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    Highlights—November 13 , 2004
  • Wall Street Journal: Cigna Loses in Case on Change In an Older Employee's Pension, by Ellen E. Schultz. Excerpts: A federal appeals court ruled Wednesday that Cigna Corp. had wrongly forced an older employee to switch to a cash-balance pension plan, a move that reduced his pension significantly. The court, reversing a lower-court decision in favor of Cigna, ruled that the company had adopted a rule that retroactively prevented certain long-service employees from qualifying for a "grandfather" clause, which would have allowed them to remain under the older, more-generous pension formula. "This case is a by-product of corporate America's recent effort to curb costs by scaling back the benefits provided under pension plans," wrote Circuit Judge Max Rosenn in the decision by the three-judge panel in the Third Circuit in Philadelphia. The ruling doesn't involve age discrimination, which is a central issue in several suits regarding cash-balance pensions.

  • Wall Street Journal: Plaintiff Cry: When Retirees Sue an Ex-Employer, by Ellen E. Schultz. Excerpts: When retirees of GenCorp Inc. were told the company was going to start charging them for health insurance, despite a labor contract they say promises coverage for life, John Van Dyke thought fighting back in court was the answer. "I was sure that once the judge saw the contract, it would be over," the 76-year-old says. "How long could it take?" So far, almost five years. What happened to the retirees shows the daunting challenges faced by the oldest Americans, union and salaried, if they go to court on their own to recover health benefits. ... Mr. Bottolfs says the health-care premium for him and his wife is now $685 a month, more than erasing his GenCorp pension of $460. "A lot have dropped out because of the inability to pay" for the health coverage, he says. "My wife says they're waiting for everyone to die." (If link is broken, view Adobe Acrobat version [PDF--59 KB].)

  • Wall Street Journal: Tentative Lucent Labor Pact Includes Health-Care Premiums. Excerpts: Lucent Technologies Inc. reached a tentative seven-year, seven-month labor pact with its unions, for the first time requiring active union employees and some retirees to pay monthly premiums for medical coverage and increasing medical co-payments and deductibles. Beginning next year, Lucent workers who retired after March 1, 1990, will have to surrender as much as 5% of their monthly pension payment for medical coverage. The contribution percentage will increase by 0.5 points a year through the end of the contract, May 2012. Current union-represented employees -- who make up only about 10% of Lucent's work force -- will see premiums phased in over the next few years, reaching $45 a month for individuals and $60 a month for family coverage. Agreeing to a deal that makes active and retired workers pay for medical coverage is a first for Lucent's lead union, the Communications Workers of America, illustrating the "very difficult financial shape" the company is in, said CWA spokeswoman Candice Johnson. ... The CWA said Lucent retirees get, on average, a $950 monthly pension payment. Union workers who left the company before March 1, 1990, won't have to contribute anything for medical coverage. Newer union retirees now will, however. In 2005, single retirees under the age of 65 will have to contribute 3% of their monthly payment, or about $28.50 on average, for medical coverage. Married retirees under the age of 65 will have to contribute 5%, or about $47.50, for family coverage. For retirees over 65, single and family coverage will cost 2%, or $19, and 4%, or $38, on average a month, respectively.

  • Wall Street Journal: Bank of America Pensions Draw Ire by Ellen E. Schultz. Employees File Lawsuit, Call Cash-Balance Plan Part of 'Arbitrage Scheme'. Excerpts: The debate over whether and how companies can use their employees' pension plans as profit centers seems unlikely to end soon. Employees of Bank of America Corp. are suing the company over its cash-balance pension plan, which they say the company used as part of an "arbitrage scheme" to enrich itself at the expense of participants. According to the suit, employees were required to invest their pension assets in hypothetical portfolios tracking the returns of in-house mutual funds managed by the bank. Moreover, the bank encouraged the employees to transfer more than $2.7 billion of 401(k) assets into the bank's pension plan in 1998 and 2000. This unusual arrangement, the suit alleges, enabled the bank to invest the money for higher returns than what it would pay the employees in "virtual" returns, and to harness their 401(k) assets to boost the company's income. While the pension arrangement may be unique, the case may draw wide interest, as it comes in the wake of heightened scrutiny by the Securities and Exchange Commission over ways companies can use pension plans to affect earnings.

