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    Highlights—October 2, 2004
  • Wall Street Journal: IBM Sets Accord On Pension Plan For $300 Million, by Ellen E. Schultz, Theo Francis and William M. Bulkeley. Excerpts: Douglas R. Sprong, one of the plaintiffs' attorneys, said, "We are confident the class will win any appeal, because under both the conversion formula and the cash-balance formula, older workers received less than their younger counterparts for no reason other than age." The case has been watched closely both for the impact on IBM and the implications for other companies with cash-balance plans. Employer groups have warned that a judgment against IBM will spell the death of cash-balance plans and trigger a flood of lawsuits. But the court's decision about IBM likely will have little immediate effect on the roughly 300 to 400 other companies with cash-balance plans, because Congress is expected eventually to pass legislation saying that cash-balance plans aren't inherently age-discriminatory, a move that would insulate other companies from similar lawsuits.

    When companies change to a cash-balance formula, they essentially freeze the pension, so additional years on the job don't make it grow. This frozen pension is converted to a dollar value (the lump sum the person would receive if the value of all his monthly retirement checks were converted to an immediate payout). The frozen pension value, called the "account balance," grows slowly each year, typically with a flat "credit" based on pay, say, 4%. For older workers, freezing their pension just when it is beginning to rise rapidly in value, and instead giving them the equivalent of a 401(k) with only a few years of growth, is devastating: Their retirement income can fall by 20% or more. In IBM's case, the court noted last year that the cash-balance plan reduced pensions for some people by more than 40%.

    What's more, many companies also lowballed the opening account balances. For instance, if someone's frozen pension was valued at $100,000, the employer would give him an opening account balance of, say, $80,000. As a result, the employee has to wait until the annual pay "credits" bring his account back up to $100,000 before his pension can grow again. In contrast, a new or young worker would begin to build up new benefits right away. Companies that converted to cash-balance plans enjoyed significant financial rewards. Under accounting rules, when a company reduces a liability (which is what happens when it cuts benefits), the move produces accounting gains, which boost income, and hence earnings. In its ruling last year, the federal court noted that in 2001 alone, IBM's pension plan contributed more than $1 billion to income, accounting for 13% of its net income. Last year, IBM's pension plans contributed $560 million, or 7% of the total, to net income.

    Companies generally told workers that they were converting "old fashioned" pensions because cash-balance plans were easier to understand, and better for a mobile work force, because job hoppers can take their money in a lump sum. While workers did, in fact, like the idea of a portable pension (not knowing that traditional pensions also can be paid out that way), few understood that their pensions had been frozen or that in many cases their opening balances were lowballed. That changed dramatically in 1999 when some IBM workers reverse-engineered the numbers, and concluded their pensions were being cut by 20% to 40% or more. Within months, the backlash from enraged employees triggered Senate hearings, an investigation by the Equal Employment Opportunity Commission and a moratorium by the Internal Revenue Service, which to this day hasn't approved a cash-balance conversion. IBM employees then filed suit, saying the cash-balance plan violates age-discrimination rules. Under pension law, the rate at which a pension builds (its "accrual rate") can't decline with age. The suit also complained that for thousands of employees IBM established opening balances that were lower than the frozen pension values, a phenomenon called "wearaway."

    If link is broken, view Adobe Acrobat version [PDF--32KB].

  • New York Times: I.B.M. Employees Get $320 Million in Pension Suit, by David Cay Johnston. Excerpts: Under the settlement, which is subject to approval by the court, I.B.M. would pay at least $300 million to current and former employees and $20 million to employees who had not been at the company long enough to earn a pension. The payment of $300 million settles all disputes that arose when I.B.M. changed its pension plan the first time, in 1995, to an interim design called a pension-equity plan. But the settlement leaves unresolved the two claims in the class-action lawsuit that pertain to cash-balance pensions. I.B.M. intends to appeal those claims. One remaining claim is at the very heart of the case: whether cash-balance pension plans by definition discriminate against older workers. ... Companies like the cash-balance design because it allows them to shrink long-term pension debt and reap accounting gains while still providing benefits to employees. ... Because of uncertainty about their legality, conversions to cash-balance plans have stopped for now. If I.B.M. wins its appeal, many more companies are expected to adopt cash-balance plans because they are generally less costly than traditional plans. ... For older workers with years in a traditional plan, the switch to a cash-balance plan at age 45 or older can halve the benefits they ultimately collect, compared with a traditional defined-benefit plan.

