How big a nest egg should a 45-year-old have? Here's a look at who faces a midlife financial crisis -- and who might be able to retire early.
Benefits accrued as of Dec. 31 won't be touched, but the 107,000 U.S. workers enrolled in one of IBM's pensions plans won't garner any more years of service toward their final benefit even if they spend another 20 years inventing microchips or writing software or selling services. ...
While retirement experts are calling the terms [of IBM's enhanced 401(k) plan] among the most generous in corporate America, they also caution that middle-aged workers are unlikely to save enough in their 401(k) plans to close the gap between their new benefits and the pension they would have enjoyed under IBM's old plan.
What makes Big Blue's freeze particularly notable is that it wasn't undertaken because the company is in financial trouble or because its pension plan is underfunded. IBM's pension fund, with assets of $52.9 billion, had a surplus of $6.4 billion at the end of 2006.
When IBM announced the pension freeze for all U.S. workers in early January 2006, touting the $3 billion the change would save the company by 2010, it was just days away from reporting net income of $7.9 billion for 2005. ...
"These companies that traditionally did right by workers have given a green light to other companies. This opened the floodgates. It became permissible," said Karen Friedman, a policy director at the Pension Rights Center, which has compiled a list of more than 75 companies freezing pensions in the wake of the IBM and Verizon moves. "Companies are getting out of the pension business. They are backing out of promises to workers," she added. ...
Pensions for CEOs. Some experts believe executives at U.S. companies are willing to cut their pension plans because fewer of them are relying on them for their own retirement. The law says that pension benefits cannot be more than four times the wage of an average worker. Meanwhile, compensation for chief executive officers has risen from 40 times an average worker's pay in the 1970s to 367 times average in the years between 2000 and 2004.
Companies started setting up what are known as supplemental executive retirement plans. While traditional pension plans are "qualified" by the IRS as tax deductible, enhanced executive plans are not.
Like those of other IBM employees, the company's chairman and chief executive officer, Samuel Palmisano, had his pension frozen on Jan. 1, but he is unlikely to notice any gap in his benefits. As of Dec. 31, 2006, Palmisano had earned an annual pension of $87,702 a year through the qualified pension plan.
In IBM's supplemental executive retirement plan (SERP), he has earned an annual pension of $2.86 million. The total yearly benefit he stands to gain is more than $2.9 million, which works out to $8,075 a day.
Based on 33 years of service, the total value of Palmisano's pension benefits are $559,722 for the share in the qualified pension plan and another $18.3 million in the executive plan for a total benefit of $18.8 million.
"The enormous divergence in pay and the emergence of non-qualified plans as the main form of pensions for upper management have reduced the firm's interest in the pension plan that benefits the rank and file," the authors of the Boston College study wrote.
The survey found 95% of respondents will retain their executive defined contribution plans and 89% will continue their executive defined benefit plans, according to a press release. However, in response to grandfathering provisions of Section 409A regulations, approximately 30% of these non-qualified plans have been split into two parts.
Hsieh, who is 28, got in just under the wire before IBM stopped offering pensions to new hires in 2005. But her benefits stopped accruing Jan. 1, like those of the rest of the 107,000 U.S. employees with pensions.
She is now enrolled in IBM's beefier 401(k) and will receive 2 percent of her salary as an automatic contribution. She also will receive a dollar-for-dollar match on the first 6 percent she contributes for a total of 8 percent of her salary from IBM. ...
Younger workers such as Hsieh are the most likely to benefit from the trend away from traditional pension plans in corporate America. ...
A study by the Center for Retirement Research at Boston College examined a hypothetical scenario involving a 35-year-old worker who joins a new firm and enrolls in its traditional pension plan. If he retired at age 62, he could expect his pension to replace 43 percent of wages.
But if his pension is frozen at age 50 after 15 years of service and he is moved into a typical 401(k) plan, he would receive just 28 percent of wages at retirement - 13 percent from the pension and 15 percent from the 401(k). ...
Steven C. LeClair, a 62-year-old Garrison resident who worked at IBM's Fishkill plant for most of his career before retiring in 1996, said that when he was hired in 1965, the pension program was a big inducement.
