBS series Frontline titled "Can You Afford to Retire?"
    But the real shocker in the Frontline program was the revelation of how such bankruptcies are becoming an acceptable way for companies to get out of their pension obligations. Listen to what United's lead bankruptcy lawyer, James H.A. Sprayregen, told Frontline: "I would say that Chapter 11 has become somewhat of a more accepted strategic tool than just companies filing who are about to go out of business or something like that. As a result, there's more use of Chapter 11 now than probably 20 years ago."
    So should you be worried if your pension is underfunded? Well, according to a recent report from Standard & Poor's, corporate America doesn't seem to be taking pension funding too seriously. From the 2005 "Pensions & Other Post Employment Benefits Report": "While corporate operating earnings post 16 consecutive quarters of double-digit growth, corporate pension plans remain in the red with minimal contributions continuing to be made. ... S&P 500 defined-benefit plans as a group were $140.4 billion underfunded for 2005."
  • Newhouse News Service: Retirees Will Face Dire Straits. By Teresa Dixon Murray. Excerpts: This nation faces a massive economic crisis -- indeed a social catastrophe -- that some experts even say will be among the worst the country's ever seen. Much has been said about how the looming retirement of 76 million baby boomers will stampede Social Security, which is expected to start running out of money in 11 years. We almost joke about senior citizens eating dog food. Maybe that joking is the only way we can keep from crying. But Social Security is just one piece of a cruel puzzle. It's not until you look at the big picture that you realize how dire the crisis is. The pieces won't fit together without a lot of pain and anguish for a lot of people. If you think it's time to stop reading, this is a wake-up call you can't afford to ignore.
  • Dr. Dobb's Portal: H-1B Pay Drags Down All Salaries. By David Roman. Excerpts: Immigrant engineers with H-1B visas may be earning up to 23 percent less on average than American engineers with similar jobs, according to documents filed with the U.S. Department of Labor. Salary data from Labor Condition Applications (LCAs) lends credence to arguments that lower compensation paid to H-1B workers suppresses the wages of other electronics professionals. [...]
    Immigrant engineers with H-1B visas may be earning up to 23 percent less on average than American engineers with similar jobs, according to documents filed with the U.S. Department of Labor. Salary data from Labor Condition Applications (LCAs) lends credence to arguments that lower compensation paid to H-1B workers suppresses the wages of other electronics professionals.
  • Time Magazine, courtesy of CNN: India's influence soars. The 'un-China' could be world's next economic superpower. Excerpts: You may not be aware of it, living in the United States, but your world is increasingly being shaped by India. Even if you've never been to India, eaten its food or watched its movies, there is a good chance you interact with it every day of your life.
    It might be the place on the other end of that call you call you make if your luggage is lost on a connecting flight, or the guys to whom your company has outsourced its data processing. Every night, young radiologists in Bangalore read CT scans e-mailed to them by emergency-room doctors in the U.S.
    Democracy aside, there is a second way in which India is the un-China -- and it's not to India's credit. In most measures of modernization, China is way ahead. Last year per capita income in India was $3,300; in China it was $6,800. Prosperity and progress haven't touched many of the nearly 650,000 villages where more than two-thirds of India's population lives. Backbreaking, empty-stomach poverty, which China has been tackling successfully for decades, is still all too common in India. Education for women -- the key driver of China's rise to become the workshop of the world -- lags terribly in India.
  • CNET News: Some H-1B workers underpaid, federal auditors say. By Anne Broache. Excerpts: More than 3,200 petitions for the H-1B visa workers much used by technology companies have gained approval even though the employers involved didn't commit to paying wages at the prevailing rate, government auditors have reported. [...]
    The GAO report didn't name which employers or industries were at fault. Kara Calvert, the director of government relations for the Information Technology Industry Council, emphasized that her organization's member companies don't abuse the system and use the visas only for "legitimate purposes." ITIC's members include Apple Computer, Dell, Cisco Systems, IBM, Intel and Microsoft.
    Four examples cited in the report showed that Labor Department officials in recent years have approved applications even though the salaries listed on the forms ranged from $3,000 to nearly $24,000 lower than the annual prevailing rate. In fiscal year 2005, for instance, a petition for an employee who should have been paid at least $75,000 went through even though the application listed an offer of only $55,000. [...]