    I.B.M. had earlier said that if it lost the case it might owe $6.5 billion, but the plaintiffs said that was an exaggerated figure intended to scare workers into abandoning the case. Kathi Cooper, the lead plaintiff, said that if the full $1.7 billion was paid out, it would have cost I.B.M. "just about what I always thought the case was worth." In August 2003, Judge Murphy found I.B.M.'s cash-balance plan - and by implication all such plans - discriminatory and illegal, a finding that alarmed corporations and administrators who have adopted or want to adopt such plans.

    The central issue that will now be appealed is whether I.B.M.'s cash-balance plan illegally discriminated against older workers on a continuing basis. If Judge Murphy's rule that it does is upheld, I.B.M. will pay the affected workers $780 million, according to yesterday's settlement. A second issue that I.B.M. will now appeal is whether certain one-time payments that it made on July 1, 1999, the day it amended its pension plan for the second time, were also age discriminatory. If I.B.M. loses its appeal on that point, it will pay the affected employees $620 million. Norman Stein, an expert on pension law who teaches at the University of Alabama and has advised a different group of I.B.M. employees on pension issues, said an appellate ruling against I.B.M. would be the end of cash-balance plans. He is a critic of how such plans have been applied to reduce benefits to older workers. "Federal law says the rate at which you accrue a pension benefit cannot decline because you are getting older," Professor Stein said. "But under a cash-balance plan, the interest on the contribution grows more for younger workers than older workers" and thus discriminates against older workers.

    He warned that, under the plaintiffs' legal theory, those corporations with cash-balance plans would face costs "which would wipe them out" if they had to repair the plans to eliminate the age discrimination. Mark Iwry, a senior fellow at the Brookings Institution, said that "Congress needs to resolve this whole controversy in a balanced way that protects older workers and clarifies the legal status of cash-balance plans." Mr. Iwry said so many millions of workers were affected by the issue that Congress would have to balance the interests of those workers against the arguments advanced by corporate lobbyists. Officials at the Pension Rights Center, a labor-supported group that works to protect employee pensions, said they feared that Congress might resolve the issue by approving plans, like I.B.M.'s, that can result in older workers losing half of the pension benefit they were planning on in retirement. "This settlement is good news for I.B.M. employees because they will get at least $320 million in increased benefits," said Karen Friedman, policy director for the center. "This is also an opportunity for Congress to protect the expectations of older workers."

    If link is broken, view Adobe Acrobat version [PDF--20 KB].

  • Raleigh News & Observer: Many watching IBM closely. A ruling on its dispute over pensions could affect thousands of companies. Excerpts: The $320 million partial settlement that IBM reached with 140,000 workers over the company's pension plan likely made some executives nervous as they read the morning papers Thursday. ... In the past four years alone, companies have canceled nearly 7,500 defined-benefit pension plans, according to Pension Benefit Guaranty Corp., a federal agency that pays benefits to more than 1 million Americans. Some switched to plans similar to IBM's. "Most people thought these [pension plan] conversions were legal and they converted. The key question now is, are they legal or are they not?" said Bruce Wolk, a law professor at University of California-Davis, who has followed the IBM case. "There will be more litigation and ultimately a higher court, or Congress, will have to resolve this issue." Benson Rosen, a management professor and compensation expert at the University of North Carolina at Chapel Hill, said the settlement sends a signal to employers to use extreme caution whenever they alter retirement plans."You have to either grandfather in certain people, or offer a cash settlement, which is, in essence, what IBM is ending up doing," he said. "The people who got caught in the transition need to be made whole. That's where IBM got into trouble."