"Would I have preferred a generous 401(k) plan over the old pension plan? In a word, no," he said. "The pension plan in effect at the time I interviewed and joined IBM in 1965 was non-contributory, and was part of the inducements offered by IBM to secure the level of talent they needed. We were told that as long as we did our job and kept our noses clean, we were guaranteed a job until we retired, with the full benefits package for life."
So much for IBM's pay and benefits competitiveness. Cringley is right again. BTW, the worldwide estimate of the folks being moved to AT&T is 5000. We're slowly getting to your estimate of IBM population numbers, Bob Cringely.
I highly recommend that you NOT tell your manager that you plan to retire. You want them to know that they will have to lay you off in order to get you to leave. You don't want there to be any confusion over the reason you are leaving. Make it clear that it is not voluntary on your part. You don't want to give them a way to weasel out of that severance pay!
You should run a pension estimate yourself on the pension estimator web site. But also call the Employee Services Center and request an official estimate. In theory, the two should match, but calling the ESC is the way you kick off the retirement process.
When you call the ESC, request that you be assigned to a Retirement Benefit Coordinator. This is one person who you can answer your questions and deal with on an ongoing basis during the retirement process, rather than getting passed back and forth between many different people.
Once you get your estimate in the mail, it is valid for 180 days and during that time you can take the next step and request your official retirement paperwork. If you don't do this, it is not a problem, you will just have to start the process over with a new estimate and that may delay the start date for your first pension payment. Since you are more than 180 days away from your termination date, you may want to wait a couple of months before you do this.
You will have a number of options on your pension payout, such as taking a lump sum or not and whether you want Joint and Survivor benefits for your spouse.
One very important thing: If you do not select your pension options within 45 days of your separation from IBM, you will lose the ability to select certain options, including when your pension payments can start.
Since you are close to age 65, you will not be getting much of an early retirement subsidy in your pension, so taking the lump sum option should give you an amount that is a pretty fair value in terms of what that portion of your pension is actually worth. I highly recommend talking to a fee-for-service financial planner about your options and what makes the most sense for you.
For medical benefits, it sounds like you are probably in the subsidized retiree medical plan, where IBM contributes up to $7000 to your medical insurance costs (dropping to $3000 once you are on medicare).
If you are laid off from IBM, you will be eligible for transitional medical benefits for up to 18 months. For the first 6 months, IBM will probably pay 100% of the cost. You will almost definitely want to stick with this coverage as long as IBM is paying for it.
After that, you can be covered by COBRA medical insurance for the remainder of the 18 months, or you can drop that in favor of the retiree medical coverage. COBRA coverage will cost you around $6000 per year for yourself, and $12,000 for yourself and your spouse. The retiree coverage probably will be less expensive (but some of the co-pays and deductibles tend to be higher).
When you leave IBM, you will have 30 days to select your medical plan, retroactive to your last day of work. It is very important that you make your selection during this time and not create a gap in your medical coverage!
If you log on to the Fidelity NetBenefits web site, you should be able to see what the retiree medical plans would cost you if you retiree this year.
In terms of personal holidays and vacation, use your personal holidays first, since IBM will not pay you for any unused holidays. Then use your vacation time. If you have any vacation days left on your last day, IBM will hand you a check for the unused vacation. You may want to document what days you are taking off as personal holidays and what days are vacation days by sending e-mails to your manager stating which days are which so there is no confusion at the end.
If you are contributing to the 401k plan, you way want to boost your contributions so that you can reach the maximum contribution limit by your last day of work.
If you set aside any money in the health care reimbursement account, you must use it for expenses that occurred before your last day, so plan to make any doctor appointments or purchase new eye glasses before you retire. Also, you can spend your full year's contribution, even though you won't work the full year. For example, if you were contributing $100 per month, you can spend $1200 from your account, even though by August you will have contributed only $800. This is free money from IBM, so take advantage of it!
I'm sure you have many other questions. Feel free to ask and we'll try and help.