    The design thus created a "massive, leveraged arbitrage opportunity that cynically depended on the company...profiting from its employees' investment mistakes and presumed naivety," the complaint says. It added that the participants are "not well-equipped...to invest pension plan assets like professionals," noted Eli Gottesdiener, the attorney representing the bank employees, in the complaint. The bank benefited from this arrangement in another way, the suit says. The infusion of almost $3 billion in assets into the pension plan boosted the company's income. Under accounting rules, companies earn "expected" rates of return on pension assets. As a result, the $1.4 billion in 401(k) assets that was transferred into the Bank of America pension in 1998, and the $1.3 billion infusion in 2000 both earned "expected returns" of 10%, which provided a lift to income. "The pension strategy was driven by a single-minded goal of gathering assets in the cash-balance plan so that the company could pad its bottom line via the pension arbitrage scheme," the complaint says. The complaint alleges self-dealing, breach of fiduciary duty, and violations involving party-in-interest transactions. It also alleges that the cash-balance pension plan violated age-discrimination laws, and that the bank shortchanged people by incorrectly calculating lump sums when they departed. Also named in the complaint was the consulting firm that designed the pension, Price Waterhouse (now PricewaterhouseCoopers), which declined to comment.

  • Washington Post: Health Care: Beyond Markets. Excerpts: As the United States moves into the 21st century, nowhere are the long-term adverse consequences of its political choices during the previous century more in evidence than in health care. Today's dysfunctional health care system is a palpable example of the lessons that come from our national obsession with markets at all costs. In the face of explosive evidence regarding the toll our choices have taken on our ability to protect citizens from the cost of illness and promote the well-being of our most vulnerable populations, our political leaders cling to them. Americans deserve better. ... The private forces that underwrite, organize and deliver care consist of a number of colossal private health insurers, as well as consolidated and entrepreneurial health care companies providing everything from specialty physician and laboratory services to nursing home care. These industrial giants, many of them publicly traded, have been enticed to the table by the promise of large profits and guarantees of total federal immunity from efforts to regulate their practices and businesses. Our health care costs are astronomical compared with those of other nations. Our population health indicators rank poorly among industrialized democracies. And the cost of care means that our people get less of what they need. Millions go without coverage, and Medicare and Medicaid stagger under the weight of the system. Preventive investments are almost nonexistent.

  • CBS MarketWatch: Fund industry eyes Bush's Social Security plan. Vanguard, Barclays other index fund cos. may benefit. Excerpt: President Bush's plan to reform Social Security could bring a rush of investor cash to the U.S. mutual fund industry to manage -- $75 billion a year by one estimate -- and companies specializing in index funds will likely be the first to benefit, analysts said.

  • Fort Worth Star-Telegram: It's time to decide: Shore up or bail out? Excerpts: One of the lowest blows that could strike American workers is the denial of retirement benefits for which they have worked long and hard. Just imagine it: You've given 30 years of devotion and sweat to your company; in exchange, you are promised that, upon retirement, you'll draw a monthly pension check to sustain you in your golden years. But then your company files for bankruptcy. Or you discover that your company has grossly underfunded your pension plan. Oops. You could be drawing an appreciably smaller pension check than you had counted on. ... Congress also may have to deal with the issue of companies switching from traditional defined-benefit plans -- which promise to pay a worker a set amount per month for life -- to cash-balance plans. Under cash-balance plans, workers have individual retirement accounts funded by the company. The amount that workers receive upon retirement is determined by how much money accumulates in their accounts. In one lawsuit, a judge ruled that older IBM Corp. employees were unfairly penalized financially by the company's conversion to a cash-balance plan. Congress should require companies to provide much more up-to-date and understandable information to workers, retirees, investors and creditors about the financial status of their pension plans, Belt said. Many companies have replaced defined-benefit plans with less costly cash-balance plans or defined-contribution plans such as 401(k)s.

