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    Highlights—September 2, 2006

  • The Ledger (Lakeland, Florida): Do-it-Yourself Pension Plans. Excerpts: A worker who entered the workforce in the early 1980s with a job at a medium- to large-size company almost certainly would have had a pension plan. More than four companies out of five offered a traditional pension. By 2005, not even one company in three offered a pension. The big change came for two reasons: Pension plans are voluntary. And 1978 marked the beginning of the 401(k), a retirement vehicle that takes its name from the section of the U.S. Tax Code Rule creating it. [...]
    Reich pointed out that 76 million baby boomers are about to start moving into retirement "But most are not saving," he added. "The new pension law won't get employers to save for them. And even if Social Security were rock solid, it's not nearly big enough to fill the resulting gap." Baby boomers, said Reich, "are, as the president's father used to say, in deep doo-doo."
  • Bloomberg News, courtesy of the Arizona Star: Age-bias lawsuits vs. IBM are reinstated. By Karen Gullo. Excerpts: A federal appeals court reinstated age-discrimination lawsuits against IBM Corp., finding that termination-pay agreements were misleading and confusing. Employees laid off as part of the company's 2001 work-force reductions were offered severance pay and benefits in exchange for signing an agreement not to sue IBM. Ten employees at IBM microchip plants who signed the waiver sued the company in San Jose, Calif., after reviewing an information packet from IBM showing the ages of those laid off and those who were retained. [...]
    The waiver used language that was "unfamiliar to lay people," created "confusion" about employees' rights to sue for age discrimination and was unenforceable, the San Francisco- based 9th U.S. Circuit Court of Appeals ruled Thursday. The ruling opens the door to tens of thousands of age-discrimination claims from workers who signed the agreements starting in 2001, said Jeffrey Young, an attorney for the workers.
    "IBM has literally terminated perhaps 20,000 older employees during that time period, most of whom signed releases similar if not identical to the waiver" at issue in the case, said Young in a telephone interview. Clint Roswell, a spokesman at IBM, had no immediate comment. Young said IBM employees in Vermont, Colorado, California and North Carolina signed similar waivers.
  • Poughkeepsie Journal: Court brings IBM age bias suit back to life. Waiver was not clear, judges rule. By Craig Wolf. Excerpts: Hundreds, and potentially thousands, of terminated IBMers can now get their day in court to try to prove IBM Corp. executives unfairly and illegally fired older workers at rates higher than for younger ones. A three-judge federal panel in the Ninth Circuit Court of Appeals in San Francisco vacated a lower court's decision, ruling unanimously in a decision posted Thursday that the lower court judge erred in throwing out the suit. The ruling clears the way for the underlying claims of age bias to go to trial. [...]
    The ruling brightens the Labor Day weekend for the plaintiffs, but more importantly, could put thousands of extra dollars in their retirement accounts. Their lawyers have estimated that tens of "This is a major victory for us. Our case will now move forward with full steam," said Antonio Rivera of Union Vale, one of the plaintiffs and an organizer of the move to sue. "This is going to help an awful lot of people," he said, assuming the decision on the issues ends in their favor.
  • San Jose Mercury News: IBM age-bias lawsuit is reinstated. By "This will allow tens of thousands of employees potentially to sue the company for age discrimination," said Jeffrey Young, an attorney with the law firm of McTeague, Higbee & Case in Topsham, Maine, who represented the former employees from around the country. The case is the second of its kind to be overturned by a federal appeals court. The suits address a series of IBM layoffs from 2001 to 2003. In 2002 alone, IBM cut its worldwide workforce of 315,889 by 15,600. However, the company's workforce continued to grow as IBM hired new people and acquired other companies. IBM now employs about 329,000 people, including about 7,000 in the Bay Area.
    William Syverson, a 56-year-old plaintiff in the San Jose suit, said in court documents that an analysis he did of the people who had been laid off along with him showed that workers "who were over 45 years old had a much higher chance of being selected for layoff than younger employees." Syverson, an engineer who worked in a chip-making plant in Burlington, Vt., contended that the analysis showed that engineers and technicians under 45 had less than a 20 percent chance of being laid off from IBM's worldwide semiconductor manufacturing operations, while workers between the ages of 61 and 65 had a 67 percent chance of being laid off. [...]
    In a suit filed in Minnesota in 2002, and cited in Thursday's ruling, an IBM worker named Dale J. Thomforde said he was confused by the agreement and asked his supervisor what it meant. The supervisor later sent Thomforde an e-mail: "Regarding your question on the General Release and Covenant Not to Sue, the wording is as intended by IBM. The site attorney was not comfortable providing an interpretation for you and suggested you consult your own attorney." According to court documents, Thomforde's attorney said he thought he could sign the waiver and still pursue an age-discrimination claim. In the opinion issued Thursday, the justices said: "We do not agree that the direction to consult an attorney or an IBM employee mitigates confusing waiver language."