  • iSeries Network: IBM Reaches Partial Pension Settlement, but Suit Far from Over. Excerpts: IBM has settled at least part of its dispute with employees stemming from changes it made to its pension plan five years ago. A partial settlement reached last week affects only those employees who'd been with IBM for less than five years when the changes to the pension plan were made and thus weren't fully vested in the plan. "It's only a very small part of the overall settlement," says Ralph Montefusco, organizer for the IBM employees union Alliance@IBM and a former IBMer in the Microelectronics Division. "The majority of the settlement, which is the actual pension conversion and the age discrimination that was involved in that, still has to be ruled on. We won the lawsuit, but the judge still has to announce what the penalty will be, in other words, what IBM will have to pay."

    Alliance@IBM is expecting that ruling at any time now. "As I understand it," Montefusco says, "IBM has asked the judge to hold off on that ruling because they are making an attempt to settle. ... I honestly don't know if giving away a partial settlement piece and then saying you're trying to reach a settlement — I don't know if that is nothing more than an attempt to delay the judge's ruling, or if it's actually a sincere attempt to settle things. You can't help but be suspicious — not just of IBM, but of the process itself."

    The changes to the pension plan came during the reign of previous CEO Lou Gerstner, whose hard-boiled devotion to the bottom dollar made him the darling of Wall Street — but also led to numerous layoffs and benefits cuts for employees. Have things improved much under the kinder, gentler leadership of new CEO Sam Palmisano? "Sam Palmisano has been more cordial at stockholder meetings and probably pays a little more attention to the PR part of the job." Montefusco says. "But when you look at the actual policies, benefits are being cut, hours are being added to without additional pay, people are under a lot of stress, offshoring is happening left and right, short-term financial decisions are what drive the entire corporation. I honestly don't see any change under Sam."

  • Message to employees from Randy MacDonald, IBM SVP, Human Resources. Excerpt: I am writing to let you know that IBM has reached an agreement in the lawsuit over its U.S. pension plan. Earlier this afternoon, IBM and the plaintiffs notified the U.S. District Court that they have agreed in principle to settle some claims in Cooper vs. IBM. Under the agreement, the Court will issue no rulings on remedies, and the company will appeal remaining claims regarding the validity of IBM's cash balance pension plan. We believe that we are likely to be successful on appeal. While IBM believes both its pension formulas are fair and legal, under the terms of today's agreement, IBM has agreed to settle some of these claims in the interest of the business and shareholders.

  • IBM IR Press Room: IBM Settles Certain Claims In Pension Lawsuit. Will Appeal Cash Balance Claims. Excerpts: “The position that cash balance plans are unlawful seriously jeopardizes the security of an already fragile U.S. pension system,” said Randy MacDonald, IBM’s senior vice president of human resources. “While IBM has the financial strength to deal with the ramifications of this case, many companies do not. If the ruling in this case is upheld, many companies will be forced to end their pensions, reduce the number of employees who receive pensions, or become noncompetitive which could result in job losses." ... “Anyone who thinks that a Court ruling against cash balance plans is good for American workers misses the fact that these plans ensure the survival of secure retirement income,” said Mr. MacDonald.

  • Alliance@IBM: Pension Lawsuit Update.

  • Statement from Plaintiffs' Counsel Regarding Agreement In The IBM Pension Class Action Case, Cooper v. IBM Personal Pension Plan. Excerpts: According to Douglas R. Sprong, of the plaintiffs' legal team, "Under this agreement, IBM could pay as much as $1.7 billion in additional pension benefits if an appellate court sustains the district court's age discrimination rulings on two issues: the cash balance formula and IBM's use of a unique, age-based formula when it converted participants' benefits to opening account balances. Under the agreement, $300 million of the $1.7 billion will be paid regardless of the outcome on any appeal, an additional $620 million will be paid unless the age-based conversion formula is allowed, and the remaining $780 million will be paid unless the court's ruling on the cash balance formula is reversed. We are confident the class will win any appeal, because under both the conversion formula and the cash balance formula, older workers received less than their younger counterparts for no reason other than age." Most importantly," Sprong emphasized, "IBM has agreed that whatever additional benefits will be paid, those amounts cannot be offset or worn away by additional pension accruals or other benefits a class member may earn." ... According to Sprong, "Plaintiffs believe that the amount of money available to the class members under the agreement compares favorably to the amount of pension dollars that would actually have been paid to the class under a judgment. For that reason, it is clearly in the best interests of the class." If link is broken, view Adobe Acrobat version [PDF--61 KB].