  • Los Angeles Times: Privatized Accounts Moved to 'Fast Track'. Excerpts: President Bush on Thursday set the stage for a monumental legislative battle by placing Social Security reform at the top of his second-term agenda, even though he acknowledged that no long-term fix would be pain-free. Although he did not embrace a specific blueprint, Bush said the starting point for discussions was a set of recommendations that in all likelihood would run up the federal debt and reduce government-paid benefits for workers who chose to set up private retirement accounts. ... Jack Kemp, a former Republican House member and former Cabinet member, said he thought the president's comments reflected his conclusion that Tuesday's election was a mandate for partial privatization of Social Security. "He wants to leave a legacy of what he calls an ownership society, where people get a chance to own their own home, own their own retirement account, own a piece of the rock," Kemp said. "I think he is going to use that mandate."

  • Reuters: Democrats Vow to Protect Social Security. Excerpts: Bush would also alter the tax code's reliance on a progressive tax system, possibly to a flat-tax system that critics say could hurt the poor and middle class and favor the wealthy. Bush has given few details of his tax plan, but Pelosi warned that any changes should reduce the national deficit, not add to it. "In the days after the election, he said he wants even more tax cuts and proposed yet another increase in the debt limit," she said, adding that "Democrats will continue to fight for fiscal responsibility."

  • Washington Post: How to Fix Taxes and Social Security. Excerpts: With his reelection won, President Bush says he will move forward on two big domestic issues: the tax system and Social Security. Both are much in need of our attention; there was little serious discussion of either during the presidential campaign. Notwithstanding recent tax cuts, our tax system places a huge burden on middle-class Americans, reducing not just their take-home pay but also their incentives to work and save. And Social Security is a time bomb: There are no obvious means, apart from highly regressive payroll tax increases, for covering about two-fifths of its future benefit commitments.

  • Human Resource Executive: Critics: Pension Conversion Problems Could Cause Upheaval. Excerpts: While International Business Machines Corp. agreed to pay $300 million in partial settlement of claims that it improperly converted to a cash-balance pension plan, critics of this lawsuit and similar ones fear an appeals court ruling declaring such conversion formulas discriminatory could result in the wholesale rejection of pensions by large employers. The partial settlement of the age-discrimination case, involving about 200,000 current and former employees, was announced at the end of September. It put to rest certain questions about the company's intent in the case–namely, how much it would be willing to pay initially to settle claims that it discriminated against older workers when it switched from a traditional pension plan to a cash-balance plan in 1999. ... "The position that cash-balance plans are unlawful seriously jeopardizes the security of an already fragile U.S. pension system," says 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," MacDonald says, "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 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," he says.

  • The Motley Fool: Take Social Security at 62?

  • The New Yorker: The Risk Society. Excerpts: Bush doesn’t get to coast for the next four years, though; he’s facing a host of economic problems, particularly the mounting cost of health care and the looming crisis in funding for Social Security and Medicare. Bush, of course, has a master plan: he intends to turn America into what he calls an ownership society. That sounds unobjectionable—who’s against ownership? But what the President has in mind is nothing less than a radical overhaul of America’s entire system of social insurance. In place of unwieldy government programs run by busybody bureaucrats, Bush wants Americans to have more independence and more choices regarding their health care, their savings, and their retirement. Social Security would be partially privatized, with people allowed to put aside money in individual accounts. Private health-insurance plans would compete with Medicare. Tax-free retirement accounts would be expanded. And health savings accounts would let people save money for health-care expenses tax-free, as long as they agreed to sign up for plans with high deductibles. The result, Bush claimed earlier this year, would be “greater opportunity, more freedom, and more control over your own life.” And with freedom, presumably, will come greater responsibility; people will be more careful as users of health care, more diligent as savers and investors. ... The ownership society promises freedom, but at the price of a huge shift in risk, away from government and society and onto individual citizens. Social Security, Medicare, insurance—these are basically collective risk-sharing mechanisms. Rather than let each person run the risk of ending up destitute or sick, these programs pool the risk. Because the risk is shared, it can be managed, and people can be guaranteed a minimally acceptable outcome. In Bush’s brave new world, that guarantee will be eliminated.

