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Highlights—December 22, 2012

  • Forbes: IBM Leader in Gutting 401(k)s. By Edward "Ted" Siedle. Full excerpt: The 2008 market meltdown made it painfully clear that 401(k)s were failing America’s workers. The financial crisis which stripped $1.6 trillion, or about a third of the total value, from the nation’s 401(k) plans was the “tipping point.” But the larger truth was that the financial services industry, aided and abetted by employers, had for the prior 30 years misled workers to believe that defined contribution plans could provide the same (or even better) retirement prospects than traditional pension plans that were being phased out. If workers socked away enough money, faithfully followed industry asset allocation advice and invested in pricey retail mutual funds, they’d prosper they were assured.

    “Take responsibility for your own retirement by trusting us with your money,” was the pretzel logic employed by the financial services industry.

    The grand 401(k) experiment worked out just dandy for mutual fund companies, allowing them to skim 1-3% in fees annually from workers’ accounts, as assets under management swelled, and for employers who were freed of responsibility for the fate of their workers in retirement. The only losers were the workers participating in these so-called retirement plans.

    Four years after the nation was awaken to the 401(k) debacle, you might expect that responsible employers would be concerned about the dire circumstances facing the majority of their retirees, be motivated to strengthen the plans they offer, and address many of the weaknesses that three decades of defined contribution experience have exposed. If so, you’d be dead wrong.

    Recently IBM, often considered a trendsetter for employee benefits, notified workers that starting next year it is changing the timing of the IBM match and automatic contribution from semi-monthly to an annual lump-sum contribution at the end of the year. IBM noted that “the percentage of the IBM match and automatic contribution workers receive – which makes IBM’s 401(k) plans among the best in the industry – is not changing.”

    The percentage of the IBM match may not be changing but the percentage of workers receiving it sure as hell is. Gutting of this benefit makes the IBM 401(k) plans far from “best in the industry,” in my opinion. By the way, every employer I’ve ever encountered in my career tells workers that its 401(k) is among the best in the industry – if not the very best. Not surprising, no employer seems willing to acknowledge its plan is garbage.

    IBM’s move is consistent with the trend large employers have followed in recent decades of slashing costs related to workers’ retirement plans—both defined benefit and defined contribution. Over time the clear trend has been to cut or eliminate existing pension obligations; shift workers into 401(k)s and, most recently, reduce employer contributions to these defined contribution plans.

    IBM will benefit greatly from the switch to an annual match; workers, on the other hand, will pay the price. Again, there is absolutely nothing to be gained by workers from the shift to an annual match and, of course, workers, under ERISA, have no say in the matter. As a fiduciary to the plans it sponsors, IBM should have, in my opinion, clearly disclosed to participants the downside and dangers related to this change.

    Expect more of the same as the nation’s leading employers, assisted by their hired-guns (employee benefits experts), to join IBM in a race to the bottom of the 401(k) heap.

  • Forbes: IBM Makes Changes To Its 401(k) Plan. By Helaine Olen. Excerpts: When it comes to pension and 401(k) plans, IBM has long been a trendsetter. That’s a worrisome fact in view of the company’s recent controversial change to their employee retirement plan.

    As of January 1, 2013, IBM will no longer give employees their 401(k) match with each pay cycle. Instead, the technology behemoth will make one large lump-sum payment to employee accounts on December 31 of each year.

    The motivation? Most independent observers say we should follow the money – IBM’s money, that is.

    According to the Wall Street Journal, IBM paid out $875 million in employee 401(k) contributions in 2011, a number that will likely decrease as a result of the planned change in 2013.

    First, any employee who leaves IBM’s employment prior to December 15 for any reason other than a formal retirement will not receive any company match to his or her own 401(k) contributions for the entire year. Nada. IBM executives could fire someone on December 14 and the company would not have to pay out.

    Second, all employees lose an entire year of the IBM match working for them in the investment sense. To be fair, that could be considered a lucky break if the year is 2008, when the S&P 500 fell by 37 percent. But in 2012? The advantage would go to IBM. As of today, the S&P 500 is up by 12.6 percent for the year.

    All in all, this points to one of the main problems in the United States’ private retirement planning system: companies can change the structure of their plans with little or no notice, throwing years of employee financial planning for their golden years into chaos.

    IBM is as good a place to see this in action as any.

    In 1999, IBM jettisoned its traditional pension plan in favor of a cash-balance plan. Pension amounts were frozen in place, with all future benefits coming in the form of a cash credit. Many employees – especially older workers who had been with IBM for more than a decade — lost tens of thousands of dollars in future retirement benefits in the switch.

    Anger, recriminations, charges of age discrimination and lawsuits resulted, an ongoing legal and public relations mess that was not fully resolved until 2007, when the United States Supreme Court ruled in IBM’s favor. But by then, IBM was already making other changes to their retirement benefits package. In the cash balance plan, IBM was still responsible for investment risk. That would soon end. Beginning in 2005, the company ceased offering new employees the cash balance plan at all, instead granting them access to a 401(k) plan. Then in 2008, IBM froze ceased offering the cash balance plan to all employees, freezing those plans as well. All future contributions would come in the form of the 401(k).

  • Yahoo! IBM Employee Issues message board: Re: IBM now making their 401k contribution once a year on Dec. 15th? Full excerpt: Here is a sample letter putting all the points together. I have sent this letter to my Senators and my representative. I wasn't able to send to my new Representative through the web-interface but I will find another way. Feel free to use. Contact Congress!

    Dear Senator/Congressperson,

    IBM Corporation recently announced a change to their 401K match for 2013 that has many harmful side-effects for their employees and financial markets.

    IBM announced that all 401K matches of personal contributions to the 401K retirement plan would be withheld until the end of every calendar year. Previously the employee match was done bi-weekly.

    Here is why the change is wrong for IBM employees, and reason #1 listed below might be illegal:

    1. Employees who terminate or are terminated for any reason other than retirement between January 2 through December 14 will receive no contribution for the entire year. That is a huge blow for employees who may have to leave for reasons beyond their control—including layoffs, which are ongoing every year at IBM. IBM US employee population has declined from 160,000 ten years ago, to 92,000 now. It is expected that more large job cuts will take place in 2013.
    2. Since money is not being distributed into employees' accounts until the very end of the year, employees will no longer benefit from any interest that would have been earned on those contributions throughout the year. (Instead, the company will benefit from this interest.)
    3. Because the stock market can be volatile, regular, semimonthly contributions are preferable to a single, annual contribution due to the investment guideline of dollar-cost averaging. The idea is that investing smaller, equal amounts on a regular basis will lower the total average cost per share of the investment, giving the investor a lower overall cost over time.
    4. If IBM is allowed to make this change, many corporations that offer 401K matches will follow suit. The effect of large institutional buys of investment instruments on a corporate timetable could lead to collusion and unexpected effects in financial market stability and volatility.

    Patterns in corporate buying factored in across hundreds of corporations timing their investment activity using financial clout and insider information from interlocking directorates and boards should sound the alarm bells among any Congresspersons who worry about monopolistic practices in financial trading.

    Please contact Ginny Rometty, CEO and Chair of the Board of IBM and urge her to reverse this wrong-headed and mean-spirited change to the IBM 401K plan.


    Your Name Here, IBM Employee/IBM Retiree/IBM Spouse

  • CNN: Will 401(k) plans keep getting worse? By Teresa Ghilarducci. Excerpts: IBM, one of America's largest companies, shook the employee compensation world when it announced recently that it would contribute only once every December to its employees' 401(k) accounts. Any employee who leaves before December would not be able to collect the company's match.

    Workers at IBM aren't marching to the picket line like Walmart workers and longshoreman who protest pay and working conditions, but you just never know.

    Only about 9% of the nation's employers make matches once a year. IBM's move is paving the way for big companies to go down this road. ...

    The company can be pretty sure that there will be very few workers exiting during crunch time season: September, October and November. It would really be IBM's choice in determining which employees to let go. This incremental addition to IBM's control over their employees is surely the main reason IBM changed its 401(k) payment timing.

    Selected reader comments follow:

    • That actually is not an indication things are going very well at IBM. You can expect people to leave in droves in January.
    • Like many of the great companies of the past, sooner or later IBM will just be a shell brand that has its name stamped on various cheap Chinese products like paperclips and promotional pocket calculators.
    • ..and you can expect a bunch of layoffs from IBM every November.
    • Actually there might be picket lines at IBM. Workers are furious at this move by IBM. Because of all the job cuts throughout the year due to offshoring, workers believe there is an incentive to fire more before the Dec. 15th cutoff date. The Alliance @ IBM has a petition on its web site and workers and family members are signing.
    • And I presume the best time to quit is January. So management fires the the people they don't like in December and the folks they like leave in January. Pretty soon IBM has a HR problem on its hands.
    • Don't worry, I'm sure the IBM suits that engineered this got a nice fat bonus this year.
    • 401k match is not altruistic, its designed to keep employees. IBM is starting to set a new lower standard of market value compensation which will likely become typical for all who work soon enough. Of course they will only get away with it if the rest of the employers follow suit. As for your notion that altruism is bad for business, that false. Many companies engage in it with great results. New Belgium brewery is one. And the people who run companies are part of society and they are not immune to the regulatory consequences we the people have the right to impose upon them if we feel they do more harm than good.
    • IBM has now lowered the value of its total compensation package. They have done so in a way that is designed to not reduce their employees ability to leave as a result of that change, but it's a short sighted and very poor plan and here's why. Right now, IBM employees may not have as many opportunities due to the market. But the economy will improve. And not every company will necessarily follow IBM's lead because they are likely following a longer term strategy. So, as a share holder in IBM, tell me what happens when the economy improves and lots of jobs are available, many with a 401k match that happens with every paycheck like is the norm now? Those IBM employees that are the best and brightest will jump ship, and your stock will plummet as the company is now left with mediocre at best employees who mismanage their individual tasks and departments while the best and brightest go elsewhere.