    Earlier this week, the Programmers Guild, which represents information technology workers, said it filed more than 300 complaints of its own this year with the Justice Department alleging discrimination against U.S. workers in favor of H-1B holders. Those complaints target online job postings that the organization claims demonstrate a clear preference toward hiring foreign workers. [...]
    "Implementation of the H-1B program fails every test of the principles its advocates have asserted," said Ralph Wyndrum Jr., the president of IEEE-USA, an organization that represents high-tech professionals. "Employers can and do give preference to H-1Bs over U.S. workers."
  • InfoWorld: Tech worker group files complaints over H-1B job ads. Complaints accuse U.S. companies of violating U.S. Immigration and Naturality Act. By Grant Gross. Excerpts: The group has filed about 100 complaints since May and plans to file about 280 more over the next six months, said John Miano, founder of the Guild. The complaints, made to the U.S. Department of Justice (DOJ), accuse several companies of advertising that they specifically want H-1B workers, a violation of U.S. law. The U.S. Immigration and Nationality Act requires that U.S. jobs must be available to U.S. workers. [...]
    Abuse of the H-1B program has become so widespread that companies apparently feel free to engage openly" in advertising seeking H-1B workers before U.S. workers, Miano said. The complaints stem from ads containing wording such as "We require candidates for H1B from India," and "We sponsor GC [green card] and we do prefer H1B holders," the Programmers Guild said. The Programmers Guild, looking for ads on major online job boards, has so far targeted only ads seeking computer programmers, the guild said. The Programmers Guild has not yet compiled a list of the companies targeted in the complaints, but most of the companies are what Miano called "body shops," not big-name technology vendors from the U.S. Some of the ads come from recruiters running operations out of apartments, the Programmers Guild said.
  • Yahoo! message board post by "ibmaccountant". Excerpts: It will take a major blow to the brand for the Board and the major shareholders to properly react. If not, the brand will die an economic and marketing death by a thousand cuts, which is what is happening right now.
    Although I've been out of IBM for a little while now, my colleagues still active in the company state that one of the problems is that there is no legacy. There is a program called "Spirit" which is trying to bring back the old values under the new mantra of "we love you as long as management thinks you are worth something to them" but its widely viewed as a cynical initiative from an HR in horror of current retention statistics. It is hard to staff projects, find dedicated people, etc.
    Essentially IBM has become what the consultants that came to IBM wanted: just another company feeding on the current fads with no continuity, stability or core management backbone. What is amazing is that the shareholders, like many on this board, are so brand blinded they can't see what's happening.
  • Committee on Government Reform: Dollars, Not Sense: Government Contracting Under the Bush Administration. Excerpts: Under the Bush Administration, the “shadow government” of private companies working under federal contract has exploded in size. Between 2000 and 2005, procurement spending increased by over $175 billion dollars, making federal contracts the fastest growing component of federal discretionary spending. This growth in federal procurement has enriched private contractors. But it has also come at a steep cost for federal taxpayers. Overcharging has been frequent, and billions of dollars of taxpayer money have been squandered. [...]
    Federal procurement spending is highly concentrated on a few large contractors, with the five largest federal contractors receiving over 20% of the contract dollars awarded in 2005. Last year, the largest federal contractor, Lockheed Martin, received contracts worth more than the total combined budgets of the Department of Commerce, the Department of the Interior, the Small Business Administration, and the U.S. Congress. The fastest growing contractor under the Bush Administration has been Halliburton. Federal spending on Halliburton contracts increased over 600% between 2000 and 2005.
  • Reuters, courtesy of Yahoo! News: CEOs earn 262 times pay of average worker. Chief executive officers in the United States earned 262 times the pay of an average worker in 2005, the second-highest level in the 40 years for which there is data, a nonprofit think-tank said on Wednesday. In fact, a CEO earned more in one workday than an average worker earned in 52 weeks, said the Economic Policy Institute in Washington, D.C. [...]
    In 1965, U.S. CEOs at major companies earned 24 times a worker's pay. That ratio surged in the 1990s and hit 300 at the end of the recovery in 2000, according to EPI.