  • Accounting Web: IRS Auditing PwC’s Pension Plan, Deductions, Income Transfers. PricewaterhouseCoopers LLP (PwC), the world’s largest accounting firm, is being audited by the Internal Revenue Service (IRS), Bloomberg News reported Friday. Officials at PwC initially refused to comment on the Bloomberg report, which was based on company documents and IRS documents provided to Bloomberg. Late in the day, PwC confirmed that a review was underway but would not comment on the nature of the review. [...]
    The IRS is said to be examining PwC’s cash-balance pension plan, the timing of tax deductions and the transfer of profits among the firm’s international units, Reuters says. The Financial Times reports that the IRS is specifically looking at the $3.5 billion sale of PwC’s consulting practice to IBM, which took place in 2003. The giant accounting firm’s 2,000 partners would be liable for any additional taxes or penalties that the firm is required to pay. PwC employs 138,000 people, worldwide.
  • Reuters: DuPont to cut pension contributions by two-thirds. Excerpts: DuPont is among the first major U.S. companies to cut pensions after President George W. Bush signed into law new rules meant to overhaul the country's pension system earlier this month. The move also follows an August ruling by a U.S. court that found that IBM did not discriminate against older workers when it shifted to a new pension plan. DuPont said its defined benefit pension program for current employees will continue, but after 2007 the pension calculation will be reduced to one-third of its current level. It said that beginning in 2007, new hires will not be eligible to participate in the pension and retirement plan and will not receive a company subsidy for retiree health care or retiree life insurance. [...]
    It said it expects the changes to improve earnings by about 3 cents per share in 2007 and by about 5 cents per share beginning in 2008.
  • New York Times: Real Wages Fail to Match a Rise in Productivity. By Steven Greenhouse and David Leonhardt. Excerpts: With the economy beginning to slow, the current expansion has a chance to become the first sustained period of economic growth since World War II that fails to offer a prolonged increase in real wages for most workers. That situation is adding to fears among Republicans that the economy will hurt vulnerable incumbents in this year’s midterm elections even though overall growth has been healthy for much of the last five years.
    The median hourly wage for American workers has declined 2 percent since 2003, after factoring in inflation. The drop has been especially notable, economists say, because productivity — the amount that an average worker produces in an hour and the basic wellspring of a nation’s living standards — has risen steadily over the same period.
    As a result, wages and salaries now make up the lowest share of the nation’s gross domestic product since the government began recording the data in 1947, while corporate profits have climbed to their highest share since the 1960’s. UBS, the investment bank, recently described the current period as “the golden era of profitability.” [...]
    At the very top of the income spectrum, many workers have continued to receive raises that outpace inflation, and the gains have been large enough to keep average income and consumer spending rising. In a speech on Friday, Ben S. Bernanke, the Federal Reserve chairman, did not specifically discuss wages, but he warned that the unequal distribution of the economy’s spoils could derail the trade liberalization of recent decades. Because recent economic changes “threaten the livelihoods of some workers and the profits of some firms,” Mr. Bernanke said, policy makers must try “to ensure that the benefits of global economic integration are sufficiently widely shared.” [...]
    In another recent report on the boom in profits, economists at Goldman Sachs wrote, “The most important contributor to higher profit margins over the past five years has been a decline in labor’s share of national income.” Low interest rates and the moderate cost of capital goods, like computers, have also played a role, though economists note that an economic slowdown could hurt profits in coming months. [...]
    Average family income, adjusted for inflation, has continued to advance at a good clip, a fact Mr. Bush has cited when speaking about the economy. But these gains are a result mainly of increases at the top of the income spectrum that pull up the overall numbers. Even for workers at the 90th percentile of earners — making about $80,000 a year — inflation has outpaced their pay increases over the last three years, according to the Labor Department. [...]
    “There are two economies out there,” Mr. Cook, the political analyst, said. “One has been just white hot, going great guns. Those are the people who have benefited from globalization, technology, greater productivity and higher corporate earnings. “And then there’s the working stiffs,’’ he added, “who just don’t feel like they’re getting ahead despite the fact that they’re working very hard. And there are a lot more people in that group than the other group.”
    In 2004, the top 1 percent of earners — a group that includes many chief executives — received 11.2 percent of all wage income, up from 8.7 percent a decade earlier and less than 6 percent three decades ago, according to Emmanuel Saez and Thomas Piketty, economists who analyzed the tax data.
  • New York Times: The Falling Paycheck. Excerpts: After huddling with his economic team at Camp David this month, President Bush emerged from a meeting and, flanked by advisers — including the secretaries of labor, commerce and the Treasury — announced to reporters, “Things are good for American workers.”
    The comment is preposterous. As The Times’s Steven Greenhouse and David Leonhardt reported yesterday, the economic expansion that began in late 2001 is on track to become the first since World War II that fails to offer a sustained lift to the real wages of most American workers. Although the nation’s economy has grown and productivity has been strong, American employees have not shared in the wealth they’ve helped to create. Wages and salaries now make up the lowest proportion of the economy since the government began keeping records in 1947, while corporate profits have climbed to their highest share since the 1960’s.