Once you get your first pension check: Call 1-866-716-4098 Cooper Settlement ... you may now be able to receive additional money now that you are retiring due to a settlement .... here's the website info: www.coopersettlement.com/subclass1and2 Make sure you are on their list. You should get a package from them 90 days after your first retirement check. Look for it and call if you don't get it. It's not much but it could buy some extra beer...
While automatic enrollment helps many people start saving, it often excludes a large segment of workers and steers participants to a contribution rate that is in many cases below the rate these employees would have chosen on their own, the research shows. Nearly two-thirds of employers who use automatic enrollment apply it only to new hires, according to a survey of 5,490 plans by Plansponsor, a retirement-research firm in Stamford, Conn. And the median participant-contribution rate decreases under automatic enrollment, according to a study of about 50 plans by mutual fund firm and 401(k) provider Vanguard Group Inc.
Chairman Glenn Tilton noted when the dividend was announced the $250 million includes $20 million to employee shareholders. Many long-time employees suffered significant pay cuts when the company filed for Chapter 11 bankruptcy protection in 2002. Since exiting bankruptcy, UAL has reduced its debt by $2.7 billion, but still owes $8.5 billion in long-term obligations.
United's unions don't think the $20 million comes close to compensating for their losses, especially considering executive pay. Tilton, for instance, earned $23.8 million in salary and long-term compensation in 2006 while Chief Financial Officer Frederic Brace earned $13.2 million. Some employees, including Greg Davidowitch, president of the Association of Flight Attendants at United, were quick to condemn the distribution, calling managements' actions "shameless," "reckless" and "irresponsible." "The best shareholder initiative would be one that invests in the employees for the long-term success of the airline," said Davidowitch.
They predict that gross domestic product (GDP) per head in the UK, an indicator of average incomes, will be £23,500 in 2008, compared with £23,250 in America, reflecting the strength of the pound against the dollar and the steady growth of the British economy.
Presidential candidates in particular have responded to the public concern. Former Sen. John Edwards of North Carolina has been the bluntest populist voice, but other front-running Democrats, including Sen. Hillary Rodham Clinton of New York and Sen. Barack Obama of Illinois, have also called for change on behalf of middle-class voters. ...
Since he took over the chamber, contributions by businesses have soared, often to pay for political advertising known as "issue ads," which are exempt from many of the Federal Election Commission limits. Under a system Donohue pioneered, corporations contribute money to the chamber, which then finances attack ads targeting individual candidates without revealing the name of the businesses involved in the ads.
In 2000, drug companies paid the chamber to run advertisements in Michigan to help elect then-Republican Sen. Spencer Abraham. Pharmaceutical companies that year gave the chamber additional millions to run issue ads attacking mostly Democratic House candidates. And large corporations paid $1 million or more to support advertising campaigns against judges deemed too friendly to plaintiffs. ...
In the interview Monday, Donohue said he was unhappy with anti-corporate rhetoric coming from candidates in both parties and he wanted candidates to know about the chamber's ambitious plans. Donohue is not likely to name names at his news conference, but there is no doubt he is unhappy about Huckabee. The concerns Donohue expresses reveal apprehension that Republican pro-business candidates may lose favor with voters and that the GOP's important but fragile alliance between economic and social conservatives is showing signs of strain. ...
Even more than Republicans, Democratic candidates have boosted the volume of populist messages as the economy softens. Edwards, whose trial lawyer past has been openly criticized by Donohue for years, launched new advertisements that warn against the danger of replacing "corporate Republicans with corporate Democrats." The middle class, Edwards says in the new ad, is "losing ground while CEOs pocket million-dollar bonuses and corporate lobbyists get their way in Washington."
They called such deaths an important way to gauge the performance of a country's health care system.
The new study, funded by Commonwealth and appearing in the Jan/Feb ’08 issue of Health Affairs, looks at “deaths from certain causes before age 75 that are potentially preventable with timely and effective health care.” Relevant causes of death include diabetes mellitus, intestinal infectious diseases, whooping cough, childhood respiratory diseases, leukemia and others.