  • New York Times: A Look at Republican Priorities: Comforting the Comfortable. Excerpts: Yesterday, the House of Representatives passed an estate-tax cut that is a repeal in everything but name. The so-called compromise would exempt more than 99.5 percent of estates from tax, slash the tax rates on the rest and cost at least $760 billion during its first full decade. Of that, $600 billion is the amount the government would have to borrow to make up for lost revenue from the cuts, which would benefit the heirs of America's wealthiest families, like the Marses of Mars bar and the Waltons of Wal-Mart Stores. The remaining $160 billion is the interest on that borrowing, which would be paid by all Americans.
    No lawmaker who voted for the compromise gets any points for moderation. Like the earlier full repeal bill, this one is unfair and grounded in intellectual dishonesty. The goal is not to pass good legislation, but to get this top priority for big-shot constituents nailed into law before the November elections produce a legislature that's more responsible on fiscal matters. [....]
    All this effort for a bill that would put $760 billion in new debt on the backs of Americans in the name of making a handful of extremely rich people even richer. Congressional leaders may know how to count votes, but otherwise their math is pathetic.
  • AFL-CIO: Raising the Minimum Wage or Lowering Estate Taxes—Guess What House Republicans Picked? Excerpts: et’s talk about priorities. Imagine you’re a powerful leader of the U.S. House of Representatives. What would you say is more important—raising the $5.15 an hour minimum wage for the first time in nearly 10 years or making sure the small number of estates worth up to $10 million are permanently exempt from estate tax?
    That’s the choice Republican House leaders are facing this week. And no surprise, they’ve chosen the side of the millionaires. Republican leaders are adamant they will not bring the fiscal year 2007 Labor, Health and Human Services appropriations bill up for a vote because it contains an amendment to raise the minimum wage—now at it’s lowest value in 51 years—to $7.25 an hour.

News and Opinion Concerning Health Savings Accounts, Medical Costs and Health Care Reform
  • San Francisco Chronicle: S.F. plan would offer health insurance for all residents. By Cecilia M. Vega. Excerpts: Mayor Gavin Newsom unveiled a proposal today that would make San Francisco the first city in the country to provide health care for all of its uninsured residents through a plan that covers everything from patient doctor visits and surgeries to prescription drugs. San Francisco's estimated 82,000 uninsured residents who typically go to public clinics and hospitals for treatment would be covered under the plan, dubbed the San Francisco Health Access Program. It would offer people the primary and preventative health care they currently lack and allow them to access hundreds of doctors in public and private hospitals and clinics.
  • Employee Benefit News: Coverage for older dependents brings cost, admin worries. By Karen Lee. Excerpts: Even as insurers and employers try to conserve health care costs by passing on expenses to employees and slashing benefit fat, many states are passing, or at least considering, legislation raising the age of dependents covered on their parents' health plans, employer-sponsored or not. So far, about a dozen states have passed laws, and another 15 bills have been introduced. All increase dependent ages, usually to between 25 and 30, although in at least one instance, the definition of dependent simply was changed to include elderly parents and disabled adult children. Many extend "dependent" only to full-time students up to a certain point, while a few go simply by age. [...]
    Band-Aid on a bigger problem: This is a measure, some say, that does not do enough to actually solve the uninsured problem. Of the estimated 46 million uninsured nationally, New Jersey houses about 1.3 million of them. One reason for that, says Janice Kupiec, the National Association of Health Underwriters' director of state affairs, is the high cost of individual coverage in the Garden State, which is among the country's most expensive. "The individual market coverage, which is what most young people who are starting out in the workforce and don't have access to employee benefits would be purchasing, is just really out of reach. The premiums are too high," Kupiec elucidates.