    Generally, we want people to reap the benefits of their own successes and pay a price for their failures. But Social Security and Medicare are designed to protect people from things they have little control over—risk of illness, risk of macroeconomic change, risk of industrial obsolescence. To manage that kind of risk, you have to do it collectively. What’s more, as the political scientist Jacob Hacker has pointed out, Americans’ everyday lives are considerably riskier than they used to be. Jobs are less secure. Health-care costs are increasingly difficult to plan for. And the pace of technological change—which can lay waste to entire industries almost overnight—is faster than ever. So now may not be the best time to undermine the few programs that provide people with some protection against bad decisions and bad luck. ... The ownership society’s greatest flaw, however, is that it won’t solve the problems it purports to address. A real solution would require facing up to some thorny issues—raising the retirement age, slowing the growth of benefits, means-testing. By advocating greater freedom and independence, while failing to explain or account for the greater risk, Bush is setting Americans up for an unpleasant surprise. If his plans are implemented, a lot of people are going to end up a lot poorer in their old age than they otherwise would have been. (A lot of people will end up a lot richer, too.) The result would be Social Security without the security part. Freedom of choice is a beautiful thing. But the Bush plan is asking you to swap an insurance policy for a lottery ticket.

  • Cincinnati Business Courier courtesy of MSNBC: Docs urged to collect fees up front. Excerpts: The CEOs of the Tri-State's largest health insurers -- Anthem, Humana and UnitedHealthcare -- say doctors should be demanding co-pay and deductible payments from their patients, especially as consumers become responsible for a larger portion of the cost of care. Physicians, who once received most of their pay from insurance companies and government-run health plans such as Medicare, are now forced to collect more of their fees directly from patients. And more consumers -- used to $10 and $20 co-payments -- are now faced with health plans that carry co-pays upwards of $30 or consumer-directed plans that carry a high deductible of $1,000 or more. If patients don't pay their share, physicians will need to find new ways to recoup those losses, and they won't get the money from insurance companies. "You are a business, and you should act like a business," Humana CEO Larry Savage said to a roomful of physicians and practice managers. "We encourage you to operate as a business and treat the patient as a customer."

  • New York Post: Privatizing Social Security Doesn't Make a Lick of Sense. Excerpt: I'll say it again: allowing people to take some of their Social Security contributions and invest that money privately is not possible. End of story. Wall Street staged a wonderful rally last week partly on this Social Security fantasy and it doesn't want to hear logic. Politicians don't want to deal with it either because they believe people can be conned into thinking that such a simple plan will actually reform and strengthen Social Security. It won't. But it could make the entire financial system of this country a lot weaker. ... "Putting 10 percent of the payroll tax in private accounts without reducing benefits involves $1 trillion to $2 trillion of transition costs — transition costs being a euphemism for $1 trillion to $2 trillion of added deficits and debts," says Pete Peterson, former U.S. Commerce Secretary, author of "Running on Empty," a book about the Social Security calamity, and co-head of Blackstone Group. That extra money that'll have to be borrowed by Washington to replace the Social Security loans will cause an inevitable rise in interest rates beyond where they would ordinarily be.

  • National Public Radio (NPR): Bush Eyes Privatizing Social Security in Second Term. Excerpt: President Bush says reforming social security will be a top priority during his second term. He wants workers to be able to divert some of their payroll taxes into private accounts. They could invest that money in stocks and bonds to save for their own retirement. NPR's Kathleen Schalch reports on what privatization could mean, and how it might be done. (Editor's note: Ms. Schalch's excellent report is available from NPR as streaming audio).