  • IBM Investor Relations Executive Presentations: Pension Plan Update, by IBM Vice President and Treasurer Jesse Greene Jr. Audio casts, including presentation slides, and a transcript of the presentation are available at the linked page. Excerpts: "With respect to the next steps in the litigation, in the coming months class members will receive formal notice of the settlement and the judge will hold a fairness hearing on the settlement. Once the settlement is approved by the judge, we will appeal the liability rulings for the cash balance claims. The appeal process should take between 9 and 15 months to complete, bringing the end date for the total process to 15 to 27 months from now."

  • Benefitsblog: House Debate Over the Gutknecht-Sanders Amendment. Excerpts: As noted in this previous post here, the House of Representatives on Tuesday (237-162) approved the Gutknecht-Sanders Amendment pertaining to cash balance plans, which reads as follows: "None of the funds appropriated by this Act may be used to assist in overturning the judicial ruling contained in the Memorandum and Order of the United States District Court for the Southern District of Illinois entered on July 31, 2003, in the action entitled Kathi Cooper, Beth Harrington, and Matthew Hilleshein, Individually and on Behalf of All Those Similarly Situated vs. IBM Personal Pension Plan and IBM Corporation (CivilNo. 99-829-GPM)." For those who are interested in reading the debate which took place on the floor of the House of Representatives over the Amendment, continue reading...

    (Congressman Sanders comments): Mr. Chairman, let me just read a brief excerpt from the ruling of Judge Murphy: "In 1999, IBM opted for a cash balance formula. The plan's actuaries projected that this would produce annual savings of almost $500 million by 2009. These savings would result from reductions of up to 47 percent in future benefits that would be earned by older IBM employees. The 1999 cash balance formula violates the literal terms of the Employee Retirement Income Security Act. IBM's own age discrimination analysis illustrates the problem." That was Judge Murphy.

    Mr. Chairman, I became involved in this issue several years ago when hundreds of IBM employees in Vermont contacted my office and told me that the pensions that they had been promised by the company had been cut by 20 to 50 percent. In fact, the largest town meeting that I have ever held in Vermont, and I have held many, was for some 700 IBM workers who came out to demand that the company rescind the changes that had been made in their pension plan.

    Mr. Chairman, think about it. Think about workers staying at a company through good times and bad times, providing loyalty to their employers because, among other reasons, they expect to receive certain agreed-upon pensions when they retire. And then, Mr. Chairman, one day, out of nowhere, the company sends a document, maybe it is an e-mail, which says, in so many words: Thank you, employees, for your dedicated service to the company, but forget about the promises that we made to you regarding the retirement that you and your family were anticipating. Forget about it. That is gone. And, in many instances, while pulling the rug out from under their employees, we are seeing older workers, years of service to a company, suddenly find that the pensions that they had been planning on, the retirement dreams that they had been expecting, slashed by up to 50 percent.

  • New York Times commentary by Austan Goolsbee: Retiring Minds Want to Know. Excerpts: Even as I.B.M.'s pension difficulties make headlines - the company has agreed to pay current and former employees $320 million to settle some charges that changes to its plan discriminated against older workers - a more serious financial disaster looms for the pension system. Taxpayers could face an even larger bill from corporations' failure to put enough money into their pension funds. ... The crisis concerns the Pension Benefit Guaranty Corporation, the federal agency that insures workers' pensions in case their employer defaults. The agency charges employers a premium for the insurance, and that money is supposed to cover its costs. The system is not supposed to cost taxpayers anything. But a dreadful lack of judgment, coupled with a new federal law, could leave the public with a $100 billion bill. ...