      My original point is not that companies should engage in altruism, but rather that they never do. My point is that a 401k match that comes with each paycheck or more frequently than once a year is part of a company strategy to offer good compensation to have good people. You do believe that the best employees command the best compensation right? I'm pretty sure even your conservative economist Sowell would agree with that...right?

      Bottom line is this. IBM is making a short sighted decision based on what's in front of them right now. Their management may be rewarded handsomely for it, but in the long run, they will suffer because the economy will change and it's harder to reverse and go back to this sort of thing than not. IBM will have to find another way to compete that could wind up being even more costly. Welcome to a more complex economics than you're used to.

    • My company just announced quarterly 401k matches that are conditional based on EBTIDA performance. They also in changed the match from 2 1/2% on a 3% employee contribution to a 2 1/2% match on a 5% contribution ... if they make the numbers. They also capped their maximum match at $3k. I started working in 1984 when many retired between 55 and 65 with medical benefits and a company pension. Now I joke that I will have a closed casket funeral because there will be the imprint of the keyboard keys on my forehead when they find me dead at my desk at 90 yrs old.
    • My great-grandparents retired at a decent age with pensions and medical benefits, as did my grandparents and parents. Me? Work till I die, most likely. The American dream is turning into a nightmare.
    • People allowed this. First pensions were killing them, so they sold people on 401Ks. Now they are cutting 401K benefits. They won't be happy until you get nothing, and you can take it or leave it. Think about that the next time you criticize Unions. They aren't perfect, but at least you had some power. Now, we're just bending over backwards and taking it.
    • Now go read the article about unions and see all the posts about how they're no longer needed. If you don't think American corporations will turn workers back into what they were before 1930 as soon as they possibly can, then you're living in dreamland. A corporation's only purpose is to make a profit; not care about its employees or take care of the environment or anything else. And they will do everything they can to squeeze out every last penny of profit no matter what the result. THAT'S why we need unions.
    • Making employees stay until December doesn't mean they're actually doing anything productive while they're there. American companies continue to prove that they just don't get it when it comes to people management. Want to run a company the way Stalin would? Fine. Just don't whine about employee motivation and productivity.
    • From a pure business point of view, it's a great move. But if your goal with benefits are to compete to attract the best employees, this is shooting yourself in the foot. Why would I, as a young hotshot engineer, go to work for a company that a) openly screws me and b) keeps a year's interest on my 401(k) match when I can go to Google, Yahoo, TI, or a number of other places and get my match throughout the year?
    • It's not as if most US IBM employees can afford to contribute to their own plans anymore. IBM's been on a crusade to flatten wages since 2000 when it essentially stopped giving out pay increases and bonuses for all but a tiny tiny faction of the workforce. So in real terms the income of IBM workers has dropped 25% or more since then. Year over year benefits costs increase 9-17% so most of the workers who aren't already in spitting distance of retirement have to pare down their own contributions to the absolute bare minimum. Luckily though the prior CEO Sam Palmisano granted himself tens of millions of dollars in incentive bonuses for sending 30 or 40 thousand jobs from the US to India and elsewhere.

      But the wider issue is that employees are considered superfluous widgets now. The perfect workforce is the non existent workforce. IBM isn't alone in this. They'd all be thrilled if no one worked for them. And in industries that are largely service based and not stamping out widgets based, they can 'leverage' labor savings in far off lands, even if it's just a nickel cheaper. Hell even Indian companies are starting to do their own outsourcing to Malaysia and Bangladesh. A nickel's a nickel.

    • This seems like a shortsighted policy for IBM. While many industries have a surplus of qualified people trying for a smaller number of jobs, the high tech industry has traditionally been one that lures well-trained and highly skilled employees from other companies. For years, it was common for programmers and engineers to jump from one company to another to get more pay and better benefits.

      The economy is improving and there are a lot of high tech jobs available for those with the skills, training and experience. Since employees provide their own pensions, in the form of 401k's, rather than the old vesting pension plans, if IBM cuts the benefits, the people they will lose first will be the most skilled. It might not hurt them in the course of a few months, but as the economy continues to improve, it will likely cost them a lot more in human capital than it will save them in dollars.

    • I work in the tech industry and was laid off 6 months ago along with at least 60 other employees who worked at the company for over 5 years. The layoffs weren't a result of the recession because the company is doing fine. Profits were up and looked great due to a large 5 year contract. The objective was to cut payroll and benefits. They don't want long term employees. Anybody over 5 years was replaced by either an intern or an Indian working here on an H1B visa. H1B workers are easily intimidated into working long hours by using the threat of exportation. It isn't that they possess a unique skill other than letting management treat them like slaves. I'm not sure why this is good for America.
    • IBM has something like $100 billion in the bank. IBM is committing an atrocity at the expense of employees financial retirement by trying to save a few pennies in their accounting practices and holding on to their money for longer (all while earning interest) This is dollar cost averaging--benefiting IBM and only, ah lets see---IBM. I could spend all night going over the grocery list of issues associated with this topic.
    • Simple lesson learned: When faced with taking competing high tech job offers from more than one employer when the market improves, look at the track record of how they've treated employees in the past because as the saying goes, the best predictor of future behavior is past behavior.
    • "IBM can be pretty sure that there will be very few workers exiting during crunch time season." Coming from a top software company, I think IBM guaranteed little except that there will be very few top talents wanting to join the company.
    • I don't think many people here realize that this is just one more thing they can take away, on their journey to roadmap 2015, which is to honestly cut as much of the US workforce as possible, and shift jobs to India/Asia.
    • The words "stealing" and "extortion" come to mind after reading this article. What a wonderful gift to your employees, IBM, during this holiday season of generosity.
    • IBM saves in the short term, but will talented college grads want to work there in the future? Having done payroll, the 401k record keeping isn't that tough. I simply cut a check for the amount withheld and the amount matched, and sent a spreadsheet to the 401k company detailing who got what of our 300 or so bimonthly contributors. IBM still has to do the record keeping, so it all boils down to saving money by making the match once per year.
    • Aw it's just another way to screw those too stupid to remain in corporate servitude. Personally, I walked from IBM twenty years ago. Their corporate culture under Gerstner had deteriorated to the point of where IBM was nothing but a vapid company no better than the "vaporware" they sell and promise. Leave for other companies folks. Don't believe there aren't options. Let these large institutions of abuse rot.
    • IBM pays it CEO $25M, made $19B in profits, and has cut at least 30K US jobs while hiring 70K Indians. It's a great country the US, where else can the ubber wealthy be admired so much by the masses they squash into the dirt. To their CEO and Board everyone else is the Great Unwashed! By the way, they have paid a whopping 3.8% effective tax rate for several years in a row.
    • Amazing...Business schools are teaching these kids it's all about the buck. It's NOT. As a 37 yr. (same company) business guy, I can tell you that it used to be FUN...yes FUN. In today's business world however there is no fun left. Everything is so incredibly sterile...and I really believe this is caused by what I call the "metrics" effect. Kids getting their MBA's today are being taught that nothing matters except making the bottom line LARGER. How that is measured is all that is really important. That's too bad....these kids have no idea what they are missing.
    • Unfortunately, this is a regressive trend. As an H.R. person charged with selling the company 401k plan to eligible employees, the key selling point of dollar cost averaging is lost in this scenario. The primary reason for having a 401k plan, along with vesting schedules, is employee retention. Companies moving to these regressive models may ultimately achieve a level of retention but they're missing out on opportunities to initially lure some employees into the plan.
    • People will be laid off and jobs shipped overseas before year's end. IBM won't contribute to worker's 401(k) thereby saving the company money and reducing head count. This is how IBM now operates while raking in millions of dollars in profits.
    • The reason for this is very simple: IBM is using negative incentives to get rid of older, more highly paid workers. They're the ones this will most negatively impact, and the ones most likely to look elsewhere as a result. Younger employees barely save anyway, if at all, while those in their 40s and 50s are actively shoveling as much money into their retirement funds as possible as they try to catch up. IBM will save millions in salary by replacing these long-term employees with younger, lower-pay employees.
    • IBM has been going downhill for decades now. I'm surprised they are still in business. They treated their employees pretty poorly.
    • How nice it is for IBM that their employees aren't unionized. IBM gets to 'save' money by only depositing matching funds in December. Let's forget that that the money 'saved' would belong to the employee if the company paid the match every time the employee does. If an employee complains? Well there are other people would like your job, so you get to do what we say, no matter how much it's different than what we promised you when you got hired.

      The argument that it makes less work for HR and finance is baloney. Do you think IBM does its payroll by hand? I would imagine they have it done by a service like ADP, or a computer services company like, er, IBM.