  • New York Times: AARP Opposes Bush Plan to Replace Social Security With Private Accounts. Excerpts: Gearing up for battle over the future of Social Security, AARP, the influential lobby for older Americans, said Thursday that it opposed President Bush's plan to divert some payroll taxes into private retirement accounts. But it supports new incentives for private accounts that supplement Social Security. ... The fight over Social Security, pitting Mr. Bush's vision of an "ownership society" against the Democrats' determination to preserve a cornerstone of the New Deal, is reflected in a battle over the proper terminology. The White House dislikes the word "privatization,'' which it sees as a misleading and imprecise way to describe Mr. Bush's ideas for Social Security. Democrats insist that the term is accurate. E-mail messages circulated within AARP in recent weeks indicated that the group would avoid the word whenever possible. One message, by an editor of an AARP magazine, says, "There is a new forbidden word at AARP: Social Security privatization.'' Another e-mail message, by a manager of its Web site, says, "The term 'privatization' is stricken from our vocabulary forever.'' ... The Cato Institute, a libertarian research center, established a Project on Social Security Privatization in 1995, but in 2002 it was renamed the Project on Social Security Choice. "Republicans in Congress do not like the word 'privatization' because it does not poll well,'' said Michael Tanner, director of the project. "The word polls more poorly than the actual concept, in part because people do not understand what it means.''

  • Sacramento Bee: Health care fight not over. Congress may be the next battleground in efforts to cover the millions uninsured. Excerpt: CalPERS, the nation's third-largest buyer of employee health benefits, took a rare stand on a ballot proposition last month in hopes that voters would uphold California's employee health insurance law. The rationale was simple, said state Treasurer Phil Angelides, a member of the CalPERS board. "CalPERS and all the other employers who buy insurance for workers pay higher premiums to cover the cost of treating the uninsured, including workers at the firms that choose not to provide coverage," Angelides said. Because Tuesday's vote to repeal Senate Bill 2 - the employee health insurance law - was narrow, Angelides and many other prominent Democrats believe California may yet create the nation's most comprehensive health insurance program for workers and their families.

  • Janet Krueger comments on the changes IBM has made to its retiree medical plans. Excerpt: Granted, the FHA medical change was a big issue. But I wish more employees would pay a bit more attention to the fact that all current retirees have lost just about as much -- through the ever increasing co-pay, paired with a reduction in plan choices, more and more current IBM retirees are paying just as much to IBM for health insurance as they would be charged in the open market. Btw, anyone factoring FHA into their retirement plans needs to remember they can only collect it if they are allowed to stay at IBM until they turn 55, and then only if IBM hasn't eliminated it by then. I don't think you need to be a conspiratorist to wonder why IBM hasn't bothered to set up a trust fund or any other kind of account to cover the money supposedly accumulating in people's FHAs... The fine print clearly says you never vest in your FHA, and IBM can eliminate it any time.

  • Charlotte Observer: IRS audits BofA's retirement programs. Excerpts: In a lawsuit filed July 1, former employees allege the company's cash-balance pension plan violated the Employee Retirement Income Security Act in a scheme to earn the company profits at the expense of participants. Cash-balance plans are like typical defined-benefit plans, offering a monthly pension payment to employees in retirement. But they are similar to a 401(k) plan because employees have a "virtual" account showing the value of future benefits. Bank of America encouraged employees to transfer $2.7 billion in assets to the cash-balance plan in 1998 and 2000, according to the lawsuit filed in federal court in Illinois.

  • CNN/Money: Benefits: Many come up short. BLS study shows roughly a third of private-sector employees lack health, retirement plans. Excerpts: Only 60 percent of private-sector workers have access to a retirement plan, while 69 percent have access to employer-sponsored health insurance plans. Those numbers are little changed from last year, according to a survey released Tuesday.

  • Vault's IBM Business Consulting Services message board is a popular hangout for IBM BCS employees, including many employees acquired from PwC.
    • "You've been Consulting too Long" by "Dose of reality". Excerpt: There is a definite temporal aspect to the connection between organizational dynamics and profitability. It is a bit short-sighted to claim that meeting next year’s target is sufficient to declare that the “strategy is obviously correct”. I can meet next year’s target by cutting compensation and benefits, raising utilization requirements, padding fees, or any number of tactical financial ploys. The problem is that this leads to an unfavorable chain reaction with key stakeholders, like clients and staff. We are in a relatively long cycle business, so that revenue/bookings, which are the key dynamic variables that drive profitability, are locked in 6 – 12 months in advance, and success is based on reputation and staff contribution that are in existence long before it is realized. This buffers the time between when bad organizational decisions are made and the timing of the eventual impact on profits. The tactical ploys listed above will temporarily “goose” profits, and we may achieve our financial targets, but at the expense of the revenue generating machine – reputation and staff effectiveness. A year later the organization will have a strong propensity to contract, since morale, staff caliber, and staff continuity will drop significantly. Eventually, it will bottom out at some sub-optimal level, but there is no way anyone can objectively declare this a success for the corporation.