New on the Alliance@IBM Site:
  • From the Job Cuts Status & Comments page
    • Comment 6/22/06: Re: 6/17 posting about IBM internal VM and MVS support going to India - are you referring simply to the Help Desk functions, or all aspects of internal support: applications, storage mgmt, capacity, security, CLAS, CICS, etc? Please elaborate. -Anonymous-
    • Comment 6/23/06: The last site in White Plains NY, once IBM's flagship, WILL BE CLOSED by year end. Look for more job losses. Employees not willing to relocate farther north can become mobile. Won't be long after that. -Anonymous-
    • Comment 6/23/06: GTS re-org to start in July. Sectors get blown up, a lot of sales people will be canned for no delivering sales. Lots of lower and mid-level management are exposed and they don't realize it yet. Delivery will take some hits as well. Look for sector leaders to lose jobs to SPL leaders. It's going to be a mess for a few months. -Machiavelli-
  • From the General Visitor's Comment page:
    • Comment 6/22/06: IBM used to manage the health insurance itself. Nowadays that has been farmed out. Seems pretty clear this was done to make the process more "hard edged" and less sympathetic to employees. -Anonymous--
  • From the Pension Comments page
    • Comments 06/13/06: Just heard a story that some pompous IBM exec has been making the rounds from IBM site to site, attempting to cheer employees up over the last pension ripoff. He was depressed because he could not understand why people were so mad. Then somehow, the crowd discovered, his pension was not cut at all and protected by "His" contract with IBM... the crowd started calling him names,liar, phony, etc., when they realized he lost nothing because of his contract. What a phony, liar! Is this a true story? All I can say, anyone at IBM should seek contracts because IBM will never stop cutting benefits unless contracts stop them! Join Alliance -Anonymous-
    • Comments 06/15/06: I just ran the numbers on the new pension comparison tool. It appears that there is a different conversion factor for those who were lucky to make it to 30 before 12/31/2007 so you get screwed anyway. I'm history. Band 10 "1" performer in IGS with 33 years in this rat hole. -Anonymous-
    • Comments 06/15/06: Better read the new W3 estimator real close. Estimates are based on yearly raises of 2.6% and varible pay of 5% per year. IBM claims this is the average for all employees over the last five years. For me , this means the estimator will be biased high!
    • Comments 06/16/06: The Retirement Comparison assumes "annual pay increases of 2.75% because that is the annual average of U.S. pay increases over the past three years." I know that IBM would not lie to me, so I have three possible explanations for this statistic:
      1. If over the past six years I received: no raise, no raise, 3%, no raise, no raise, and 2.5% then perhaps the average of my raises – when they occurred - is 2.75%.
      2. “All U.S. employees” includes new hires. When I joined the company right out of college, I received more frequent raises, and the percentages were relatively large as my base salary was relatively low. Of course today new hires are not in any pension plan but their numbers can be used to skew the statistics anyway.
      3. If we factor in a 29% raise for one very highly paid executive, that might make up for a lot of employees receiving non-existent raises. However, that would be cynical and I refuse to be cynical in this Best of All Possible Companies!
    • Comments 06/16/06: Just looked at this new estimator. First I am amazed it took so long to get something this USELESS out. Second it showed me what I feared if I retire at 58 I lose almost 40% of what was coming from IBM pension. However they add in your 401K savings to make it look not so bad at over 10% loss at 58. -Anonymous-
    • Comments 06/23/06: If you want a good sense of what corporate America (IBM and others) are doing to the rank and file workers, take a look at the WSJ article of 6/23/06 regarding pensions of employees and executives. The net: while corporate America is cutting the pensions of the rank and file, the executive pension is flourishing. In many cases, the executive pension plan is to 100% replace the salary of the executive and not slice and dice the pension as they do for the rank and file. I was laid off from IBM after 26 years . . . no full retirement package received only vested rights which puts me near the poverty level. -Anonymous-
  • From the IBM employees on employee raises page:
    • Comment 6/21/06: I've been at IBM for 24 years: 14 years in San Jose, and the last 10 years in Austin. I am 49 years old. My band is 7 and division is 07 (Global Services). I have now gone 3 years without a raise. I have now been rated a 2 for 2 straight years, when I have always been a 2+ before, except for the year I was last promoted, which was a 2. Oh, I was rated a 1 once, too. My current manager, who I've had for 2 years, since he became a 1st time manager, is the one who has knocked my rating down for no good reason. He said this year I didn't get a raise because he didn't have as much money for raises this year and I was "only" a "solid 2".