    Until recently, the decline in real wages has been masked in large part by the housing boom that allowed many Americans to borrow and spend, even as their pay was squeezed. But now the housing market is flagging and with it, the Bush-era economy — without American workers having ever experienced a period of solid prosperity.
    Unfortunately, there’s little likelihood of meaningful improvement anytime soon. When Mr. Bush and his advisers are not insisting that everything is fine, they’re promising more high-end tax cuts as a cure-all, or painting the problem as one of impersonal market forces for which there are no government solutions.
  • Seeking Alpha: Pension Freeze Continues to Spread. By Jack Ciesielski. Excerpts: As mentioned before, the fourth quarter of 2006 may be the beginning of a new Ice Age for defined benefit pension plans. IBM may have gotten it started, but other firms have jumped on the bandwagon - Tenneco last week, DuPont yesterday.
News and Opinion Concerning the Pension Reform Bill
  • Los Angeles Times: Charitable Donations Get Stricter Tax Rules. Soon you'll need a receipt or canceled check for every gift. And those old jeans must be in 'good' shape. By Kathy M. Kristof. Excerpts: The nation's new pension law may have an unexpected effect on your ability to deduct charitable contributions. The Pension Protection Act of 2006, passed this month, was aimed at shoring up the beleaguered defined-benefit pension system. But it includes a variety of unrelated provisions, including some that govern the type of proof that will now be required to claim tax breaks for gifts to charities, including cash and clothing given to organizations such as Goodwill and the Salvation Army. [...]
    Under current law, taxpayers are largely taken at their word when claiming $20 placed in the church collection plate, or the relatively minor amounts of out-of-pocket cash that they might throw into the Salvation Army's annual Christmas kettles. Documentation has been required only for a donation of $250 or more. But, if audited, taxpayers are expected to supply a written record of how much they gave and to whom. The new law, however, requires that taxpayers have a receipt or canceled check for every monetary donation. A taxpayer's written record is no longer enough.
  • Magic City Morning-Star (Millinocket, Maine): Pension Protection Act: A Missed Opportunity. By Representative Michael Michaud. Excerpt: On August 17, 2006, President Bush signed into law the Pension Protection Act of 2006. The Act was touted by the White House as the "Most Sweeping Reform of America's Pension Laws in Over 30 Years." I think this Act is a missed opportunity. I believe that real pension reform is in fact urgently needed. Ensuring that working families can have a secure retirement certainly should be at the top of the Congressional agenda. However, instead of enacting real reform, H.R. 4, The Pension Protection Act, will result in further under-funding of workers' pension plans over the next five years and cause the claims against the nation's struggling pension insurer to go up, not down.
  • Asbury Park Press: Middlemen may be raiding 401(k) plans and hiding fees. By John F. Wasik. Excerpts: While the new U.S. pension-reform law gives a few savings plums to employees, it still hides the pitfalls of 401(k) plans in the form of excessive expenses. Middlemen in 401(k)s who provide administrative support and line up mutual funds for employers may conceal their compensation in individual fund expense ratios, an annual percentage deducted from your plan assets. In some cases, third-party administrators and broker-consultants may be raking in one-third or more in total expenses through what the industry calls revenue sharing or soft-dollar deals. That's like a car dealer taking a $10,000 commission on a $30,000 vehicle.
  • Dow Jones Newswires: Pension Economics Point to Companies Freezing More Plans. By Steven D. Jones. Excerpts: There's a chill in creeping through the pension industry that the pension reform signed into law last week won't thaw. The Pension Reform Bill is aimed at forcing companies to fully fund defined-benefit retirement plans and shore up the nation's pension insurance fund, and in doing so it may add to the incentives companies -- even those with well-funded plans -- already have to freeze traditional pensions.
    "I believe we will witness an unprecedented number of companies closing their well-funded defined-benefit pension plans to new employees," said James Klein, president of the American Benefits Council, in a statement.
    Verizon Communications Inc., Motorola Inc., Hewlett-Packard Co. and International Business Machines Corp. have recently announced freezes of their defined benefit pension plans. Delta Air Lines Inc. and Northwest Airlines Corp. also have imposed freezes as part of their reorganizations in bankruptcy court.
    For companies, there are clear economic benefits to freezing a pension plan. Jack VanDerhei, professor at Temple University and a research director at the Employee Benefit Research Institute, has analyzed pension freezes and estimates a hard freeze can cut the annual retirement payout to a worker by more than half.
    Payments to many pensioners are calculated using a "final-average defined benefit" formula. That means the company multiplies the number of years worked by the average of the worker's three highest years of pay times 1 percent. Suppose a worker retires at 65 after 35 years on the job with a final three years of pay averaging $103,000 a year. His benefit would be $36,000, or $103,000 times 35 years times 0.01. If the retiree survives to age 85, the total benefit paid would be $720,000.
    But consider what would happen if the company had frozen the pension plan when the worker was age 50 after he had put in 20 years on the job. Suppose his average salary the final three years before the freeze was $70,000. That means at age 65 when he retired his benefit would be $14,000, or $70,000 times 20 times 0.01.
