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 Join your fellow employees who are fighting for your benefits - Join the Alliance! Retirees, Vendors, Contractors, Temps, and Active Employees are all eligible to become members of the Alliance. |
Highlights—August 20, 2005
- Yahoo! message board
post by Janet Krueger. Full excerpt: The settlement was finalized almost
as is -- the only
major amendment was that the folks IBM sold to AT&T as
of May, 1999 were shifted to groups 3 and 4, since IBM
converted them to the cash balance plan before closing
out their pensions in November, 1999.
Details of the settlement agreement are available at http://www.coopersettlement.com/subclass1and2/ -- if you click on the FAQ file, you'll see sample payouts at about page 3. The detailed formulae are included in the settlement document itself.The estimated date for when payouts might start is November 2006, based on the probable schedule of the IBM appeal. The total settlement pot will be between $314 million and $1.7 billion, depending on the outcome of that appeal.The appeal is likely to go in our favor UNLESS Congress decides to retroactively legalize IBM's age discriminatory actions -- YOU can make a difference by:
- Signing our petition at http://www.petitiononline.com/rrs01/
- Printing a copy and sending it to your representative and senators in DC, with a handwritten cover letter letting them know exactly how you will feel if they vote yes to legislation retroactively legalizing cash balance plans and,
- Asking your friends, neighbors and colleagues to do the same.
- Yahoo! message board post by Janet Krueger. Full excerpt: I just uploaded
a document named
CB-Myths-Facts 8-16-05.doc
to the Files area of this board... It is another useful resource
for fighting the legalization of cash balance plans. Feel free to
extract bits and pieces to use in letters to the editor of your
local paper. Or hand deliver a copy to the local office of your
Representative and Senators while they are home on summer vacation.
Share it with your friends and colleagues...
Below are some excerpts; I can't include the whole thing in a note,
because it contains some good charts and footnotes that don't paste
well into plain text.
Comments? (Editor's note: An Adobe Acrobat version
of Ms. Krueger's excellent document is available from www.ibmemployee.com here) [PDF--32
KB].
MYTH # 1: EMPLOYERS PROTECT OLDER WORKERS FROM THE ADVERSE IMPACTS OF CONVERSIONS TO CASH BALANCE PLANS.FACT: While some employers have protected their employees from some of the worst adverse impacts of a conversion, even cash balance supporters have acknowledged that "it is not unusual in some cash balance conversions for the 40 to 50 year old employee to lose one-third to as much as one-half of his expected pension." A study of actual cash balance conversions conducted by the actuarial firm Towers & Perrin determined that in over one-third of the conversions the employers provided no transition protections whatsoever.In 2002, a General Accounting Office (GAO) report documented the dramatic reduction in benefits for older workers: "a 45-year old worker at the time of conversion receives an annual annuity of about $18,500 at retirement from the cash balance plan instead of the $39,800 annuity the worker could have received from the defined benefit plan with a final average pay formula. Likewise, a worker 50 years old at conversion receives an annual annuity of about $17,800 from the cash balance plan rather than the $35,100 annuity the final average pay formula would have provided."---- 2002 GAO ReportTo make matters worse, some employers structure their conversions so that older employees often work for months or years without accruing additional pension benefits while similarly situated younger employees continue to accrue benefits. During a typical conversion, many older workers experience what is referred to as "wearaway," which means that they continue working without earning additional pension benefits until the amount in their cash balance plan reaches the amount they had already earned under their traditional defined benefit plan. The GAO found that the amount of wearaway any employee experiences is tied directly to age. Older workers suffer the longest periods of wearaway, which may last many years. For example, a typical conversion scenario "generated a 2-year lump sum wearaway for a 35-year old worker, a 4-year wearaway for a 45-year old worker, and an 11-year wearaway for a 55-year old worker at conversion." In such an instance, the 55-year old would earn no additional pension benefit before reaching normal retirement age, in effect working the last decade for no corresponding retirement benefit.MYTH #2: EMPLOYERS DID NOT REALIZE WHEN THEY CONVERTED TO CASH BALANCE PLANS THAT THE PLANS MIGHT VIOLATE AGE DISCRIMINATION LAWS.FACT: From the earliest days of cash balance plans, the employer community recognized