      It is shocking that Sam gets a 29.2% raise when those of us who keep the company going are constantly getting stepped on and treated like we are bringing the company down. As a matter of fact, in my organization, we are required to work a minimum of 2100 "billable" hours (creative work is "on our own time" beyond that 2100 hours.and they talk about work/life balance?). This is regardless of how much vacation anyone has. I have 5 weeks of vacation, but whatever vacation (and holidays and sick days and education days and whatever other "non-billable" days) I take, I have to make them up in "billable" hours, and at least 20 more hours besides
      I'm sure the number is only going to go up. I can't believe that's legal, is it? So, since I'm not getting any pay raise, but the "bar" keeps getting raised higher, I'm effectively getting a pay cut, not to mention the increased stress put on by my manager and organization. -Anonymous-
    • Comment 6/21/06: 17 Year Employee, IGS, Band 8, 2 Performer, no raise since 2002, 2500 hrs per year worked -Tired-
    • Comment 6/22/06: Band 9 - no raise in 3 years and making less than "market pay" as a 2/2+ rating. Manager said that 80+ hr work week and "giveback" of 1/2 or earned vacation is expected. Meanwhile our mgmt team goes to Florida and France for "strategy sessions". Palmisano should be fired. -IBM RTP Employee-

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:
  • "tired" by "chicagostar". Excerpts: folks..I am tired of people engaged in India bashing and I am tired of people talking great things about India ad nauseam. Let me put it this way. Outsourcing is a reality we live with. Obviously it has some tangible benefits as we see more and more companies joining the outsourcing band wagon.
    I disagree with folks that pointed out that international students are taking away american jobs. The enrollment for math and science courses is at an all time low in the US. The internationsals fill a void in this space and lets not forget, they still pay their taxes to our government. It is kind of hypocritical that a nation of immigrants should want to castigate legal educated workers from other nations..
  • "Tired redux" by "Frank_Reality". Excerpts: OK, I see your bid and match it. I have no problem with legal immigration, in fact I welcome it. I have a lot of problems with illegal immigration and temporary workers and students that appear to stay here virtually permanently. If you want to come here permanently, go through the legal immigration process and become citizens. If you want to come here temporarily for education or work (that includes H1Bs), then fine, get it without government subsidy and go home when you're done. It's a bad thing to have long term residents here that have no desire to become citizens.
    I think we have a solemn, moral obligation to our citizens (including naturalized citizens) to ensure a legal immigration path and to control who comes and stays here. It seems crass to say this, but I'd prefer to "cherry pick" and get the brightest and best, then encourage them to be citizens.
  • "Tired" by "CandorSense". Excerpts: I don't recall anyone saying we were opposed to LEGAL immigration and it seems like we are all opposed to illegal immigration. The point we were making is that the majority of Indians here, are here "illegally" because they do not pass the 2 critical requirements of an H1 visa. We won't even go into the growing scam of the L visa.
    And no one has really bashed anyone in the majority of the Indian population. We have expressed some ire at the minority Upper Castes who scam our system to come here and fill jobs that could be filled by an American, as the law intended.
    If a student comes here and excels and finds a job, that is going begging because no one already here is qualified, then hell yes give him the job. That's what the H1 program was designed to do and I think it is a good idea. But when you drag your ass through the airport on Monday, the Indians you see will be H1 visa holders doing work that millions of unemployed tech workers already here would welcome.
    It's illegal immigration, the Indian Caste system, and IBM's falling all over itself to laud the land of enchantment that has us pissed off.
  • "Enough Already!" by "Dose of reality". Excerpts: No one is complaining about students and student Visas. The point is that your physical presence here while you get your education should in no way enhance your ability to get a job in this country. It should not be a back door in the immigration pipeline.
    If you want to emigrate here, or even work here, you should get in the same line with the rest of the foreigners. You should be subject to the criteria that is in the H1 program - namely that there is a job that can not be filled by a US citizen. Absent that apply for a green card and wait like anyone else.
    The 20,000 Visas that you refer to are just a supplement to the conventional H1 program. While it has been earmarked for graduate university students, it is subject to the same general statutory criteria as the baseline 65,000 Visas – namely that sponsorship has to be predicated on a position that can not be filled with an American applicant – the core stated premise of the program that is being scammed by applicants and sponsors alike.