    That's $22,000 a year less than he would have received without the hard freeze. And if the retiree survived to age 85, the total amount of the benefit would be $280,000, or $440,000 less than the total benefit paid had the pension not been frozen.
  • The Groom Law Group: Pension Protection Act of 2006. Full excerpt: Years of negotiations, lobbying efforts, and political posturing have finally culminated in comprehensive pension reform, as the House of Representatives and the Senate passed H.R. 4, the "Pension Protection Act of 2006", on July 28th and August 3rd, respectively. The President is expected to sign the bill into law on August 17th. We attach detailed summary comparisons of current law and the principal provisions of H.R. 4, the Pension Protection Act – in separate packages focusing on defined benefit and defined contribution plans. We also attach a separate side-by-side that focuses on the many ERISA fiduciary changes in the legislation.
    We are currently forming various coalitions for identifying and drafting technical corrections to the bill. We also have identified a number of regulation projects that the Treasury Department and the Department of Labor have been directed to undertake and intend to work closely with these agencies to not only assist them in their drafting efforts, but to craft the new rules in ways that are most favorable.
    • Commentary by Kathi Cooper (of Cooper v. IBM). Full excerpt: If you think HR4, the pension bill, passed because it was the will of 'the people' and hence 'good for us', please think again. In fact, throw away what you learned in civics class. Bill Sweetnam, of the the Groom Law Group (not a friend of ours), tells us who is really in charge below (referring to the Groom Law Group page, quoted above).
      Lobbying efforts? Political posturing? Negotiations? Craft new rules in ways that are most favorable? If any out there still believe that you will get your pension or 401K as promised, you might as well be whistling Dixie.
  • Kansas City Star: Kiss pension plans bye-bye. By Robert Reich. Excerpts: With the recent passage of a 907-page pension reform bill, you may think you have more retirement security.
    Think again.
    The new law does require companies to fully fund their “defined benefit” pension plans — plans that guarantee retirees a certain fixed sum per month. That’s a step in the right direction. But the law eliminates any incentive for companies to set up such plans in the first place. In fact, incentives are now just the opposite. There’s no requirement that companies offer defined benefit plans, or keep the ones they have in place. [...]
    As recently as 25 years ago, more than 80 percent of large and medium-sized companies offered defined-benefit pensions. By 2005, fewer than a third did. What happened? In an era of fiercely competitive cost-cutting, companies will do what’s cheapest. And it’s cheaper to switch to what are called “defined contribution” plans, like 401(k)s, where employees decide how much of their paychecks to put away.
    I’m not blaming companies. They have to show profits by squeezing payrolls. Wall Street is demanding it. And I’m not blaming employees. Many can’t afford to save. How could they? Adjusted for inflation, hourly wages today are lower than they were 30 years ago. I’m blaming Congress for failing to level the playing field and require all companies to do more.
    Seventy-six million baby boomers are heading full speed toward retirement. But most are not saving. The new pension law won’t get employers to save for them. And even if Social Security were rock-solid, it’s not nearly big enough to fill the resulting gap. Notwithstanding 907 pages of new pension legislation, baby boomers are, as the president’s father used to say, in deep doo-doo.
  • New York Times: Rendezvous With Oblivion. By Thomas Frank. Excerpts: What we have watched unfold for a few decades, I have argued, is a broad reversion to 19th-century political form, with free-market economics understood as the state of nature, plutocracy as the default social condition, and, enthroned as the nation’s necessary vice, an institutionalized corruption surpassing anything we have seen for 80 years. All that is missing is a return to the gold standard and a war to Christianize the Philippines.
    Historically, liberalism was a fighting response to precisely these conditions. Look through the foundational texts of American liberalism and you can find everything you need to derail the conservative juggernaut. But don’t expect liberal leaders in Washington to use those things. They are “New Democrats” now, enlightened and entrepreneurial and barely able to get out of bed in the morning, let alone muster the strength to deliver some Rooseveltian stemwinder against “economic royalists.” [...]
    Or take the “inevitability” of recent economic changes, a word that the centrist liberals of the Washington school like to pair with “globalization.” We are told to regard the “free-trade” deals that have hammered the working class almost as acts of nature. As the economist Dean Baker points out, however, we could just as easily have crafted “free-trade” agreements that protected manufacturing while exposing professions like law, journalism and even medicine to ruinous foreign competition, losing nothing in quality but saving consumers far more than Nafta did. [...]
    When you view the world from the satisfied environs of Washington — a place where lawyers outnumber machinists 27 to 1 and where five suburban counties rank among the seven wealthiest in the nation — the fantasies of postindustrial liberalism make perfect sense. The reign of the “knowledge workers” seems noble.
    Seen from almost anywhere else, however, these are lousy times. The latest data confirms that as the productivity of workers has increased, the ones reaping the benefits are stockholders. Census data tells us that the only reason family income is keeping up with inflation is that more family members are working.