the very serious legal issues posed by the age discriminatory aspects of hybrid plans. In fact, as early as the mid-1980s benefits consultants were "writing articles . . . panning cash balance plans, that they are a flash in the pan, that they are a gimmick, that they can't satisfy any of the rules."Significantly, following an early meeting of what later became known as the Cash Balance Practitioner's Group in 1990, attendees—which included representatives from four large pension consulting firms and two major law firms--circulated a memorandum acknowledging that "it is well known that a [cash balance] plan is at risk under a literal reading of" the age discrimination laws. The Working Group Report noted that a "number of practitioners believe that there is a very significant risk that the [Internal Revenue] Service will ultimately take the view that it cannot avoid a literal interpretation of the statute." The group concluded that in the absence of a "legislative fix," the "potential employer exposure is extremely high – potentially increasing the plan liabilities four or five times."The concerns of the Working Group Report were subsequently confirmed in an Internal Revenue Service document indicating that Onan Corporation's cash balance plan was not in legal compliance: "This plan does not satisfy the clear and straightforward requirement of section 411(b)(1)(H)(i) of the Code because the plan's benefit accrual rate decreases as a participant attains each additional year of age."MYTH # 3: AUTHORIZING CASH BALANCE PLANS WON'T INCREASE THE PBGC'S LIABILITY EXPOSURE.FACT: Authorizing cash balance plans will create significant additional liability exposure for the PBGC at the very time Congress is acting to reduce that exposure. It is indeed ironic that cash balance advocates would suggest that provisions encouraging the use of cash balance plans would be added to legislation designed to reduce PBGC liability exposure and suggestions that cash balances plans are "like" 401(k) plans or defined contribution plans are grossly misleading as neither of those plans generate PBGC exposure. Cash balance plans generate significant additional liability exposure to the PBGC because the "leverage" inherent in a cash balance plan creates funding issues should all benefits come due immediately as would happen in the event of a bankruptcy. This is because even though cash balance plans promise to pay participants a benefit at any point in time which is equal to the employee's account balance, the plans are funded by employers on the basis of "actuarial liability." The result is that, even when the plan is considered "fully funded" for PBGC purposes, the actuarial liability used for funding purposes will often be as little as 70% of the plan's current account balance liability thereby creating additional potential liability exposure to the PBGC.In addition to increasing the liability exposure of the PBGC, authorizing cash balance plans leaves a myriad of issues unresolved in terms of what benefits the PBGC will provide to employees covered by cash balance plans in the event of bankruptcy. Employees should not be left to guess what their benefits would be in the event their company fails and they are forced to look to the PBGC to provide their hard earned retirement benefits.MYTH #4: EMPLOYERS NEED CASH BALANCE PLANS TO APPEAL TO TODAY'S MORE MOBILE WORKFORCE.FACT: It is a total fiction that today's work force is more mobile. As Eric Lofgren, an actuary at Watson Wyatt, explained to the Society of Actuaries: "[B]aby boomers have had the same level of mobility as their parents and grandparents when you look at people at the same age... So far the boomers have been staying on the job longer, actually, than their parents and their grandparents." Mr. Lofgren's comments are consistent with a study conducted in 1998 by his firm which concluded that this phenomenon applied as well to younger workers, age 25 to 34, who in 1996 spent a considerably longer time, on average, with one employer than did workers in that same age group in the 1950's. More recently, the authors in the largest research study to date of conversions to cash balance plans concluded that they had "found no support for claims that CB conversions are a response to labor markets with more mobile employees."MYTH #5: BY CONVERTING TO CASH BALANCE PLANS EMPLOYERS MAKE PENSIONS EASIER FOR THEIR EMPLOYEES TO UNDERSTAND AND APPRECIATE.FACT: More frequently, employers use a conversion to cash balance plans to hide benefit cutbacks. In 1986, shortly after the adoption of the first cash balance plan, Eric Lofgren, an actuary with Watson Wyatt, outlined for a conference of actuaries that a primary objective of conversions to a cash balance plan was to "to camouflage a benefit cutback, or remove early retirement subsidies." Mr Lofgren even noted how a company converting to a cash balance plan could use two very different