  • "Scammers come in all flavors" by "Dose of reality". Excerpts: Again, the premise of the H1 program is that it is meant to fill jobs that American companies can not fill at a comparable salary with domestic applicants. It is not meant to allow the willingness of the average Indian to be exploited to incite American companies to choose them over more qualified domestic applicants. This is the services equivalent to product "dumping". It is also not meant to provide foreigners access to residency in the U.S. that they could not get through conventional immigration channels. [...]
    Are you really suggesting that the average Indian IT hire rightly believes that there are no qualified American applicants for developer, consultant, and other conventional service roles??! If that were the case, then why would they be willing to allow themselves to be taken advantage of with exploitative worklife policies?
    We all know what is happening here. Companies are looking for cheaper all-in costing staff that they can control and exploit, and the applicants are just feigning ignorance of the real dynamics of the employment market.
  • "Did you know..." by "civilliberty". Full excerpt: That indian IT resources are told before embarking for australia that australians 'need their help' and that is why they are going to australia. As if to say that after 4 decades of computing australians don't understand their industry.
  • "IBM's clients pay..." by "IGS_Consultant". Full excerpt: CandorSense, your assertion that IBM doesn't care that its employees aren't helped by the "Help" desk but only that the help desk is cheaper, and that call volume is reduced (because employees have learned it's hopeless to call for help) is brilliant!
    Ultimately, at least for people in IGS, clients pay for the problems IBM employees have with their systems. Hell, they pay for the company's philosophy of having employees use ancient ThinkPads...I can't begin to estimate how much time I waste rebooting my machine or waiting for Windows hour glasses to go away!
  • "Sadly" by "CandorSense". Excerpts: I wish I could say that this was IBM's plan all along (to make help desk support so awful people would stop using it). That would imply someone using their head. What I believe happened is that some one-aspect bonehead looked at cost and got a woody at the prospect. Only later did they realize they could really lower costs by effectively, if not officially, eliminating the help desk.
    Ditto on the laptop non-sense. This year I have lost 4 weeks of productive work due to equipment issues (too much to describe here) that could have been solved in one day with a new laptop. As you can imagine, the new laptop would have been much cheaper than the loss of all that productive time but I got paid either way.
    Ironically, those of us in the field seem to care most about "real" costs and productivity, things that translate in bottom line profits for IBM but we're hamstrung by folks in power who look at only one part of any equation, the cost part. So IBM saved $1000 (temporarily) on a new laptop and lost many times that in revenue. Smart.
  • "The Helpless Desk - oh the stories!" by "Tom Musto". Full excerpt: Does anyone remember back in 2001 or 2002 when the IBM Internal Help Desk's stock answer to any problem was to tell the caller to "re-boot" his system? Since it took at least ten minutes to do that, the HD agent would tell the hapless caller to call back if it was still a problem - ticket-closed ! And then the follow-up customer satisfaction message left on your voice mail at 3 AM?
    The aim of current and proposed IBM SO desktop management systems are to make the system or its user fix the damned thing without a call to anyone. The HD agents are pathetic (I had one one time tell me that Lotus Notes did not support creating a table in a Note) so make the user fumble around on HelpNow! or hopefully push some system recovery incantations on his/her brand-new IBM/Lenovo system. Anything to avoid human contact.
  • "Phone Support Worse than Worthless" by "Frank_Reality". Full excerpt: The phone support is so bad that taking their recommended actions just dig you in deeper. After a couple of iterations, it's time to scratch and reinstall. Our local deskside support is as good as the phone support is bad. I have software I must run to do my job that will not run on my miserably old laptop, yet I can't get a better machine nor can I order memory or other upgrades.
  • "Loser Moves" by "eyes-wide-open". Full excerpt: Noting that over 80% of the PwCC partners and employees have left, the Chair of IBM's Audit Committee (a lawyer - no shit!) threatens PwC to stop stealing employees or lose the audit. Never mind that over 95% of those that left have gone into industry, retired or gone to other consulting firms. Never ask yourself, if you treated them so well, why are they leaving. The history of failed enterprises is replete with executives and boards lashing out, based on ineptitude, denial and stupidity. Too bad you can't manage the enterprise to deliver value to the shareholder - stock price sucks over the last five years. Too bad your vaunted "juice the stock by boosting the dividend" accomplished squat. (Do elephants squat to shit?) Maybe you should look deep into your outhouse soul and examine why professionals do not want to work for you

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