    Everything I have written about in this space points to the same conclusion: Democratic leaders must learn to talk about class issues again. But they won’t on their own. So pressure must come from traditional liberal constituencies and the grass roots, like the much-vilified bloggers. Liberalism also needs strong, well-funded institutions fighting the rhetorical battle. Laying out policy objectives is all well and good, but the reason the right has prevailed is its army of journalists and public intellectuals. Moving the economic debate to the right are dozens if not hundreds of well-funded Washington think tanks, lobbying outfits and news media outlets. Pushing the other way are perhaps 10. The more comfortable option for Democrats is to maintain their present course, gaming out each election with political science and a little triangulation magic, their relevance slowly ebbing as memories of the middle-class republic fade.
News and Opinion Concerning Health Savings Accounts, Medical Costs and Health Care Reform
  • Kaiser Network: Percentage of Workers Enrolled in Employer-Sponsored Health Plans at Large Companies Drops, New Government Data Show. Excerpt: Large companies that employ 1,000 or more workers are experiencing a decline in participation in employer-sponsored health plans because of increases in out-of-pocket costs, the Wall Street Journal reports. The percentage of employees at large companies who enrolled in employer-sponsored health plans declined from 87.7% to 81% between 1996 and 2004, according to a new survey by the Agency for Healthcare Research and Quality.
  • Rand Corporation: Getting Full Value from Our Health Care System. Excerpt: Americans spend nearly $2 trillion a year on health care, but that’s about $1 trillion more than what Americans should be spending for what they’re getting in return. That’s the bold assertion of Paul O’Neill, former U.S. Secretary of the Treasury under President George W. Bush; former chief executive officer of the Alcoa aluminum manufacturing company; and currently a chairman of the Value Capture Policy Institute, an organization that seeks to improve the value of health care. With just a few simple, small changes in the way the U.S. health system operates, Americans could “simultaneously see a huge improvement in health care outcomes and reduce the cost of health care to society by about 50 percent,” O’Neill argued during a provocative discussion at the RAND Corporation.
  • Physicians for a National Health Program: What Would Lenin Do? Attempting to shore up our dysfunctional employer-based health care system is counterproductive, not progressive. By Maggie Mahar. Excerpts: While some progressives applaud efforts to force employers like Wal-Mart to take on greater responsibility for health care, others argue that our employer-based health care system is a failing relic of the past and that such gambits are actually counterproductive. Rather than trying to shore up our employer-based system, they say, we should seek to capitalize on that system’s mounting woes to build support for replacing it with national health insurance. Call it the Leninist road to universal health care — things have to get worse before they get better. [...]
    Today, our profit-driven health care system is bloated with waste. Studies published in journals like the Annals of Internal Medicine and Health Affairs reveal that roughly half of our health care dollars are squandered, each year, on unnecessary or redundant tests, ineffective, sometimes unproven treatments, and over-priced new drugs and devices that are no better — and sometimes worse — than the products that they replaced. Meanwhile, a fee-for-service system encourages over-treatment. Last week, when The New York Times asked its readers, “Have you ever suspected that a physician had financial incentives for recommending a medical treatment to you?,” the paper received 237 replies in just one day.
    In virtually every other developed country in the world, the government takes responsibility for trying to check health care inflation. This is why patients in other countries pay so much less for both drugs and medical devices. In nationalized systems, governments are the health care industry’s biggest customer, and they use their clout to negotiate lower prices. By contrast, in our fragmented employer-based system, individual employers are left to attempt to negotiate lower premiums with insurers who, in turn, are fighting their own price wars with drug-makers, device-makers, and health care providers.
    When employers find they cannot afford to fight the battle, they retire from the field. Over the past five years, the share of employers who offer health benefits has fallen from 70 percent to 60 percent. As for insurers, if they cannot persuade a drug-maker to offer the drug at a discount, they simply pass the higher costs on in the form of higher premiums — one reason why premiums have jumped by more than 75 percent over the past six years. Little wonder that a recent poll by the Commonwealth Fund shows that 23 percent of families earning $75,000 or more report they have trouble paying for health insurance. [...]
    But if support for universal healthcare is swelling, does Washington really have the will to fight the lobbyists who defend the health care system’s hazardous waste? On this point, recent history is discouraging. The 2003 Medicare reform infamously prohibits the government from negotiating with drug-makers for lower prices. And earlier this year, when Medicare announced that it was planning to cut reimbursements for some of the most over-priced medical devices and procedures, lobbyists representing companies like Boston Scientific marshaled their forces, Congressmen wrote letters and Medicare capitulated. Describing the incident on his blog, Brown University medical professor Dr. Roy Poses quoted Piper Jaffrey securities analyst Thomas Gunderson: “[T]hey didn’t even back off — they folded.”