    Why doesn't the agency have the money to cover this shortfall? Fundamentally, it is an insurance company. Higher risk ought to mean higher prices; a regular sky diver, for example, pays higher life insurance premiums. But the pension agency doesn't work that way. The agency's fees are unrelated to investment risk. It charges a fixed amount per corporation and an additional fee based on the amount its pension fund is underfinanced. United had about two-thirds of its pension fund in risky investments, including junk bonds and a Ghanaian gold-mining company. Yet if United had invested every dollar in United States Treasury bonds, it would have paid exactly the same premium to the pension agency. Thus corporations have little incentive to invest workers' retirement savings wisely. If a bet wins big, a corporation can add that money to the pension plan and keep the funds it would otherwise have been required to contribute. If it loses big, the government will bail it out.

  • Motley Fool: The Power of Pensions. Excerpts: I spent Labor Day weekend attending a seminar at the North Carolina Center for Creative Retirement. For three days, a group of 40 retirees and almost-retirees discussed their fears and fantasies about post-work life. In a previous article, I wrote about how many participants had some anxiety about leaving their careers -- their accomplishments, their social networks, their identities -- behind. But here's something that most of the participants didn't fear: That they'll run out of money. For some, that was a result of their higher incomes. But for others, their retirement will be secure because they worked for years for an employer that offered a defined-benefit plan (i.e., a traditional pension). For their service, they will receive a monthly check for the rest of their lives, regardless of bear markets, Wall Street scandals, and terrorist attacks. However, fewer and fewer Americans will be able to rely on a pension check. In 1986, 172,642 companies offered traditional pension plans, according to the Employee Benefit Research Institute. By 1998, the number of companies sponsoring defined-benefit plans had shrunk to 56,405, a 67% drop in just 12 years.

  • Vault's IBM Business Consulting Services message board is a popular hangout for IBM BCS employees, including many employees acquired from PwC. Some sample posts follow:
    • "Thanks again – likewise I’m sure" by " Dose of reality". Excerpt: I think that a lot of BCS staff are waking up to the Quid Pro Quo approach to output and work focus, are leaving, or are doing both. The current resource management model (I hesitate to call it a strategy, and even the word model implies more concerted thought than there really is), hinges on the ability to convince staff that they should work as hard as possible in the pursuit of management acceptance and client satisfaction, with a vague promise of commensurate reward. The problem is that the reward never materializes. It’s like that plastic rabbit that revolves on the rail at the dog race track. It’s always out of reach, but the dogs keep coming back to try to catch it. Since the cognitive ability of management consultants is at least moderately higher than canines, you would expect that after one or two cycles this model would break down. Some of the really smart consultants should even be able to figure the game out before the fact and adapt their behavior accordingly. It has always baffled me as to why this latter group is so small!

  • New York Times, courtesy of HeraldTribune.com: Medicare Rules Set Off a Battle on Drug Choices. Excerpts: The new Medicare law has touched off a huge battle between insurance companies and drug companies that could determine how many medicines will be readily available to Medicare beneficiaries. Under the law, Medicare will rely on private health plans to deliver drug benefits to the elderly and disabled. The government will not specify precisely which drugs must be covered. Rather, each plan will develop a list of drugs approved for reimbursement. In general, drug companies want as many drugs as possible on each list, known as a formulary. Many doctors and consumer groups agree. But insurers and drug benefit managers generally want to limit the number of drugs, and the types of drugs. Otherwise, they say, the new drug benefit will quickly become unaffordable.