    • IBM's profits have been up year after year. I could 'maybe' understand this move if they weren't doing so good. They just had a year of record earnings per share, revenue, profit and free cash flow. Is there no end to the greed and hoarding of money at the top end? The CEO had her pay doubled earlier this year, I suppose it will be tripled next year for coming up with this new cost savings plan.
    • With statements referring to this cut such as, "projects can be planned better and employees can be asked to do more", and "IBM is putting back, albeit with an anemic substitute, a reward for workers to stay at least until December", the author really seems to be defending the unfair practices of these large corporations, in particular this recent move by IBM. How in the world is this a "reward" to employees? This takes away the ability for employees to earn "the float", and if at any time they leave, or GET FIRED (wink wink, big executive grin), even on December 14, they lose ALL of that match. Yeah, sounds like a reward to me.

      And for this person to insinuate that workers should be happy about it is an example of one of the fundamental problems in this country. This suggestion from some people that the middle class should just happy with what they have and shut up. Meanwhile, the executives and major shareholders, who already have profane amounts of wealth don't need to follow the same doctrine - it's fine and dandy for them to take more at the expense of individuals and the whole economy. Why don't we say '*those* people should be happy with what they have and stop this assault on U.S. employees and the entire U.S. economy'?

      Why don't we say '*those* people should be happy with what they have and stop this assault on U.S. employees and the entire U.S. economy'? People should be happy they just got exploited and had more taken away from them so people who already have too much can benefit even further? It's not like this is a case where this company is struggling and all employees (including executives) need to make a sacrifice to keep it afloat. Far from it.

      How does this attitude of 'be happy things aren't worse for you' help *anyone* (except executives and major shareholders who already have way more than they deserve)? Again, in different circumstances maybe employees could tolerate something like this, but as corporations continue to offshore jobs, drive down salaries, and take away benefits just to boost stock prices and EPS in the short-term, the American economy suffers. This gives leverage and incentive to other companies to follow suit making things worse for most people in this country. The trickle-down theory has not panned out.

      We know based on historical evidence and the current situation that small numbers of people making exponentially more than the vast majority of the population and reduction in pay, benefits, and jobs for everyone else hurts the economy. Things are not going to get better until treatment of the overwhelming majority of people (i.e., the middle class) gets better. Remember, "A rising tide lifts all the boats" (and I mean that in the way JFK meant it during his speeches in 1962 and 1963, not in the way it's been co-opted to mean by some of the greedy, short-sighted among us).

      If executives can make this kind of move for their own self-interest, then employees have every right to defend *their* self-interest (which again, is the interest of the entire U.S. economy). There is a petition for people to add their voice against this sort of thing. Please consider signing it to stand up for American employees and the entire U.S. economy - search keywords "ibm 401k" at change dot org

  • The Register (United Kingdom): Australian State launches IBM probe. SAP-based payroll system said to need $AUD245m of repair work. By Simon Sharwood. Excerpts: IBM's dealings with the Australian state of Queensland will be the subject of an inquiry with the powers of a Royal Commission, after an SAP-based payroll system implemented in part by big blue failed so badly returning it to working order is expected to cost $AUD245m, with the whole project costing $AUD1.25bn. ...

    Among those messes was a payroll system that saw staff paid incorrectly, or not at all. Some nurses were paid more than they were owed, but were told it was not possible to repay the extra money. The State government later docked wages to recoup the overpayments, a deeply unpopular move as some had been overpaid by 25% and did not enjoy the resulting cash flow hit. Newman has signalled an intention to claw back cash from IBM and others found to have dudded the State. “The Inquiry will … fully examine the implementation of the Health Payroll and may be used to assist with the potential recovery of losses from any external party,” Newman said in a canned statement.

    Selected reader comments follow:

    • In this case IBM pushed ahead with the payroll system, despite it not being tested fully, to avoid having to make late payments on its contract. So every other taxpayer in Queensland now has to pay for IBM's clusterf***. Hopefully Newman can get some of our cash back
    • I worked with SAP systems for five years; I think that the product design is out dated, processes are bureaucratic and not easy to learn; and the implementation process is generally very cumbersome. But if it is correctly configured and managed it does actually work.

      Unfortunately, IBM have a record of promising the customer that they will manage and deliver a working system, but then buy in the cheapest people that they can find to work on the project (whilst charging the client an arm and a leg). These contractors often have limited experience or knowledge of SAP or its implementation; the result is inevitable.

  • WRAL-TV (Raleigh-Durham) TechWire: Upset judge refuses to 'rubber stamp' IBM bribery settlement. A federal judge said he won’t “rubber stamp” the U.S. Securities and Exchange Commission’s settlement of foreign bribery allegations brought last year against International Business Machines Corp. ...

    U.S. District Judge Richard Leon said he couldn't approve the settlement unless the SEC and IBM agreed to abide by additional settlement terms imposed by the court or explain why the terms are "too burdensome," The Journal noted.

    During a hearing in Washington, Leon criticized the SEC and IBM (NYSE: IBM) for opposing his proposed reporting requirements for the company. He said IBM and the SEC need to prove statistically that his disclosure obligations are too burdensome.

    “I’m not just going to roll over like the SEC has,” Leon told IBM’s lawyer, Peter Barbur, during the 25-minute hearing. “You’re going to need data to satisfy me.”

    The heart of the dispute is that Leon, who has had the case under review for 22 months, wants reporting on a broader range of possible wrongdoing than the company is willing to turn over. Leon, who spoke loudly and angrily, asked why the regulator would agree to limit such requirements for a company with a history of books-and-records violations. He also threatened to hold Barbur, of Cravath, Swaine & Moore LLP, in contempt for talking over him. ...

    Leon said that IBM has at least one employee dedicated to monitoring company litigation and FCPA compliance. Leon said he didn’t understand “why for one of the largest companies in the world this is too burdensome.” He said that IBM accountants may be called to testify in his courtroom to back up the company’s position. “I guess you want that $10 million judgment on your list of achievements this year,” Leon told DeYoung. “Well, it’s not going to happen.” ...

  • Yahoo! IBM Pension and Retirement Issues message board: "Re: Changes to IBM 401K" by "chz_whiz". Full excerpt: What's the magnitude of the 401(k) change?

    The change to active employees is a takeaway, but not devastating. If you assume $80,000 salary with an 8% match, and an 8% annual return over 1/2 year on average, the difference with the new plan would be $256.

    MUCH more significant is changing the semi-monthly match payment to yearend, if one is still an active employee. It could provide a way for the company to boost yearend profit by reversing previously accrued expenses. December 1st conversation could be:

    "Hello Randy? Mark here. Fine, and you? Hey, got a situation where we need your help. I'm running about $50 million low on pre-tax profits this year so I need you to target (no pun intended) about 7,000 heads to appear before the Firing Squad (no pun intended). Should get us about $50 mil in match reduction, all in Q4. Call the Plant & Lab GM's with their allocations, and keep it in enough small groups so we don't have to bother with WARN stuff.

    Have the GM's shoot for (no pun intended) high salary 401(k) participants. But stay away from Director and above – we gotta protect them. Announce it on 12/13, and have the firees clean out their desks by 12/14. Most of the schmucks will be on vacation and not even know what hit them til January. Take care of this by the end of the week, and give Ginni and me a call when you're done. Yeah, and hope you and your family have a great Christmas. `Tis the season."

  • Yahoo! IBM Pension and Retirement Issues message board: "Re: Tech workers, beware: IBM cuts retirement, Microsoft wants more H-1Bs" by "dogbreath127k". > IBM reiterates the quality of its benefits. "This change reflects our continuing commitment to invest in our employee 401(k) plans... So does IBM understand why their USA employees are pi$$ed about this change? It's partly because they can't ever tell it like it is, they always have to put a candy coating on a negative change and spin it up as a positive change. Stop the lie. Tell us straight out that we are getting screwed over because Ginny's pocketbook looks empty and needs a refill. We know the execs are greedy, pump up the stock to line their own pockets with money due employees.
  • Yahoo! IBM Pension and Retirement Issues message board: "Re: Tech workers, beware: IBM cuts retirement, Microsoft wants more H-1Bs" by "teamb562". Full excerpt: Yep, Armonk's strategy is executing pretty darn well. They piss on the worker grunt so more quit, hey great, less severance to pay and the public impression improves. All the while more bucks flow into execs pockets. What a great plan. I can only dream what could be achieved if the typical absent-minded ibm employee would think and execute the same way. It's way past time for employees to keep believing in those that shit on them. Wake up and grow a pair.
  • PR Newswire: IBM Continues Growth Market Expansion with New Branches in Latin America. New locations in Brazil and Mexico meet rising demand for technology solutions in region's smaller cities. Excerpts: In Brazil, IBM has opened a new office in the city of Caxias do Sul which follows the recent opening of new branches in the cities of Sao Luis, Joinville and Natal. In Mexico, IBM has opened a new office in the city of Puebla following the opening of a new branch in the city of Toluca in October. ...

    In Brazil, where IBM has grown its presence from 11 branches in 2009 to over 30 today, the new Caxias do Sul location will service clients and partners in the city and in the neighboring Serra Gaucha region. Caxais do Sul has experienced strong economic growth in recent years becoming an important exporter of rolling stock, automotive parts and machinery.