  • Physicians for a National Health Program: Uninsured Ranks Swell as Private Coverage Deteriorates Middle-Class Losing Coverage at Fastest Rate 14,000 Doctors: “National Health Insurance is the Only Solution”. Excerpts: The number of uninsured rose from 45.3 million in 2004 to 46.6 million in 2005 (15.9 percent of the population), the fifth straight year of increases. The number of uninsured has increased by 6.8 million since 2000. The number of uninsured children rose from 7.9 million in 2004 to 8.3 million (11.2 percent of all kids) in 2005, despite continued expansions of the Medicaid and SCHIP programs. “Virtually all of the people who lost their coverage were solidly middle-class, full-time working American citizens,” said PNHP co-founder Dr. Steffie Woolhandler, Associate Professor of Medicine at Harvard Medical School. "Additionally, there are the tens of millions more whose insurance is so skimpy they’d be bankrupted if they got sick. The mainstream of America is suffering.”
    The Physicians’ group noted that the large increase in the number of uninsured Americans was a result of the continued erosion of employer-based coverage. A million full time workers lost their coverage between 2004 and 2005 (in 2005, 21.5 million of the uninsured worked full-time). The proportion of Americans covered by employer-based coverage continues to plummet, from 63.6 percent in 2000, to 59.8 percent in 2004, and 59.5 percent in 2005.
    Almost all the rise in the uninsured was in families with incomes over $50,000 per year; there was a modest decline in the number of uninsured poor, those families with incomes under $25,000 per year (partly due to the expansion of public coverage to another 857,000 people). The number of uninsured people making between $50,000 and $75,000 per year rose the fastest, by 600,000 people, to 8.3 million (14.1 percent of this income group). Additionally, the number of uninsured making over $75,000 rose by 800,000, to 8.7 million. [...]
    The doctors’ group said that the only solution to the rising number of uninsured and underinsured is a single-payer national health insurance program, publicly financed but delivered by private doctors and hospitals. Such a program could save more than $400 billion annually in administrative waste, enough to provide high-quality coverage to all and halt the erosion of the current private system. On Monday, the California Assembly voted 43-30 in favor of a statewide single-payer program.
  • Yahoo! message board post by Janet Krueger. Full excerpt: I believe it is foolish to rely on corporate America to voluntarily provide our citizens with health care, particularly in companies that provide 'at will' employment where there is nothing stopping them from letting employees go when they, or their dependents, become too 'expensive' due to health care issues that are beyond their control. The FHA, in which you never vest, and which IBM has never bothered to set up any trust funds for, is just one more sign of this critical and rapidly worsening problem.
    There are two Actions you can take, and I have posted both in the past:
    1. Insist that Congress regulate corporate promises better, forcing corporations to keep retirement promises they have made in the area of health care. If you are interested in working with others to do this, a good organization to visit is the National Retiree Legislative Network at www.nrln.org. Unfortunately, as evidenced by the recent so-called Pension Protection Act of 2006, Congress is moving backwards and working to make it easier for corporations to reneg on promises.
    2. Work towards Universal Health Care coverage, so that every American has access to affordable health care, no matter where they are employed. If you are interested in working with others to do this, a good organization to visit is the Universal Health Care Action Network at www.uhcan.org. Here again, we aren't going to make much progress unless we clear most of the current incumbents out of Washington.
    Surely the United States can do much better in working towards affordable, high quality health care for everyone!

New on the Alliance@IBM Site:
  • IBM Pension Lawsuit FAQ about Cooper v IBM (Updated 8/8/06)
  • From the Job Cuts Status & Comments page
    • Comment 8/27/06: In my area, certification has not been used as a reason for layoffs. However it is always the manager's cronies that get the right engagements/projects to get certified. You will be sent on projects that don't qualify as defined by the certification requirements. You will accept these of course in order to get enough utilisation. These projects will never match your extensive experience, and you will be studying at night so you can do your job. At the end of the project, you will be rated low because you did not do well (they do this deliberately so you can be layed off). You may have had great current skills as a professional hire but years later, because you've been on so many projects that don't require your skillsets, you are worth nothing in the marketplace. Then when they send your job overseas, you have to settle for a low paying job because your value has been eroded. Better not to join IBM at all! -Anonymous-
    • Comment 8/29/06: IBM should set the example and have Sam train his Indian or maybe Chinese replacement and then have the IBM directors remove him. -Anonymous-
    • Comments 08/31/06: STG layoff taking longer than expected. Word is that HR and lawyers are reviewing reason for redeployment of each employee. -Anonymous-
    • Comments 08/31/06: Atkins speech at Poughkeepsie today (8/31/2006): Job cut details to be announced to employees within 10 days. -Anonymous-
  • From the General Visitor's Comment page:
    • Comment 8/28/06: To: I would really like to understand what? All I can say is, join the Alliance@IBM and do NOT wait for or worry about the "all talk and no action" apathy cluck... the process is easy. Join online, pay $10.00 per month if you can; but at the least become a subscriber.. Then find those at IBM of like mind, and from this seed, who knows what will grow?..Start meeting after work, talk by phone or e-mail. As a group forms in your area and grows with some IBMers with courage; the meek may decide to join behind you... The worst mistake is to wait for the meek to find courage. Start without them. Conviction matters. Decide and do. Good luck... Our nation may very well hinge on those with the courage to stand up against today's immoral business tactics. If not, our children may inherit a very dire situation far worst than today. -BeNotMeek-
    • Comment 8/29/06: Since we are tracking our exec’s deceit (lies), here’s one: Sanford’s bio online states, “Previously Ms. Sanford was Senior Vice President & Group Executive, IBM Storage Systems Group, where she helped take IBM from fifth place in storage market share to second in two years.” Yet the 2005 annual report under “Discontinued Operations” it says, “On December 31, 2002, the company sold its HDD business to Hitachi for approximately $2 billion. The final cash payment of $399 million was received on December 30, 2005. In addition, the company paid Hitachi $80 million to settle warranty obligations during 2005. These transactions were consistent with the company’s previous estimates. The HDD business was accounted for as a discontinued operation … The company incurred a loss from discontinued operations of $24 million in 2005, $18 million in 2004 and $30 million in 2003, net of tax. These losses were primarily due to additional costs associated with parts warranty as agreed upon by the company and Hitachi, under the terms of the agreement for the sale of the HDD business to Hitachi. So if you don’t count selling off the group, taking $72 million in losses and “discontinued operations” then she took the Systems Group “from fifth place in storage market share to second in two years.” I wonder what else has been swept under the carpet as another future surprise? Maybe it’s why the company is rushing overseas, to try and financially backfill on such disasters before they are discovered.-Anonymous-
    • Comment 9/01/06: Stockholders: If you're looking for "dirt" on Executives, read what the Carlyle Group said back when the hired Gerstner. "Mr. Gerstner, 60, is widely credited with transforming IBM into a customer-focused global enterprise dedicated to leadership in services and technology. Since Mr. Gerstner joined IBM in April 1993 through year-end 2001, the company's share price increased more than 800 percent, and its market value grew by $180 billion." Everyone must have been asleep and missed the 800 percent increase share price.
      Palmisano's doing the same thing SHAREHOLDERS!! Wake Up!! He received $ 29 million last year. His buddies: Donofrio just cleared over $7M on stock-options. Executive stock options between $27 to $40 per share, then unloading them at market value. They're cleaning up. Wake Up SHAREHOLDERS. Sam needs to be ousted, plus most of his buddies.
      They've ROBBED/STOLEN from you and the employees enough. These guys are lying, cheating, etc people. They're GREEDY. Wake Up SHAREHOLDERS !!! Remember to ask yourself. I owned IBM stock when Gerstner made the stock go up 800 percent, but I didn't see any of the money. Sam's doing the same crap. Employees JOIN the Union. SHAREHOLDERS wake up. -Anonymous-
  • Pension Comments page
  • IBM employees on employee raises
    • Comment 8/29/06: If all of you think your raises were puny, please consider this. My friend who works in Lenovo (who was sent there by IBM against his wishes, and had a pay cut of 25%), told me that there would be no pay increases nor bonuses for all employees for the year 2005, irrespective of the PBC rating you got. Maybe they need all those extra cash so that the Chinese govt. can build a few more nuclear bombs to bomb America -IBMer-

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:
  • "Consulting can mean anything within IBM" by "civilliberty". Full excerpt: They can stick you in the strangest of places (resource management, Project Office, networks , database, mainframe, ERP0. They don't really care what you want - it's more a case of what they want and you may not know till it's too late. And they can change the rules on you at anytime. You may be a great ERP specialist - but if you are on the bench the resource manager(RM) may strongly 'encourage' you to turn your hand to a testing role. Defy the RM and you could have a black mark against you waiting to bight you on the posterior come assessment time - irrespective of how good a job you may have done and how much the client appreciated your work. It doesn't matter that much if the client doesn't like you, it's more a case of are you playing IBM's game their way. Join IBM at your own peril.
  • "Good start" by "Dose of reality". Full excerpt: Here's the key question. Given the overwhelming cons, at what price point, and for what kind of work, would a client be willing to pay a slight discount for significantly inferior resources? I believe that for most work in this industry, this is not a linear relationship.
    In other words, a client will not accept a 10% discount for a resource with 10% worse skills – they will require a 30% discount for a resource with 10% worse skills. The problem is that we are offering a <10% discount for a resource with 30% worse skills. This price insensitivity is typical of a premium markets. For an understanding in a different industry look at the medical profession. Would you shop price for an eye laser surgery service? If the most reputable provider in the area charges $3,500 for the procedure, at what price will you agree to go to a B-/C+ provider? Parachute manufacturing is another good example.
    Given this dynamic, our entire resource strategy is based on fooling the clients into thinking they are getting a slight-moderate discount for the same caliber of resources. Since we consistently fail to deliver on resource quality, we are getting killed in the market. They are simply going to the 30% discounters who are offering the same resources that we do. This game of perception-reality leapfrog has been going on for over three years now, and we are losing badly.