      Consultants have a tendency to focus on the project at hand, since most projects have a fixed end date and defined deliverable. It is hard for many of them to think several quantum moves into the future, hence your position that A (lower costs) driving B (fix this year’s P&L) is the end of the story, ignoring C (morale/retention problems) and D (revenue contraction) which don’t figure into your evaluation. The same geniuses in Armonk that brought you A and B then follow it up with A2 and B2 and the cycle continues. The following year’s target will be unachievable since the overhang effect of last years organization-destroying tactics will continue to reduce revenue opportunities. I can also make this year’s target by collecting T&L kickbacks, engaging in illegal pension plan changes, or aggressive accounting practices. It is easy to believe that there are no negative repercussions, at least until you get caught – just ask Fastow if you don’t believe me.

    • "Marketing Sleight of Hand" by "Dose of reality": Excerpt: The answers to your questions are really quite simple. First, on the subject of hiring rates, the gross number of people being hired is not a valid indicator of company health. If 12,000 out of 60,00 staff resign, and 4,000 are hired, what does that tell you? It tells me that IBM has not offered a competitive compensation/career opportunity/worklife package to its existing employees. Our staff levels are <70% of what they were after the PwC acquisition. The new hires coming in now are not even sufficient to maintain these lower levels. We transitioned from a model where staff were expected to be 70% utilized to 90% now. At the same revenue levels, this means that you need almost 30% fewer staff (70-90)/70 to produce the same revenue level. They are discovering that this is an unsustainable model, since that means that we never have the right people available on the bench when a project is sold, people are being put on off-career track projects, and worklife balance suffers. So we are hiring to fill specific project needs and to restock the shelves, but it has absolutely no relationship to revenue levels. It is just the backside of a whipsaw.

  • Communications Workers of America (CWA): President Morton Bahr's column in the CWA News post-election edition: Fear and Divisiveness Trumps Jobs, Health Care. Excerpt: When the sun came up November 3rd, 45 million Americans still had no health coverage - and no prospects for health care reform. A worker could still be fired for trying to organize a union, with little expectation that our government would start protecting that basic right. We still had an administration handing tax breaks to corporations for outsourcing jobs while presiding over a net loss of a million jobs in its first term - one quarter of them in Ohio. Record budget deficits continued to mount and to starve needed funding for education, worker training, health services for children and other programs in our beleaguered states. Oil prices continued to soar with no plan by our government to conserve energy and reduce our reliance on foreign reserves. ... We have to continue to proclaim that real family values mean family-supporting jobs with a 40-hour workweek that allows parents to spend quality time with their children. Family values mean good public schools and a chance for our kids to go on to college if that is their dream. Family values mean insuring that our Social Security and Medicare safety nets are there for our elderly family members. As for morality, I submit that it's immoral for the richest country on earth to allow 45 million of its citizens, a majority of them children, to go without health care coverage - no doubt contributing to the fact that our life expectancy is lower than that of 47 other countries.

  • Forbes: Halliburton Sues Retired Executives. Excerpt: Halliburton Co. is suing three retired executives who complained about a company plan to stop providing health insurance for retirees eligible for Medicare. The lawsuit was filed after the retirees, including former Halliburton vice president of human resources Paul Bryant, sent a letter to company officials to complain about the change. Bryant, 58, retired from the oil services conglomerate in 1999. Halliburton spokeswoman Zelma Branch said the company sued so the dispute would be resolved quickly, allowing the retirees to arrange for their own medical coverage.

  • New York Times: Tennessee to Cut Health Program. Excerpt: Gov. Phil Bredesen announced Wednesday that Tennessee planned to dissolve its financially troubled program expanding Medicaid, a decision that would cut as many as 430,000 people from state health care rolls.