  • Wall Street Journal: Buybacks Rule the Day. With Cash on Hand, Companies Invest in Their Stocks as Business Spending Slows. By Kate Linebaugh. Excerpts: When executives visit Washington they argue for a negotiated solution to deficit reduction and a corporate tax overhaul to spur investment; back at headquarters they're busily sending money back to investors. ...

    Some of the spending on buybacks is just financial tinkering—interest rates on borrowed money are cheaper than paying dividends, so companies take on more debt to eliminate some of their shares. But it's also an exercise that boosts per-share profits without creating more productive capacity or new jobs, revealing a lack of confidence on the part of executives to commit to new projects while the global economy remains sluggish. ...

    International Business Machines Corp. has one of the biggest share buyback plans. The company plans to buy back $50 billion of its own stock in the five years to 2015. In the past year, the company reduced its shares outstanding by 4.9%.

    Selected reader comments follow:

    • The article did not discuss how executive compensation policies might have driven share buybacks. Executive compensation is often tied somewhat to stock prices. With outside investors continuing to sell shares, would executives increase their income if they bought back shares and raise earnings per share, thereby preventing prices from falling further?

      Ironically, executives say they are buying back shares because they think their share prices will go up. But in conceding that they can't use the cash for internal growth, they may send a different sign to investors who aren't fixated on earnings per share. In earlier decades, share buybacks were often seen as an admission of failure from executives.

    • I remain a skeptic of stock buy-backs. they are generally proposed by management with large options trying to inflate the value of these options. a director voting for it is supposedly showing his enthusiasm for the " home team". i have never met an executive who didn't think the market underpriced his company's shares. the problem is that liquid cash is converted to illiquid treasury shares. truly the only legitimate reason for most share buy-backs is for future options- as apple, for example, recently implemented. cornelius bond
  • Glassdoor IBM reviews. Selected reviews follow:
    • The good , the bad and the ugly!” Former Advisory Software Engineer in Providence, RI . Pros: Pay, flexible work schedule, access to brilliant minds! Had the privilege of working with some great individuals. Cons: Pitting team against team, performance measurement tools did not give managers enough leeway. Line managers really had very little say in employee reviews and compensation. Teamwork was promoted, however not supported. Cost reduction trumped quality every time! Focus was way too much on short term rather than long term goals. Advice to Senior Management: Stop playing 'the game' and take a stand and make what was a terrific company terrific again! Hire North American work force rather than off shoring.
    • Decent company to work for” Current Senior IT Specialist in San Francisco, CA. Pros: Rewarding technical challenges, very good benefits, telecommuting encouraged. Cons: If you don't make your numbers, you're out. They're constantly looking to cut US staff, so a drop in performance can be fatal. Relentless metrics and measurements. Long hours. Advice to Senior Management: The quality of work from the India branch does not compare to historic IBM standards. The high turnover is draining IBM's organizational memory.
    • Good benefits and flexibility, not so good upper management” Current Staff Software Engineer in San Jose, CA. Pros: Flexible with personal life. Good benefits. Room to grow: you can move across groups, departments, etc. relatively easily. Culture that promotes integrity. Cons: Budget freezing is crippling teams. The 'do more with less' mentality needs to stop. Decisions from execs and finance are negatively affecting teams. Benefits could be better compared to other high tech companies. Advice to Senior Management: Keep teams together, don't tear them apart, especially when they succeed in putting out a good product. Bring in more people to bolster teams or you're going to lose good talent that you already have.
    • Growing pains” Current Technical Support Specialist in Columbia, MO. Pros: IBM seems very generous with the way it handles its employees. Between the benefits package, IBM events, community discounts, essentially unlimited sick leave, and flexible work schedule, it has made for a fantastic starting point for an IT career. Cons: IBM is implementing a new system for technical support, and it is currently going through understandable growing pains. For the most part management still seems to be trying to figure out how to best handle the new system, and many odd decisions are made that often hinder efficiency in favor of process. Advice to Senior Management: Try not to be so afraid of third party software. IBM is really good at many things, but many items in their software portfolio should be scrapped.
    • Modern, competent, fair, bureaucratic” Current Research Staff Member in Yorktown, NY. Pros: If you work here, you have a unique opportunity to work on top tier software and hardware products. A large company like IBM can apply its weight to go in directions that other companies cannot. It is certainly a unique company and an interesting experience. Cons: Working conditions are somewhat grey and dull. The email client everyone has to use (Lotus Notes) is an appalling piece of software that quite frankly is beyond contempt. Other internal tools (the intranet, expense claims, etc) are slightly better but still way below expectations. The bureaucracy generally is a pain. You must follow the bureaucracy and be a good cog in the machine but if it fails you then that is your problem, not IBMs. Very frustrating. Advice to Senior Management: Please fix or discontinue Lotus Notes.
    • Very good at first but they went down hill over the years” Current Systems Analyst. Pros: They allow work at home and have some good benefits Cons: Over worked employees, low morale and moving too many US jobs overseas. Advice to Senior Management: Need to think about keeping their good and experienced employees here in the US
    • Focus is misdirected, management illogical” Current Advisory Software Engineer. Pros: Work alongside many very smart software engineers with a wide variety of expertise. Products you develop get used by large, well-known enterprises for critical operations. Pay and benefits are good, although ongoing deterioration is occurring. IBM is like an Amazon.com of software projects. There are many different interesting projects and you can pursue them (if mgmt will allow you to leave their team, which is often a struggle).

      Cons: Layoffs (aka Resource Actions or RAs) are an annual event. Areas impacted often have job openings for more people when they occur, which are then frozen until the RAs last day. Replacing experienced employees with inexperienced employees, and then mgmt wonders why nobody on the team knows how to handle a critical customer problem in an area that they just had the talent walk out the door. Many layoffs occurred in such areas in March 2012, and products went out the door to customers with extremely low quality. RA'd employees also get last day set to be a couple days before the end of a month so that they employee does not get vacation credit for that month even though they almost completed it.

      In US, focus is more on Project Management and less on those putting in the long hours and actually creating the product. A software engineer will get more positive feedback/rewards for putting together a simple status report for management (on something they shouldn't be micro-managing) rather than for high quality work on a product that only shipped because of excessive overtime and commitment put in by the team.

      Salary has essentially been frozen the past few years.

      Expectations are that you will work nights and weekends on a regular basis. A 50 hour week will feel like a vacation after you have been here awhile. IBM used to brag about its "Work/Life Balance" but has in recent years change that term (publicly) to "Work/Life Integration". In other words, you are expected to integrate work into your personal life. Don't be surprised if you work 14 hours on Saturday only to be questioned in your Sunday morning status meeting (yes, Sunday) about why you aren't finished.

      I have never witnessed so many employees voluntarily leaving IBM as I have now seen in the past few years. In my early years, nobody left unless retiring or RA'd. And that was when the economy was roaring and software jobs were abundant. Now when the pool is much smaller, we are seeing more voluntary exits.

      Ongoing deterioration of benefits. The most recent change to the 401K is an obvious example. Back when the defined contribution pension was converted to a cash balance plan, IBM tried to present it as a better benefit to the employee (which for most, it was not). Now the change to only contribute to the 401K at end of the year is 100% a cost savings measure that has negative benefits to the employees. Along with no salary increases, while the company is making more money than ever before.

      Advice to Senior Management: Read the Cons. Product quality is deteriorating, employees are being overworked, and this is going to backfire as the economy improves and your top quality people are running to the exits.

      Products don't get produced by status reports, they get out the door by the dedicated employees you are overworking 14+ hour days and weekends. Although I do see many intelligent employees in China and India, they do not have the experience in designing robust, enterprise-level applications. It is very much a code-it-as-quickly-as-you-can without considering the reliability and robustness that is expected of an Enterprise level application. Take a look at the quality issues over there.

      Our enterprise customers cannot run their mission critical business operations on software that is written and tested with the quality of a smartphone app. Management is reinforcing this attitude by expecting designs to be done in a couple days without sufficient expertise reviews, coding and testing a few days later, and the Agile "done done done" by end of month. This will decrease long term customer satisfaction and increase software maintenance costs.