  • Jim Hightower: "Fixing" Social Security. Excerpt: Wouldn't you be a little skeptical if you took your car in for a routine checkup and the repair shop said it had found a mysterious and costly problem deep in the engine that "needs fixing"––even though you can't detect any problem at all? Welcome to the shady world of today's Social Security mechanics, including politicos of both parties and a phalanx of banking lobbyists. They're telling us in the direst terms that there's a major problem deep in the Social Security system that must be fixed right away. The "fix" is going to be costly, they solemnly inform us––it'll require raising people's retirement age to as high as 70, cutting the monthly payments for retired workers, and even privatizing part or all of this public safety net for retirees. But we must accept these fixes, they warn, or the whole system will sputter and die. B. S. ALERT, B. S. ALERT! Of all government programs––including the bloated, fraud-ridden Pentagon––Social Security is least in need of fixing. It's the most efficient program we have, requiring a mere one-percent of its total budget for administrative costs. And even the political mechanics who want to mess with the program admit that Social Security is perfectly sound and capable of paying full benefits to future retirees through at least 2042. What insurance company or bank can make that claim? And with only minor adjustment, the system is solid through 2075––long after most of today's "fixers" will be dead.

  • Boston Globe commentary by Barney Frank: A Social Security swindle. Excerpts: Sometimes mixed metaphors say it best. Federal Reserve chairman Alan Greenspan's call for significant reductions in Social Security can best be described as a case of the fox in the chicken coop crying wolf. He is greatly exaggerating the dimensions of a problem that he helped create. ... Greenspan recently said, "We have promised more than our economy has the ability to deliver to retirees." He argued that we have the choice either of raising payroll taxes, which are regressive and economically burdensome, or reducing cost-of-living adjustments while raising the retirement age. The assumption that leads him to pose this stark choice is that the federal government does not have enough revenue available to deliver the benefits we have promised retirees. What he omitted to note is that if all of the payroll taxes that have been and will be paid into Social Security are made available for Social Security payments as they are supposed to be, the system is entirely solvent until 2042 at least. When the Bush administration took office, we were on the path to accumulating the level of surpluses sufficient for the federal government to meet this legal and moral commitment to Social Security without causing severe fiscal distress. Then came the deficits of the last four years, caused in substantial part by the large tax cuts pushed through Congress by President Bush, predominately for the benefit of our wealthier citizens and with the strong support of Greenspan.

  • Jim Hightower: Time To Take Our Country Back. Excerpt: What's at stake on November 2nd is the very idea of America itself – the historic idea that we might actually build a society based on our egalitarian ideals of economic fairness, social justice, and equal opportunity for all. The moneyed elites – presently working through BushCheneyAshcroftRumsfeld & Company – have decided that America should no longer bother pursuing egalitarianism. They are asserting a new ethic of privilege, declaring that the role of government is to take care of the good fortunes of the few...and not worry about the well-being of the many. In their view, they're the top dogs and the rest of us are just a bunch of fire hydrants. Wielding their administrative blow-torches and legislative monkey-wrenches, they are jerry-rigging America's rules so that money and power flow uphill, out of our neighborhoods into their corporate suites and offshore bank accounts. They're seizing control of every decision that affects our lives – from wages to taxation, from what's in your dinner to what's in your daily news feed, from who goes to college to who goes to war. They're turning our America – our democracy – into their America of plutocracy and autocracy.

  • New York Times: Inquiry on Medicare Finds Improper Limits. Excerpts: Federal investigators said Monday that the Bush administration had improperly allowed some private health plans to limit Medicare patients' choice of health care providers, including doctors, nursing homes and home care agencies. The investigators, from the Government Accountability Office, also said that the private plans had increased out-of-pocket costs for the elderly and had not saved money for the government, contrary to predictions by Medicare officials. ... Medicare is spending $650 to $750 a year more for each beneficiary in such private plans than it would have spent if the same people stayed in traditional Medicare, the investigators said. In negotiations over the Medicare bill last year, the administration pressed for more money and authority to foster the growth of preferred provider plans, saying they would be more efficient and would save money over time. Administration officials reiterated that view on Monday. ... The report was the fourth in two years to find that the administration had skirted federal law in pursuing health policy objectives. In July 2002 and last January, the accountability office said the administration had improperly allowed states to divert money from the Children's Health Insurance Program to provide coverage for childless adults. Earlier this month the auditing agency said that the Bush administration had illegally withheld data from Congress on the projected cost of the new Medicare law.