  • Medscape from WebMD: "Ownership Society" to Extend to Healthcare in Bush's Second Term. Excerpts: At a Nov. 9 press conference in Washington, D.C., analysts from the consulting firm PricewaterhouseCoopers (PWC) described an overall trend toward an "ownership society," exemplified by President George Bush's endorsement of health savings accounts (HSAs), according to Ron Bachman, a principal in PWC's human resources group. "For the first time, the [Bush] administration has a language around healthcare and the healthcare marketplace," Mr. Bachman said, "...such as personal responsibilities and self-care and individual ownership. This is at the core of what the President wants to expand." ... HSAs, passed as part of last year's new Medicare law, are tax-favored instruments that are paired with high-deductible health plans; individuals must use funds from the HSA to pay for their initial medical expenses. Advocates say HSAs offer some of the nation's 45 million uninsured an option for coverage that is not dependent on employment-based insurance and make consumers more aware of the cost of health services. As part of its reelection platform, the Bush administration projected that the wider adoption of HSAs and high-deductible health plans could provide health coverage to up to eight million currently uninsured people at a cost of $25 billion a year. But given the current favorable tax treatment of HSAs and President Bush's hope to extend tax deductibility to the purchase of high-deductible health plans, more uninsured individuals could use these plans to obtain coverage, Mr. Bachman predicted.

  • Reuters: Canada Warns It Cannot Be the Drugstore to U.S. Excerpt: Canada warned the United States on Wednesday that it would not be able to meet its prescription drug needs. "To me it is a matter of common sense that Canada cannot be the drugstore of the United States. Neither American consumers nor Canadian suppliers should have any illusions otherwise," Health Minister Ujjal Dosanjh said. "It is difficult for me to conceive of how a small country like Canada could meet the prescription drug needs of approximately 280 million Americans without putting our own supply at serious risk," he said in the prepared text of a speech he was giving at Harvard Medical School.

  • New York Times: As Baby Boom Ages, Era of Guaranteed Retirement Income Fades. Excerpts: We live in an age when a lot of promises regarding retirement are going to be broken. Just how they are broken, and what replaces them, will have profound effects on the future of the industrial nations that have dominated the world economy in the last century. What is at stake is a reversal of perhaps the most important economic trend in developed countries since World War II, that of guaranteeing financial security for their citizens. In most major countries, governments came to provide health care and an assured pension. In the United States, some of that came from employer-financed health care and pension plans, but the results were often similar.

  • Washington Post: When Fear Is A Joint Venture. Excerpts: Since 9/11, many on the left have accused the Bush administration of manipulating the fear of terrorism for political gain. Democrats denounce Karl Rove for drawing from a slush fund of popular anxiety to bankroll the president's reelection. Liberals decry the USA Patriot Act, arguing that Attorney General John Ashcroft has exploited widespread feelings of vulnerability to reverse decades of progress in the realm of civil liberties. Progressives generally agree that the White House has tried to turn national security into a mute button, muffling criticism with charges of insufficient patriotism and warnings about demoralizing the troops. But fear in the United States is not a government-run monopoly. It's a joint venture between the public and private sector. Sometimes employers benefit from this collusion, cashing in on the fear of terrorism to restrain combative unions and dissident employees. Other times the government benefits, for employers can do what public officials cannot: punish men and women for their political views. Like so much else in the United States, fear has been outsourced, and the price is paid in freedom.

    While color-coded alerts have little effect on most people's lives, fear can have a real impact when it is leveraged by an employer. In the spring of 2002, for example, shipping companies on the West Coast braced for a bitter showdown with their dockworkers' unions at the negotiating table. Hoping to blunt labor's ultimate weapon -- the strike -- the shipping companies joined forces with the Gap, Mattel and Home Depot, which rely on imports from East Asia, and met with officials from the Office of Homeland Security and the departments of Commerce, Labor and Transportation. Sympathetic to their concerns, the Bush administration declared the impending strike a threat to security and threatened the unions with a declaration of national emergency and the use of federal troops. Though Defense Secretary Donald Rumsfeld failed to cite any evidence that stopping imports of children's toys from the Philippines would harm the nation's safety -- and the dockworkers' unions promised to load and unload any military shipments even if the ports were closed -- the invocation of national security worked. Talk of a strike ceased, and the unions eventually capitulated.