    • IBM is not what it once was” Current Sales Manager in Austin, TX. Pros: Large global company with diverse product pillars. Cons: Management not really interested in cultivating people or loyalty to the company. Advice to Senior Management: Should try to develop people and loyalty to the job and Company
    • Software Engineer” Current Advisory Software Engineer in San Jose, CA. Pros: You have a lots of resources to learn, with flexible work hours and good work/life balance. Cons: Poor management, but surely good at international business not in national business. Jobs going overseas and revenue increasing outside US, I guess IBM is planning to reduce workforce in US. Advice to Senior Management: Better your approach of managing projects.
    • Big company, no personal feel” Current Senior Consultant in New York, NY. Pros: Huge network, a lot of intellectual capital to leverage and learn from, amazing benefits (besides the 401K plan which now sucks), great culture, there is a place for everyone, amazing work life balance. Cons: So many people there is no personal feel, just another cog in the wheel, too much dead weight, not focused enough on career development, 401K plan sucks now, administrative activities are horrific. Advice to Senior Management: Please spend more time on people and career development. Also, change experienced-hire hiring strategy. Too much dead weight is being let into the company who have no value in delivery, which is the majority of our business.
    • Best company to work for working mother” Current ASEAN Recruitment Specialist in Cyberjaya (Malaysia). Pros: Flexibility - where you can work from home or anywhere as long as you have internet connection. Good working environment - colleagues are helpful and supportive team member. Work Life Balance. Cons: Your work seems to be routined & expected most of the time because you just need to follow the procedures & Business Conduct Guidelines.
    • Once innovative but now just a sales company with poorly compensated sales reps.” Former Software Architect. Pros: Still has decent brand, benefits still OK, still pretty good place to start career. Cons: Not much organic innovation anywhere, pretty much all new technology via acquisition. PBC reviews are a total joke designed to keep raises and bonus payments low as possible. Continually squeezing teams to do more with less which is ever harder because quality people are leaving in droves. Some people believe this is by senior management design and some credibility to that argument based on the shrinkage of US employees and growth in off shore employment. Advice to Senior Management: 1. Stop allowing the CFO to drive business strategy. 2. Get a real HR department by bringing function back in house. 3. Get back to original company beliefs, especially respect for the individual.
    • Pretty much the same thing every day” Current Java Developer in Nashville, TN. Pros: Work from home work with some really smart people. Cons: Horrible compensation little no no opportunity for advancement. Expect to be laid off with little to no warning. Most people are average. Advice to Senior Management: Your reliance on overseas contractors will reduce costumer satisfaction. You will be in-sourcing these jobs in a few years at a much higher price.
    • I have worked with one of the best company ever.” Former Customer Service Representative in Gurgaon, Haryana (India). Pros: UNITED AIRLINES , VOICE PROCESS INBOUND. DOMESTIC FLIGHT RESERVATION UNDERTAKING OVER THE PHONE. Cons: Its a big problem with any B.P.0s most people smoke too much it was a wrong thing at IBM but no one ask you in IBM to do that but it should be ban at or around the office area. Advice to Senior Management: – NO COMMENTS YOU ARE THE BEST ,,,,,,,,,,,,,except little problem in transport department.
  • Alliance for Retired Americans: Friday Alert. This week's articles include:
    • Social Security COLA Cut on Table in “Fiscal Cliff” Talks
    • Join with the Alliance in Supporting Locked-Out Sugar Workers
    • Pennsylvania Alliance Fighting to Protect Funding for Seniors Programs
    • Join Us on Facebook by Becoming a “Fan” here: www.fb.com/retiredamericans
    • Beware of Holiday Scams
    • Something on Your Mind? Write Letter, Win Pen!
    • Happy Holidays from the Alliance
  • New York Times: With a Major Push, AARP Returns to a Hard Line Against Cuts in Benefits. By Eric Lichtblau. Excerpts: Seeking to stave off cuts in retirement programs, executives at AARP are determined to prove their mettle, not only to government officials negotiating a deficit deal but to their 37 million members as well.

    The group, which advocates a range of federal health and fiscal issues that affect older Americans, angered many of its own last year when it opened the door for the first time to the possibility of accepting modest cuts in Social Security benefits.

    Chastened, AARP now appears to have veered back to a hard-line position of opposing any cutbacks in Medicare or Social Security and is seeking to keep those programs off the bargaining table altogether. The group’s stance has made it a favorite target in recent weeks for conservatives pushing for cuts in social programs.

  • Washington Post: The trick Washington is using to cut Social Security and Medicare. By Ezra Klein. Excerpts: Let’s get something straight: “Chained-CPI” cuts Social Security benefits and increases taxes. That’s why it’s part of the negotiations. Full stop. ...

    The only reason we’re considering moving to chained-CPI because it saves money, and it saves money by cutting Social Security benefits and raising taxes, and it’s a much more regressive approach to cutting Social Security benefits and raising taxes than some of the other options on the table. ...

    The question worth asking, then, is if we want to cut Social Security benefits, why are we talking about chained-CPI, rather than some other approach to cutting benefits that’s perhaps more equitable? The answer is that chained-CPI’s role in correcting inflation measurement error is helpful in distracting people from its role in cutting Social Security benefits. Politicians who are unwilling or unable to offer a persuasive political or policy rationale for cutting Social Security benefits are instead hiding behind a technocratic rationale. We’re not “cutting benefits,” we’re “correcting our inflation measure.”

    A similar dynamic is behind the popularity of raising the retirement age, or the Medicare eligibility age: Its advocates can pretend that it’s not a cut, but a technical adjustment made to account for the fact that Americans are living longer. Compared to other approaches to cutting benefits, raising the retirement age is, again, a substantively unwise, regressive approach. But it can be justified as a mere technocratic tweak.

    This is bad policymaking. If we want to cut Social Security and/or Medicare, we should have a conversation about how to cut Social Security and/or Medicare, decide what our priorities are — Progressivity? Making the health-care system more efficient? Total deficit-reduction? — and find the policy that does the best job achieving those goals. The effort to mask cuts in technical adjustments just leads to worse cuts, as the top priority isn’t protecting the poorest or improving the program, but finding a policy sufficiently confusing that you can pass it before most people realize what it is.

  • Wired: LinkedIn Gone Wild: ’20 Percent Time’ to Tinker Spreads Beyond Google. By Ryan Tate. Excerpts: First Google offered workers “20 percent time” in which to tinker, then Apple reportedly followed with a similar program called “Blue Sky.” Now LinkedIn is quietly offering its own take on letting workers run wild with InCubator, a program that may well top what Google offers.

    Under InCubator, engineers can get 30 to 90 days away from their regular work to develop ideas of their own into products. Their ideas must first be developed into prototypes and clear two rounds of judging, with founder Reid Hoffman and CEO Jeff Weiner involved in the final round. Many ideas submitted to InCubator come from LinkedIn’s monthly “hack days,” in which workers can win awards for small bits of quickly written software. ...

    If LinkedIn can extract profitable, high-impact products from InCubator, it could become a model for other companies trying to foster employee experimentation with their own versions of 20 percent time. At the moment, Silicon Valley companies seem eager to tap into employees’ ideas with such programs, but their approach is largely split between startup-friendly hackathons, which are like short sprints, and Google’s 20 percent time, which can be like a grueling marathon for workers. LinkedIn seems to be trying to find a middle way by making medium-sized investments in the most promising hacks.

    Editor's comment: IBM Global Services offers a similar program, what I'll call the "reverse 20 percent time" program. With it, employees are expected to "make up" for all holidays, vacation, sick time, doctor's visits, and other time off, and, contribute at least an extra 20% of overtime (for free!) so as to ensure that senior executives in the company receive their large bonuses! What's in it for employees? Oh heck, don't you remember...they get to keep their jobs! (Maybe).

  • New York Times: No-Layoff Company Now Writes Profit-Sharing Checks. By Andrew Martin. Excerpts: Marvin Windows and Doors, a family-owned business based in northern Minnesota, survived the financial crisis without any employee layoffs, a decision that won the company praise from presidential candidates and pundits alike.

    On Friday, the company gave employees their first profit-sharing checks in four years, plus a ham. While the checks were relatively modest — $799,379 was split among 2,573 employees, an average of $311 for each employee — company officials said it was a sign that the worst of the crisis may be over. ...

    During the presidential campaign, President Obama referred to Marvin on several occasions as an example of a company that valued its employees over profits. Instead of laying off workers, Marvin officials cut back hours for hourly workers, eliminated some perks and cut pay for salaried employees, including executives and family members, with the goal of breaking even until the economy improved.

    In his acceptance speech at the Democratic National Convention, President Obama noted that Marvin did not lay off any of its employees when the recession hit “even when their competitors shut down dozens of plants, even when it meant the owner gave up some perks and some pay because they understood that their biggest asset was the community and the workers who had helped build that business — they give me hope.”

    Ironically, Marvin’s top executives are Republicans and reliable contributors to Republican presidential campaigns. The company’s president, Susan Marvin, endorsed Mitt Romney at a rally with his running mate, Paul Ryan. In November, before the election, Mr. Romney visited a Marvin plant in Virginia. ...

    In an interview last year, several members of the Marvin family said the no-layoff policy was a long-term business strategy that they thought would give them a competitive advantage by retaining experienced workers when its competitors were shedding them. In addition, they said it would keep its hometown Warroad, Minn., vibrant at a time when others were being hard hit by unemployment.

New on the Alliance@IBM Site
  • Sign the petition at change.org: International Business Machines (IBM USA): IBM must REVERSE the decision changing the IBM match 401(k) contribution. Petition wording: IBM must REVERSE their recent decision to change the timing of the IBM match and automatic contribution for our 401(k) Plus Plan and Excess 401(k) Plus Plan.

    We, the petitioners want IBM to keep the automatic contribution at semi-monthly and NOT an annual contribution.

    IBM, by moving the automatic contribution from semi-monthly to an annual contribution effectively denies employees who are terminated in resource actions up to the cut off of December 15 of the given year, the matching contribution from IBM. Furthermore, the movement of the automatic contribution to the end of the year denies interest generated for the employees 401(K) account. Sign this petition to tell IBM to REVERSE this decision, immediately!

    And if you are an active IBM employee, please Join Alliance@IBM CWA Local 1701.