  • "Pro's and Con's" (of offshoring work) by "civilliberty". Excerpts: Offshore model Pro's:
    • multi-lingual capability
    • cheap labour (though on the increase)
    • work 14 hour days perhaps more
    • flexible provision of services
    Offshore model Con's:
    • loyalty is skin deep so there is a lot of people movement and hence wage inflation
    • quality of work very patchy
    • cultural differences
    • time lags, delays and time zone issues
    • problems with managing remote resources
    • don't have the extensive experience of westerners
    • don't understand that not knowing extensive experience of westerners is a serious issue and barrier
  • "Nothing special" by "Old_Paradigm". Full excerpt: I've noticed a push to view IT work as nothing special. As though it's all process work that anyone with a few skills can do. "look, we can outsource everything and still function!" If you denigrate the value of the work, it's only a hop skip and a jump to devalue the worker. Sadly this is only compounded when you get some arrogant overbearing IT person (we all know them) that takes pride in not having a clue about 'business'.
  • "And Sadly" by "Wok N Off". Full excerpt: Aren't we finding more and more of these types on more and more projects that end up in cost over-runs, schedule delays, and some mighty pissed off clients? I thought our stated value prop. was to sell the cradle-to-grave solution set. Oh, I forgot, that's just what we say. It wasn't like we ever meant it.
  • "Art or science?" by "Dose of reality". Full excerpt: A five year-old's finger painting, and a Michelangelo both meet the basic qualifications of a work of art, and both can declare that they have met their obligations whenever they decide they are finished, yet few would argue that they are comparable, except for someone tasked with getting a lot of money for the finger-paint work.
    On the buyer side, very few service purchasers will ever admit that the project they just delivered was a business failure, so they are happy to agree with the five-year-old, as long as objective measures of success (budget and timeline) are within tolerance levels. That just leaves the business to be screwed, as the over-matched business-ignorant tech-heads manage scope and design down to the least common denominator, change-management be-damned.
  • "Band levels...this time with style pt 1" by "Dose of reality". Full excerpt:
    • Band < 6: Will never see the inside of a client’s office, strictly back-office types.
    • Band 6: Hey I just grajeated college, and my daddy told me IBM is a good company. He said they make these big boxes called computers, and every company uses them. The company is really big, so it must be a good place to work –right? Otherwise, how could they get so big? I interviewed with this old lady who was a lot like my Aunt Millie, and she told me IBM was a great place to work, but she couldn’t tell me why. That’s OK – my Aunt Millie never lied to me. I am having a great time here – putting numbers in a spreadsheet, typing notes, and making appointments for my manager. Next month, they are going to let me actually speak to a client. I have also been put in charge of a guy named Ravi who works from 9:00 PM – 6:00 AM. He is really hard to understand, but is always asking “How can I help you”. Unfortunately, he never does…..help me that is. I don’t think my manager likes him
    • Band 7: I spent 6 years working as an accountant at Pepsi, but I left last month when they promoted Ravi’s mother to CEO. IBM really likes me – they are teaching me how to fill in all these menu screens in this program called SAP. I have no idea why I need to fill them in, or what they do, but my clients keep asking me. I just agree with everything they say, and everything works out OK. When I get stuck, I call Ravi, and he puts me on hold a few times, and then asks “is there anything else I can do for you today?”
    • Band 8: I used to be an accountant, but then I worked on a project implementing SAP at my company. I got a call from IBM, and they said they wanted me to become a management consultant. That sounded impressive, so I said – “sure why not”? My daddy told me that IBM is a good company. I have since been working on projects copying all the SAP designs from my previous company and putting them into client companies. I asked my manager “how can we be sure that the designs are going to work here”? He told me that the client would accept everything we say and do, because we are IBM, and besides, we don’t have the time or budget to do anything but slam it in. I spend my whole day telling band 7 how to fill in SAP screens, and when I don’t know what to do, I call Ravi, and he puts me on hold a few times, and then asks “is there anything else I can do for you today?”
    • Band 9: I really like telling people what to do, especially when I have no idea what they are doing or what it means. I spend my whole day checking off tasks that we have completed, and telling my team to complete them on time, or else. Of course, there is no “or else”, because their actual performance has nothing to do with their evaluation at the end of the year, and regardless of how they ARE evaluated, they all get the same paltry raise and bonus. When I get behind schedule, I call Ravi, and he gets 5 of his friends to get together and complete in two weeks what my band 8 could complete in two days.
    • Band 10: I haven’t delivered a single work product in over 10 years. I used to work in the software group, but was kicked out because I was determined to have no people skills, and don’t have a clue about technology or software applications. My partner really likes me, because I do whatever he says to do, and whenever anything goes wrong, I find a band 9 to blame. My favorite thing to do is put Powerpoint pitches together – I have hundreds that I have collected and stolen over the years. Global-search-replace is the best thing invented since the system 360….or was it the PC?….no – I meant Lotus 123; I always get them confused. Whenever I need material, I call Ravi and he sends me documents from a course he took in college – “Making clients think you really want to, and can help them, even though you don’t know wtf you are doing, and still think you are better them”.

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