  • New York Times: As the Dollar Declines. Excerpts: For all its professed desire for a strong dollar, the Bush administration has apparently decided that letting the dollar slide is a good way to shrink America's trade deficit. This is dubious economic policy. It provides a modicum of relief to American exporters, but it increases the nation's vulnerability to higher prices and higher interest rates, while ignoring fiscal measures that would more assuredly anchor the United States in the global economy. The dollar, which has declined nearly 30 percent against the euro since President Bush took office in 2001, fell to a record low this week. The decline has not been as marked against other currencies, largely because China and Japan prop up the dollar by investing heavily in United States Treasury securities - in effect, lending us money so we can buy their goods. Meanwhile, the Treasury secretary, John Snow, has largely eliminated the phrase "strong dollar" from his workaday vocabulary. The underlying problem is that deficits in America's global transactions are at record levels, putting Americans at risk of either a slow deterioration in living standards or abrupt spikes in inflation and interest rates. There are three ways to get that deficit down: America can reduce the federal budget deficit, thus lowering the amount of interest we pay foreign countries to finance that deficit; trading partners like Europe and Japan can expand their economies, increasing their demand for American goods; or America can allow its dollar to fall to increase its exports. ... During the Bush years, 92 percent of the nearly $1 trillion increase in publicly held debt has been financed by foreign lenders. Foreign ownership of Treasuries has tripled from the peak of the Reagan deficits in 1983. Because of this enormous dependency, anything that might affect foreign lenders' willingness to invest in Treasuries - including dismay over the United States' long-term fiscal disarray, better investment opportunities elsewhere, or geopolitical or economic strife - could cause the dollar to tank.
Coverage on H1-B and L1 Visa and Off-Shoring Issues
  • New York Times: In India, outsourcing firms rejoice. Excerpt: Outsourcing companies in India are jubilant that the elections in the United States have returned President Bush to office. "This is great news for the offshoring industry," said Nandan Nilekani, chief executive of Infosys Technologies, a software services company. The trend toward outsourcing will now become even more inexorable, Nilekani said. ... Bush's re-election will bring out the latent demand for outsourcing and lead to more offshoring announcements by companies, he said. "Some corporations have been cautious about signing or announcing deals in the last few months," Karnik said. "Now they will no longer hold back." ... Some executives said that offshoring would grow even more strongly with Bush's victory. "The elections are over and so is the rhetoric; it will be easier for American corporations to step out with their outsourcing plans," said Vivek Paul, the vice chairman of Wipro, who works in Mountain View, California. The company itself is based in Bangalore. The tone of some campaign comments criticizing outsourcing was viewed with some concern in India. The Times of India, the country's leading newspaper, called offshoring the "swear word" of the 2004 elections. India's outsourcing industry employs more than 800,000 people. The country's software and back-office services industry posted $12.5 billion in export revenues in the year ended in March, a 30 percent rise over the previous year, as global demand for its services grew. For more than a decade now, leading Indian outsourcing companies like Infosys Technologies and Wipro have written software applications and done back-office work for top American corporations, including General Electric and Citigroup. The work can be done more cheaply here, where skilled labor is inexpensive and plentiful. The leading outsourcing companies earn as much as two-thirds of their revenue from customers from the United States.

  • WashTech: Global Outsourcing: The Irreversible Megatrend? Excerpt: The Western Washington Summit on Technology and Economic Development 2004 Conference, held in Bremerton on October 21, was attended by IT leaders from a seven-county region. They came for "cutting-edge knowledge" on how to increase productivity in their technology businesses. The room was filled with IT-focused VIPs, from Rep. Jay Inslee of the 1st District to Robert McDowell, Vice President of Business Critical Solutions at Microsoft. In addition, Joy Howland, who serves on the board of the Society for Information Management, Seattle chapter and as development director of RATEC (formerly the Regional Advanced Technology Education Consortium), was there, as was Dr. Madhu Rao of the Albers School of Business and Economics at Seattle University. On the agenda: "Global Outsourcing: The Irreversible Megatrend?"


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