    Web site: http://www.allianceibm.org; Twitter ID: @Allianceibm; Facebook: Allianceibm CWA

  • Job Cut Reports
    • Comment 12/16/12: -anonymous retiree-: I left IBM on my own in 2005. From what I read it looks like IBM is making cuts and not growing the business. I hope you own other stocks other than IBM. I sold all my stock recently @ $198 as I see that IBM is playing short term games and the future looks bleak. Also, nothing will stop IBM if they wish to sell pensions to an insurance company regardless how well the company is doing. Verizon has just done so on their non union plans. -samtheman-
    • Comment 12/18/12: My understanding of 401K rules are the executives can only invest in 401K up to the amount the rank and file do. If everyone stops investing in IBM's plan the executives will not be able to and they will certainly fix the issue fast. Put the money you would invest into a Roth IRA. Taxes already paid so less impact when you withdraw it. Use your numbers to win. See how well it works. Then use your numbers to organize. It will work just as well. -Exodus2007-
    • Comment 12/18/12: Come on people, sign this petition. Honestly, this is a chance to stand up for yourself. More signatures are needed to make a statement on this latest rip-off. -mugged-
    • Comment 12/19/12: The 401k decision seems to be one made of desperation rather than of wise corporate cost cutting. When you are hard up for cash, you get desperate. Ever go through your closet looking in coat pockets for change? In the couch cushions? IBM investors should be very concerned. I smell the books cooking. I signed the petition and asked all of my friends to sign. -CookingForReal-
    • Comment 12/19/12: Well I just sent in my check this morning to Alliance. If everybody would stop whining and moaning and join up then maybe there's a chance we'll all have jobs this time next year. Don't just complain folks, you CAN do something! -shep-
    • Comment 12/19/12: -samtheman- I am well aware of IBM's revenue and growth issues. I have been divesting since a year or two before I retired. Even if I sell all of my directly owned IBM stock I am still exposed as are most other IBM employees and retirees. Most of us have stock mutual funds of one type or another in 401K, IRA and taxable accounts. Many investments in these accounts are index funds and balanced funds that own some IBM stock. You have similar situation with bond funds that purchase IBM's corporate bonds. This means I am still a stockholder, although indirectly, that has skin in the game along with anybody else in the 401K. -anonymous retiree-
    • Comment 12/20/12: IBM Canada quietly packaged out a number of GTS 2nd Line manager, I know of 4, however, they all had around 30 years of service, also, all have kids in high school / university so you know they did not volunteer. For a better count I suggest folks check and see if their second line mgr is still around. -Anon-
    • Comment 12/21/12: We still can't get at least 1000 signers of the petition? IBM is not going to fire you for signing this. Why would you want to be treated like this if IBM is going to be that cruel? There is no reason other than IBM greed for making the 401(k) change. By not signing the petition you allow them to walk all over you and have total disregard for your retirement planning. -stand_up_for_yer_right-
    • Comment 12/21/12: Can't believe my mgr sent out a note today asking for PBC input by end of day Dec 24, this could not wait until the new year, had to stick it to his employees by having them deal with this dreadful useless waste of time tool just before the holidays.. On a side note, I was looking through my Sametime contacts only to realize more than a third of them no longer works for IBM. Merry Christmas everyone and All the Best in the New Year -Anon-
    • Comment 12/21/12: 401K matching contribution defer payment to 12/15 is just the beginning. Next target is your vacation benefits. Just like your new 2013 401K matching contribution, you'll get nothing if you are RAed, terminated, or leave at your own will. IBM will do this if not before 2015. I can see this in the planning stage to get HR/Legal seal of approval:
      1. IBM will take all vacation off the book. Meaning (supposedly) you have unlimited vacation, but there is a fine print to consider. When IBM RAs on you, IBM does not have to pay out $$$ for your hard earned vacation for the time period you worked. Your vacation may have to be approved by management/a committee on individual basis, and denied you base on a business needs. You are allows only two consecutive weeks off after you over come some hard obstacle base on the new vacation guidelines.
      2. All personal choice/national holidays will be grouped together as one lump sum and only can be taken after 12/15. Normally IBM offers 6 Personal Choice and 6 National Holiday off depend on geographic location. HR will spin as benefit to allows you to spend more time with family and don't have to worry about work at the holiday season. -cannedbyblue-

      Alliance reply: This is just speculation by you at this time. Will it become fact? Time will tell.

News and Opinion Concerning Health Savings Accounts, Medical Costs and Health Care Reform
  • Charlotte News & Observer: Doctors join hospitals, and prices soar. By Joseph Neff, Ames Alexander, Karen Garlock and David Raynor. Excerpts: North Carolina patients pay more for many tests and procedures if their physician is employed by a hospital, an investigation by The News & Observer and The Charlotte Observer has found.

    It’s true whether the health care offered is a heart stress test or a routine visit to a doctor’s office. And it’s part of a national shift that experts say is raising costs but not quality: Hospitals are increasingly buying doctors’ practices, then sending bills for routine services that are significantly higher than those charged by independent doctors.

    By one count, the percentage of doctors nationally who are employed by hospitals has doubled over the past decade. No similar statistics are available in North Carolina, but it’s clear that more and more doctors are affiliating with hospitals. ...

    One example: For a common echocardiogram procedure, Duke Hospital submitted 4,879 claims to Medicare in 2010, up 68 percent from the year before. Medicare allows $471 for outpatient echocardiograms, more than twice the $200 allowed for those performed in physician offices. ...

    Jenny Palmer of Durham had been seeing a Duke neurologist for years for her epilepsy. She was furious when her $50 copay turned into a $425 payment applied to her deductible. The visit was less than 10 minutes, Palmer said, as she told the doctor her health was good and she received a prescription for a year’s worth of medicine. Her bill made no mention of a facility fee, but Duke confirmed it in a letter after she complained.

    “This clinic is now owned by Duke University Hospital (DUH) and in addition to the professional fee, there is also a facility fee charged in conjunction with each visit. Both charges are billed as an outpatient service as opposed to an office visit.” “It makes no financial sense for me to see Duke doctors now,” Palmer wrote to her neighborhood Listserv. “BUT there aren’t many non-Duke doctors in Durham. ARGH!” ...

    Gay Miller thought she knew what to expect when she received a heart test earlier this year – until she got the bill. After a heart valve replacement eight years ago, she has been getting periodic echocardiograms at her cardiologist’s office in Shelby to ensure the valves still work properly. Under her insurance plan, the tests used to cost her a $60 copay. Not this year. During Miller’s annual checkup at the Sanger Heart & Vascular Institute in February, her doctor told her she would need to go to nearby Cleveland Regional Medical Center for her echocardiogram. At the hospital, Miller received the usual 30-minute test. And the usual technician conducted it. But there was nothing typical about the bill: Miller wound up owing $952. ...

    In late 2011, Bruce Stanley was invited to an open house at WakeMed’s new Brier Creek facility. He nibbled cookies and toured the facility. He liked the convenient location and pleasant staff. In January, he had two routine blood tests done there. He did them in advance of a physical and wanted to be able to discuss the tests with his doctor. The results pleased Stanley. The bill did not. Stanley owed WakeMed $240.82 for two routine blood panels. Three months earlier, he had paid $13.73 for the same tests done at the LabCorp office near Rex Hospital. Stanley didn’t know he would be charged full hospital prices.

  • CBS MoneyWatch: How raising age for Medicare would affect seniors. Excerpts: As part of the "fiscal cliff" negotiations, one controversial proposal for cutting entitlement spending and reining in medical costs for seniors is to raise Medicare's eligibility age from 65 to 67. Yet while it might seem obvious that restricting eligibility for these federal health care benefits will hold down future Medicare costs, that approach could have unintended, and unforeseen, consequences. ...

    Here's where the law of unintended consequences kicks in. If Medicare raises its eligibility age, the medical costs for seniors ages 65 and 66 don't disappear -- they're simply shifted somewhere else. Consider:

    • Costs would increase for employer-sponsored plans for both government and private employers because they would now have to cover a bigger share of medical costs for employees or retirees ages 65 and 66. According to the Kaiser study, if Medicare's eligibility age were increased in 2014, the $5.7 billion in net savings to the federal government would be offset by an estimated net increase of $3.7 billion in out-of-pocket costs for 65- and 66-year-olds, and a rise of $4.5 billion in employer retiree health-care costs.
    • Medicare Part B premiums, which are based on expected average costs per beneficiary, would increase. If you remove the healthiest beneficiaries from the group (people ages 65 and 66), the average costs for the remaining population would increase. Kaiser estimates that Medicare premiums would increase by 3 percent for remaining Medicare participants.
    • Costs for Medicaid and other programs that cover low-income elderly people would increase because they would have to cover people ages 65 and 66.
    • Studies have shown that many uninsured seniors delay receiving medical treatment until they're eligible for Medicare, at which point their conditions may have worsened, requiring more extensive interventions that increase costs and related premiums. Raising the eligibility age would only exacerbate this phenomenon.
    • Many people defer retiring until they can get Medicare coverage, so employees would be incented to delay retirement until age 67 instead of age 65. This could contribute to unemployment rates among younger workers if turnover slows even more among older workers.
  • Kaiser Health News: 'If I'd Had To Wait Until 67 For Medicare, I'd Be Dead'. By Russ Mitchell. Excerpts: Sam Lewis turned 65 in the nick of time. For a year, he'd been broke. His Brentwood, Calif., general contracting business had gone bust. He couldn't make payments on his home, and lost it. He couldn't make payments on his health insurance, so he let it lapse.