  • Washington Post: Higher Costs, Less Care. Data Show Crisis In Health Insurance. Excerpts: In the past four years, Americans have spent an ever-growing portion of their paychecks on health care and for the most part gotten less for their money, forcing millions into the ranks of the uninsured or personal bankruptcy, according to government figures and several independent assessments. Nationwide, workers' costs for health insurance have risen by 36 percent since 2000, dwarfing the average 12.4 percent increase in earnings since President Bush took office, the liberal consumer group Families USA reports in an analysis scheduled for release today. The number of Americans spending more than a quarter of their income on medical costs climbed from 11.6 million in 2000 to 14.3 million this year, according to the group. ... "The cost of family health insurance is rapidly approaching the gross earnings of a full-time minimum-wage worker," said Drew Altman, president and chief executive of the nonprofit foundation, which compiled the data. "If these trends continue, workers and employers will find it increasingly difficult to pay for family health coverage, and every year the share of Americans who have employer-sponsored health coverage will fall."

  • Bloomberg: Wal-Mart, General Motors May Use Bush Plan to Cut Health Costs. Excerpts: Texas Plywood & Lumber Co., a seller of homebuilding products with 130 workers, has adopted a Bush administration plan to reduce health-care costs that Wal-Mart Stores Inc. and General Motors Corp. may follow. Texas Plywood is among a growing number of small businesses turning to health-savings accounts proposed by President George W. Bush. By requiring workers to shoulder more of the costs, which they can pay for by setting aside money tax free, Texas Plywood expects to slash $90,000 off the $400,000 it spent last year on health care. ... Critics of the plan, from John Kerry, Bush's opponent in the presidential race, to Morgan Stanley's Berner, say the accounts will shift the burden to consumers and may create an incentive for healthy people to leave traditional health-insurance groups, making premiums more expensive for those with chronic or severe illnesses. Kerry, 60, said in a Sept. 21 town hall meeting with voters in Jacksonville, Florida that the accounts will prompt some companies to scrap traditional coverage, causing as many as 1.4 million people to lose insurance. The accounts will "increase both costs and the number of uninsured," he said. ...

    What's good for companies may not benefit workers, said some economists including Berner and Uwe Reinhardt, an economics professor at Princeton University. The accounts will shift health- care costs to the sickest people while cutting expenses and creating a tax shelter for the rich, they said. "They're a potential fix for corporate America only in the sense that they offer a way to unload some of the burden that they took on in the post-World War II period in offering health- care benefits," Berner said. "Even if we had a system that was dominated by HSAs, where's the funding going to come from?" Berner said only about 30 percent of eligible people contribute to their company 401-K plan, and he said he expects the same from health-savings accounts. "The great majority of people don't do it and don't feel like they have the money to put into it," he said. Reinhardt said the tax advantages of health-savings accounts would benefit the wealthy and not do much for low-income people.

  • New York Times: Kerry vs. Bush on Health Care. Excerpts: The faults in the American health care system become more glaring with each passing year. Large numbers of Americans have no health insurance at all, and those who do have insurance are faced with soaring premiums that threaten to make coverage unaffordable for individuals, families and employers. The two presidential candidates have responded to these problems with health plans that differ markedly in scope and philosophy. Both tinker at the edges of the current system rather than seeking a broad, nation-shaking change. Sadly, the fervor for sweeping reform died a decade ago with the disastrous demise of the Clinton health plan. That said, President Bush and Senator John Kerry clearly want to nudge the nation's health care system in different directions.
Coverage on H1-B and L1 Visa and Off-Shoring Issues
  • CNET News: Senate weighs H-1B visa changes. Excerpts: There's a push in Congress to change guest visa programs, including a proposal to create an exemption to the annual cap of 65,000 new H-1B visas. Legislation under serious discussion in the Senate would exempt foreign students graduating from U.S. schools with master's and doctorate degrees--a change opposed by labor groups and championed by businesses. ... Marcus Courtney, president of technology worker advocacy group WashTech, said the student exemption to H-1B visas makes no sense. He pointed to a recent study for WashTech finding significant job losses in the technology sector and high unemployment among tech workers. "There's not a shortage of skilled professional workers in the U.S.," Courtney said. Critics also say guest worker visas accelerate the trend to send highly skilled work offshore to countries such as India or the Philippines. If the guest workers return to their native countries, "they're better equipped to compete with us," said Vin O'Neill, legislative representative for the U.S. wing of the Institute of Electrical and Electronics Engineers. IEEE-USA, which has criticized offshoring, also opposes the student exemption proposal.