The authors, both from the London School of Hygiene and Tropical Medicine, found that America’s success in staving off these health problems has decreased over time. Between 1997/1998 and 2002/2003, preventable deaths fell by an average of 16 percent in all 19 industrialized countries considered; but the decline in the U.S. was only 4 percent. In 97/98, “the U.S. ranked 15th out of the 19 countries on this measure—ahead of only Finland, Portugal, the United Kingdom, and Ireland—with a rate of 114.7 deaths per 100,000 people.
The ruling allows employers to create two classes of retirees -- those younger than age 65 and those older than 65 -- and offer different benefits to each group. In addition, the ruling allows employers to eliminate or reduce benefits provided to spouses or dependents of retirees older than 65. EEOC proposed the rule in response to a 2000 U.S. Court of Appeals decision that required benefits to be offered at the same level for Medicare-eligible retirees and those younger than 65 (Kaiser Daily Health Policy Report, 1/2). A June 2007 decision by the Third Circuit Court of Appeals found that EEOC has the authority to create the exemption under the Age Discrimination in Employment Act.
Hoping for an explanation, and reconsideration, Preston’s parents filed a grievance. Blue Cross quickly rejected it. “Pulmozyme is no longer a Formulary medication,” said the virtually incomprehensible letter, which gallingly suggested the increase was part of Blue Cross’ commitment to providing its customers “the best possible care and access to medications.” ...
Here in California, Gov. Arnold Schwarzenegger and Assembly Speaker Fabian Nuñez would have you believe they stepped into the leadership void with last month's health insurance-for-all proposal.
But all they've done is come up with a shaky idea to require nearly everyone to buy medical insurance from the same companies we've all become so fed up with. Employers and hospitals would have to pick up part of the tab, and there might be a new tax on cigarettes to provide some support. But even if the vague and dubious funding proposals come to pass, there would be little or nothing in the way of additional controls on insurance companies in terms of what they cover or what they charge. ...
I began telling Kuehl about Preston and his family's issues with their insurer, but halfway through I stopped myself, figuring she's heard hundreds of similar stories. "No," she said. "It's in the thousands."
Insurers always qualify their denial letters with a sentence to the effect that the doctors must provide whatever care is necessary and that the payment is a separate issue. Insurers never deny care — only the authorization for payment. To stall the actual delivery of care, insurers hold out an insincere promise to authorize payment if the doctor provides more information. This leads the doctor on indefinitely, while insurers never say absolutely "no" until the patient gives up or dies. I agonize over having to choose whether to wait one more day for approval or to go ahead with the surgery and potentially damn the patient, his family, and the institution, to assuming the financial consequences. If I do go ahead without approval, no one comes to my defense when administrators ask me why so many of my patients' insurers are not paying. No one rescues the bankrupted families. ...
The third predictable insurance industry stall is the "expert" review. I would define an expert as a doctor who did a transplant or took care of a transplant patient this week. Insurers that review my denials define any has-been, retired, unemployed failure with a medical license an expert, paid to deny care. This is practicing medicine without examining the patient or seeing all the data. In effect, the licensed nurse or doctor working for an insurer is practicing medicine unprofessionally and criminally.
Alliance Reply: You are exactly correct. Without a union contract; IBM employees are 'at will' employees and at IBM's mercy. IBM makes their own rules and breaks their own rules whenever they please and whenever it suits THEM. Regardless of whether you deserved a poor performance rating or not; you'll never know for sure because IBM holds all the cards. Organize! It is the best advice and the only real alternative.
Alliance reply: You are correct. A contract is negotiated between the company and the executives they hire. Not all executives get contracts, but those that do, have an iron-clad agreement with the company. The employees deserve the same. That's what Alliance@IBM has advocated and continues to advocate. If you want a contract, you have to organize and work to get one. It will be worth it once you have it.
Vault's IBM Business Consulting Services message board is a popular hangout for IBM BCS employees, including many employees acquired from PwC.
This site is designed to allow IBM Employees to communicate and share methods of protecting their rights through the establishment of an IBM Employees Labor Union. Section 8(a)(1) of the National Labor Relations Act states it is a violation for Employers to spy on union gatherings, or pretend to spy. For the purpose of the National Labor Relations Act, notice is given that this site and all of its content, messages, communications, or other content is considered to be a union gathering.