    The day after his birthday in October, when he qualified for Medicare, Lewis got a checkup. Days later, he went under the knife: open-heart surgery, a triple-bypass, three arteries blocked with plaque, one of them, 99 percent. "If I'd had to wait until 67 for Medicare," Lewis said, "I'd be dead."

    A proposal to raise the Medicare eligibility age from 65 to 67 to ratchet down spending is one of the more explosive ideas in the fiscal talks between House Speaker John Boehner and the White House. The negotiations are aimed at a deficit deal to avert automatic tax increases and spending cuts slated to take effect Jan. 1. Liberal Democrats say they loathe the Medicare proposal, but the White House has not taken a public position on it. ...

    "All they’re doing is shoving the cost onto the backs of business," said Don Marks, president of Uesco Industries in Alsip, Ill., a family-owned company that assembles overhead cranes and hoists used in manufacturing plants.

    Uesco employs 45 people and pays some medical expenses of retirees that are not picked up by Medicare. With no set retirement age, the company would pay health insurance costs for older, likely sicker workers who might no longer retire at 65 because they would not be eligible for Medicare. ...

    The left-leaning Center for American Progress projects that raising the Medicare age could put up to 435,000 older people at risk of having no insurance at all, even with the protections afforded by the health care law – although the CBO’s estimate is far lower.

News and Opinion Concerning the "War on the Middle Class"
Minimize "It is a restatement of laissez-faire-let things take their natural course without government interference. If people manage to become prosperous, good. If they starve, or have no place to live, or no money to pay medical bills, they have only themselves to blame; it is not the responsibility of society. We mustn't make people dependent on government- it is bad for them, the argument goes. Better hunger than dependency, better sickness than dependency."

"But dependency on government has never been bad for the rich. The pretense of the laissez-faire people is that only the poor are dependent on government, while the rich take care of themselves. This argument manages to ignore all of modern history, which shows a consistent record of laissez-faire for the poor, but enormous government intervention for the rich." From Economic Justice: The American Class System, from the book Declarations of Independence by Howard Zinn.

  • Fiscal Times: 'Too Big to Jail': HSBC's Fine Didn’t Fit the Crime. By Suzanne McGee. Excerpts: When is a record fine not all that impressive in the grand scheme of things? When it’s the $1.9 billion in penalties levied on HSBC by U.S. authorities for money laundering and violating sanctions rules. It’s more money than most of us will ever see in our lifetimes – unless, that is, we go to work for one of these giant banks or their offshoots, such as the private equity empires built up by former bankers. But while it seems awe-inspiring in absolute terms, it really amounts to a slap on the wrist for a giant global firm like HSBC. ...

    However large or small it seems, the fine doesn’t begin to address the magnitude of what HSBC did when it helped drug traffickers launder nearly $1 billion of illegal proceeds, or helped Qadaffi’s Libya, the military junta in Burma, the Iranian theocracy and other so-called rogue states evade sanctions aimed at ensuring they couldn’t get access to the efficient and liquid U.S. financial system. That made the bank a de facto if not de jure facilitator of these governments, none of whom are known for their human rights track records.

    Among the Mexican organized crime groups that benefitted from HSBC’s lackadaisical approach to oversight – the U.S. government’s investigation revealed that the bank even widened windows at some branches so that customers could hand bigger boxes stuffed with cash to tellers, while the drug traffickers used boxes tailor-made to fit through those HSBC windows – was the Sinaloa cartel. One of the most deadly such groups in the world, Sinaloan enforcers are known for filming the murders they commit – beheadings, and bodies that are dissolved in vats of acid or alkali – and posting them online.

    In light of that, a fine of $1.9 billion and what has become the ritual mea culpa – in this case, a comment from HSBC execs that the bank is “profoundly sorry” for its “past mistakes” – looks like chicken feed. ...

    It’s time to revisit this, and find a way to hold the CEOs, CFOs and other individuals personally liable for misdeeds like this that take place on their watch. I’m fairly confident that a CEO who is aware that frustrated regulators and government officials, fed up with slapping wrists, instead have the power to slap him with a criminal case will suddenly become a devoted adherent of risk management. Bankers are bound to be more vigilant if they know they risk not just a public apology but a jail term if they are found to have violated sanctions, helped traffickers hide money or shaken the financial system by failing Risk Management 101.

  • Financial Times: How to fix costly and unjust US tax system. Too many provisions favour a very small minority of fortunate taxpayers. By Lawrence Summers. Excerpts: Sooner or later the American tax code will be reformed. Probably sooner. Raising revenue will be the main motivation, but at a time of sharply increasing economic polarisation issues of fairness will be prominent too. There are also legitimate concerns about the complexity of current tax rules and their adverse effects on the economy. ...

    Third, it will do little to address concerns about fairness: the richest taxpayers actually make relatively little use of deductions and credits.

    What is needed is an additional element, one that has largely been absent to date: the numerous exclusions from the definition of adjusted gross income that enable the accumulation of great wealth with the payment of little or no taxes. The issue of the special capital gains treatment of carried interest – performance fee income for investment managers – is only the tip of a very large iceberg. There are far too many provisions that favour a small minority of very fortunate taxpayers. Because these provisions effectively permit the accumulation of wealth to go substantially underreported on income and estate tax returns, they force the federal government to consider excessive increases in tax rates if it is to reach any given revenue target.

    All parties – whether their primary concern is preserving incentives for small businesses, closing prospective budget deficits or protecting the social safety net – should be able to come together around the idea that it should not be possible to accumulate and transfer large fortunes while avoiding taxation almost entirely. Yet this is all too possible today. ...

    Why do current valuation practices built into the tax code make it possible for investment partners to end up with $50m or more in entirely tax-free individual retirement accounts when the vast majority of Americans are constrained by a $5,000 annual contribution limit?

    A simple calculation shows that the US estate tax system is broken. Assets that are passed to relatives or other personal relations are often badly misvalued relative to what they cost on an open market. The total wealth of American households is estimated at more than $60tn. It is heavily concentrated in very few hands. ...

    Why should international companies be able to locate the lion’s share of their foreign income in small, low-tax jurisdictions such as Bermuda, the Netherlands and Ireland, and avoid paying taxes? ...

    It has been observed that the greatest scandals are not the illegal things that people do but the things that are fully legal. This is surely true with respect to a tax code in urgent need of reform.

  • New York Times: The Bribery Aisle: How Wal-Mart Got Its Way in Mexico. Wal-Mart de Mexico was an aggressive and creative corrupter, offering large payoffs to get what the law otherwise prohibited, an examination by The New York Times found. By David Barstow and Alejandra Xanic von Bertrab. Excerpt: SAN JUAN TEOTIHUACÁN, Mexico — Wal-Mart longed to build in Elda Pineda’s alfalfa field. It was an ideal location, just off this town’s bustling main entrance and barely a mile from its ancient pyramids, which draw tourists from around the world. With its usual precision, Wal-Mart calculated it would attract 250 customers an hour if only it could put a store in Mrs. Pineda’s field.

    One major obstacle stood in Wal-Mart’s way.

    After years of study, the town’s elected leaders had just approved a new zoning map. The leaders wanted to limit growth near the pyramids, and they considered the town’s main entrance too congested already. As a result, the 2003 zoning map prohibited commercial development on Mrs. Pineda’s field, seemingly dooming Wal-Mart’s hopes.

    But 30 miles away in Mexico City, at the headquarters of Wal-Mart de Mexico, executives were not about to be thwarted by an unfavorable zoning decision. Instead, records and interviews show, they decided to undo the damage with one well-placed $52,000 bribe.

    The plan was simple. The zoning map would not become law until it was published in a government newspaper. So Wal-Mart de Mexico arranged to bribe an official to change the map before it was sent to the newspaper, records and interviews show. Sure enough, when the map was published, the zoning for Mrs. Pineda’s field was redrawn to allow Wal-Mart’s store.

    Problem solved.

    Wal-Mart de Mexico broke ground months later, provoking fierce opposition. Protesters decried the very idea of a Wal-Mart so close to a cultural treasure. They contended the town’s traditional public markets would be decimated, its traffic mess made worse. Months of hunger strikes and sit-ins consumed Mexico’s news media. Yet for all the scrutiny, the story of the altered map remained a secret. The store opened for Christmas 2004, affirming Wal-Mart’s emerging dominance in Mexico.

  • Smirking Chimp: Washington’s Revolving Door Is Hazardous to Our Health. By Bill Moyers and Michael Winship. Excerpts: We’ve seen how Washington insiders write the rules of politics and the economy to protect powerful special interests, but now as we enter the holiday season, and a month or so after the election, we’re getting a refresher course in just how that inside game is played, gifts and all. In this round, Santa doesn’t come down the chimney — he simply squeezes his jolly old self through the revolving door.

    It’s an old story, the latest chapter of which came to light a few days ago with a small item in Politico: “Elizabeth Fowler is leaving the White House for a senior-level position leading ‘global health policy’ at Johnson & Johnson’s government affairs and policy group.”