  • WashTech News: Safeco begins IT offshoring program. Excerpt: Employees in Safeco's Information Technology Department have a new storm on the horizon to worry about, and it has nothing to do with hurricane season. The company has undertaken a new outsourcing initiative dubbed "SmartSource," which will involve using offshore vendors. Safeco is a nation wide insurance and investment company headquartered in Seattle Washington. ... According to the e-mail, the company plans to communicate to employees through a "roadshow" what the changes mean. It goes onto say that the program "does not have an objective to eliminate jobs through layoffs. Our objective is to encourage people to take ownership of their careers by learning new skills, being flexible, and finding different ways to contribute to Safeco's future success." However, the company also does not promise that no layoffs will occur. To allay employees' fears, it is increasingly common for such corporate communications with employees to suggest that no current jobs will be impacted at the time of the announcement of outsourcing plans.. Later in the process, however, employees typically learn of the scope of job cuts.

  • Jim Hightower: How Do You Say "Offshoring"? Excerpt: Excellent news, Americans! U.S. Corporations say that they are no longer "offshoring" our middle-class jobs. It seems that they have grown afraid of the rising public anger at this self-serving fattening of their already ample bottom lines at the expense of working families. They fear that there will be a political backlash from workers, customers, congress – and plain ol' American patriots. Does this mean that greedheaded CEOs are no longer shipping our manufacturing, professional, and high-tech jobs to India, Pakistan, Russia, and other low-wage centers? Of course not. It simply means they no longer say the word "offshoring." Instead, the doublespeak artists of corporate PR departments have coined new euphemisms. Rather than offshoring, they now call it "remote global sourcing," or "right-shoring" to disguise the perfidy. ... The report, prepared by Forrester Research, says that offshoring is increasing dramatically. Forrester's previous prediction was that the U.S. would lose 588,000 jobs to offshoring by the end of this year; now it estimates that 830,000 will be lost – a 41 percent increase. Nearly half of corporations surveyed say they're either offshoring jobs now or preparing to. Well, says one offshoring specialist, so what: "It's free enterprise. We're trying to make money." Yeah, and so are bank robbers. The proper word for what these CEOs are doing is not "offshoring" – it's stealing. They're stealing America's middle class future.

  • "nmickleberry": More jobs moving overseas. Excerpts: Got this in my mail this week. BCS Siebel practitioners work now will be available from outside the US. Note the new term "Global Resourcing" replaces "Offshoring". ... IBM is pleased to announce another key milestone in its successful partnership with Siebel Systems. IBM and Siebel have entered into a five year agreement to create a network of joint, client-focused global delivery centers (GDC) with the first one in Bangalore, India. The GDC will also leverage IBM's Siebel skills in Brazil and Canada.

  • Computerworld: Schwarzenegger terminates anti-offshoring bill. Excerpt: A law that would have banned the state of California from contracting with companies that have work done outside the U.S. was vetoed by Gov. Arnold Schwarzenegger on Wednesday. Schwarzenegger vetoed three separate bills that would have prohibited state agencies from using state funds to award outsourcing deals to companies that send work overseas. Sponsors of the bills argued that taxpayer money should go only to companies that planned to create work in the state of California, or at least in the U.S. Under the bills, California state agencies would be prohibited from outsourcing work unless the contractor could certify that all the work would be performed inside the U.S. by U.S. workers.

In Politics—
Note: The views expressed in the news articles and editorials in this section are those of their authors. They do not reflect the views of the Alliance@IBM. They do reflect the views of the editor of www.ibmemployee.com.


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