    A familiar name. We had talked about Liz Fowler on Bill Moyers Journal in 2009, during the early stages of Obama’s health care reform. She was at the center of the action, sitting behind Montana Senator Max Baucus, chairman of the Senate Finance Committee at committee hearings. We noted, “She used to work for WellPoint, the largest health insurer in the country. She was Vice President of Public Policy. And now she’s working for the very committee with the most power to give her old company and the entire industry exactly what they want: higher profits, and no competition from alternative non-profit coverage that could lower costs and premiums.”

    After Obamacare passed, Senator Baucus himself, one of the biggest recipients in Congress of campaign cash from the health care industry, boasted that the architect of the legislation was none other than Liz Fowler. “I want to single out one person,” he said.

    “… Liz Fowler is my chief health counsel. Liz Fowler has put my health care team together… She put together the white paper last November 2008, [the] 87-page document which became the basis, the foundation, the blueprint from which almost all health care measures in all bills on both sides of the aisle came. She is an amazing person. She is a lawyer; she is a Ph.D. She is just so decent. She is always smiling, she is always working, always available to help any Senator, any staff. I just thank Liz from the bottom of my heart.”

    The health care industry was very pleased, too. Early on in the evolution of Obamacare, the Senate and the White House cut deals that protected the interests of the health care industry, especially insurers and the pharmaceutical companies. Lobbyists beat back such popular proposals as a public option, an expansion of Medicare, and a requirement that drug companies negotiate the prices they charge. As the eagle-eyed journalist Glenn Greenwald noted in The Guardian last week, “The bill’s mandate that everyone purchase the products of the private health insurance industry, unaccompanied by any public alternative, was a huge gift to that industry.” That sound you hear isn’t jingle bells; it’s cash registers ringing. ...

    Reforms were passed that are supposed to slow down the revolving door, increase transparency and limit the contact ex-officials and officeholders can have with their former colleagues. But those rules and regulations have loopholes big enough for Santa and his sleigh to drive through, reindeer included. The market keeps growing for insiders poised to make a killing when they leave government to help their new bosses get what they want from government. That’s the great thing about the revolving door: one good turn deserves another.

  • Washington Post: Why don’t bad ideas ever die? By Barry Ritholtz. Excerpts: This time of year is filled with retrospectives and “best of” lists. I’d prefer a more enlightened discussion about bad ideas. Or rather, zombie ideas: the memes, theories and policies that refuse to die, despite their obvious failings. Why do we embrace the terrible, fall in love with the wrong, bet money on the fictitious? Nowhere is this truer than in the fields of economics and investing. Together they have produced a long list of thoroughly debunked ideas. Despite this, many of these zombie ideas still have a vice grip on amateurs and professionals alike. What is it about us and this intellectual voodoo? We keep repeating the same mistakes over and over. It is maddening. Let’s count the ways:

    Shareholder value: Since the early 1980s, this theory had claimed that corporate management should concentrate primarily on increasing share prices. In practice, it is fraught with problems: Short-term focus on quarterly earnings leads to a decline in long-term research and development, typically to the detriment of a company’s long-term prospects. Short-termism and stock-option compensation causes management to focus on immediate quarterly returns. It has also led to earnings “management,” accounting fraud and a raft of management scandals. Shareholders derive much less value than the name implies. ...

    Austerity: Conceived from the puritanical idea that we must pay a penance for our sins, the Austerians (as we like to call them) insist that a post-bubble economy can be cured with spending cuts and tax increases, producing a balanced budget. When the United States tried this in 1938, it helped send the nation back into recession. More recently, Greece was forced to adopt austerity measures as part of its financial-rescue terms. It pushed the country into a depression. Austerity measures in Britain and Ireland and Spain — indeed, everywhere they have been imposed in Europe — have all led to recessions. Despite the wealth of evidence showing that this is a terrible idea, it refuses to die. ...

    Tax cuts pay for themselves (supply-side economics): Sometimes bad ideas start as good ones. When tax rates are so high as to cause all manner of tax avoidance strategies — think confiscatory rates of 75 to 90 percent — reducing them makes sense and can change investor behavior for the better. Where we run into trouble is when this concept gets extrapolated to an absurd degree. Claiming that any tax cut will pay for itself by producing greater economic activity has now reached that point. No, Virginia, cutting taxes 3 percent does not lead to more revenue. Get over it. ...

    Markets can self-regulate: Another example of an idea that started out reasonably enough but soon after went off the rails. After 30 years of postwar economic growth, there was a credible argument that government regulations had become too costly, time-consuming and complex. With inefficiencies holding back small businesses, paring the worst of the regulatory burden should be productive. As so often occurs, this good idea was taken to an illogical extreme. Instead of removing onerous, expensive regulations, zealots such as then-Sen. Phil Gramm (R-Tex.) argued against all regulations. Markets can regulate themselves much better than some bureaucrat or lawyer. Besides, the self-interest of companies and the efficient market would more effectively police behavior than any government agency ever could. We know how that turned out. ...

    Incompetency: Skilled people have a greater understanding of their limitations for a given task; unskilled people do not. This is called the Dunning-Kruger effect, and it tells us that the worse we are at any given talent, the weaker our own meta-cognition about it is.

  • Smirking Chimp: The American Worker Has Gone Into Cardiac Arrest. By Christopher Williams. Excerpts: Over the past thirty years, there has been a marked shift in employer attitudes towards their employees. Employers have always been in business to make a profit but they used to pay the workers well for the countless hours of labor they provided to generate the profits that were then transformed into good wages for everyone in the company. In addition, they believed that family came first and then the business. Unfortunately, there now is a huge wage gap between the CEO’s of this country and the entry level positions that is now at 475 to 1 and the employees are now treated like slaves instead of human beings. The value of employees in this country has depreciated to the point that they don’t even feel like they are human anymore. They don’t feel like they are appreciated because they are not and two recent events in this country demonstrated the depreciation of the American worker beautifully.

    Recently, the Hostess Bakery Company, which was the maker of such products as Twinkies, Ding Dongs, Butternut Bread and countless other scrumptious baked goods, placed its union members in a very precarious position. They were given the choice to accept an eight percent wage cut and a sixteen percent increase in the amount they had to invest in their benefits or the company’s assets would be liquidated and the company would cease to exist. They had already granted concessions in 2004 and were placed behind the proverbial eight ball. What I find reprehensible is that the company’s CEO’s salary would have increased three hundred percent if the workers had agreed to have their wages go down to around minimum wage while the CEO prospered. Unfortunately, in spite of the fact that a bankruptcy judge intervened and coerced the two sides to make one final attempt at mediating this contentious issue, the CEO and management showed no desire to assist the employees in their plight and the company had now been terminated and 18,000 workers are without jobs and the CEO is still rich beyond his wildest dreams and will improve on that position once he sells the business and its recipes.

  • Huffington Post: Libor Manipulation Cost Fannie Mae, Freddie Mac $3 Billion, Watchdog Says. By Mark Gongloff. Excerpts: Libor manipulation cost Fannie Mae and Freddie Mac more than $3 billion, according to an estimate by a government watchdog, who recommends the government-owned mortgage giants sue the big banks. ...

    More than a dozen banks in the U.S. and Europe are under investigation for allegedly manipulating a key short-term interest rate known as Libor, which influences borrowing costs throughout the global economy. Swiss bank UBS on Wednesday agreed to pay $1.5 billion to settle charges that its traders manipulated Libor over several years. The bank's Japanese unit pleaded guilty to a crime -- a rarity for a bank -- and two of its former traders have also been hit with federal criminal charges. Earlier this year U.K. bank Barclays Capital agreed to pay about $450 million to settle Libor charges. ...

    Libor-setting banks have already been sued by their trading partners and customers alleging billions of dollars in losses. And Wall Street analysts have tried to estimate just how big the legal liability could be for the banks. But Linick's analysis marks the first semi-official estimate of actual damages caused by the Libor scandal.

  • Smirking Chimp: Defense Lobby Wins, Middle Class Loses In Obama Debt Proposal. By Richard Eskow. Excerpts: The President's latest budget offer slashes a 95 year old retiree's Social Security benefits by more than nine percent -- and trims the defense budget by less than one percent.

    Nancy Pelosi insists that these benefit reductions aren't "cuts," which is consistent with the propensity to describe the slowed growth or freezing of military spending as a "reduction." ...

    Why are people so anxious to avoid the "fiscal cliff" that they'll sacrifice the elderly, along with the disabled, veterans, and their families? And why does the President's proposal ask so much more "shared sacrifice" from them than it does of the nation's bloated defense contractors?

    As the old saying goes: Follow the money.

    Ike's Warning. In this case the money trail quickly leads from the corridors of power to the boardrooms of the Military Industrial Complex. (You didn't think it had gone away, did you?)

If you hire good people and treat them well, they will try to do a good job. They will stimulate one another by their vigor and example. They will set a fast pace for themselves. Then if they are well led and occasionally inspired, if they understand what the company is trying to do and know they will share in its sucess, they will contribute in a major way. The customer will get the superior service he is looking for. The result is profit to customers, employees, and to stcckholders. —Thomas J. Watson, Jr., from A Business and Its Beliefs: The Ideas That Helped Build IBM.

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