announcements for the same new cash balance plan. The upbeat version most commonly used to announce a conversion optimistically touts the purported virtues of a cash balance plan, describing it as "an exciting, modern, flexible new plan design with the advantages of both defined benefit and defined contribution." He also suggested what he described as an equally accurate, but more candid, definition:"Dear Employee: We've got for you a cash balance pension plan. It's our way to disguise the cutbacks in your benefits. First we're going to change it to career average. We'll express the benefits as lump sum so we can highlight the use of the CPI, a sub-market interest rate. What money is left in the plan will be directed towards employees who leave after just a few years. Just to make sure, we'll reduce early retirement subsidies."This ability to use conversions to mask cutbacks was still being touted in 1998, when an actuary with PricewaterhouseCoopers noted to the annual meeting of the Society of Actuaries that "converting to a cash balance plan does have an advantage of it masks a lot of the changes."As a practical matter, conversions to cash balance plans also have been used to achieve artificial accounting gains. Existing accounting rules have allowed publicly held corporations to use cash balance conversions to generate "pension income." The company's increased bottom line presents a more attractive financial picture to the investing public. As Mark Beilke, chairman of the Academy of Actuaries Pension Accounting Committee, recently observed, financial statement "gains [from cash balance conversions are] mostly derived from 'accounting gimmicks.'" Similarly, William Sweetnam, then a member of the Senate Finance Committee staff and later a Treasury Department Tax Benefits Counsel, acknowledged in 1998 that the "primary reason cash balance plans are financially advantageous is the accounting treatment of cash balance plans versus final average earnings plans . . . So the reason that cash balance plans are better is that they make the corporations [sic] financial statement look better since pension liabilities are less." Warren Buffet has described the practice by some companies of creating "phantom" pension income to inflate reported income as a misrepresentation that "dwarfs the lies of Enron and WorldCom."MYTH #6: EMPLOYERS DO NOT ADOPT CASH BALANCE PLANS TO REDUCE THEIR COSTS AT THE EXPENSE OF OLDER WORKERS.FACT: Employers repeatedly have converted to cash balance plans as a way to reduce their costs at the expense of older workers' retirement benefits. For example, Chief Judge Murphy held in IBM v. Cooper that IBM's actuaries projected that IBM's 1999 conversion to a cash balance plan "would produce annual savings of almost $500 million by 2009." Consistent with the voluminous anecdotal evidence, a survey of cash balance plan sponsors found that 56% of firms expected the long-term cost of their defined benefit plans to decrease after conversion. Similarly, the largest study of cash balance conversions documented that "firms with employees who are closer to retirement are more likely to convert to the CB format." It also concluded that "the workplace of firms that undertake conversion to CB plans has had a longer tenure with the firm, on average" lending "credence to the claims of CB conversion opponents that firms benefit from these conversions at the expense of older workers."MYTH # 7: IF LEGISLATION ALLOWING CONVERSIONS TO CASH BALANCE PLANS IS NOT RETROACTIVE SOME 1,600 LARGE PENSION PLANS WITH HYBRID PLANS ARE LIKELY TO EITHER FREEZE OR TERMINATE THEIR PLANS.FACT: It is first important to note that even if you define large employers as those as few as 1,000 employees, according to the PBGC there are only approximately 625 such employers with hybrid pension plans.Putting aside the question of how many large employers have hybrid plans, it is clear that some employers and certain employer groups, such as ERIC, have threatened and will continue to threaten massive terminations in an attempt to scare Congress into giving them immunity for their prior illegal age discrimination. But whatever exposure they have today for their prior age discrimination, they will have the same exposure following the adoption of legislation without regard to whether they terminate or freeze their plan. In other words, prospective cash balance legislation would stop the growth of their future exposure but their existing exposure remains the same without regard to whether they continue, freeze or terminate their plan. In short, while it is a threat that the employers have used in the past and will undoubtedly continue to use, it is a red herring.What most employers ignore is that all that retroactivity eliminates is the potential liability with respect to past conduct -- benefits that employees have already accrued. Employers and employer groups are also reluctant to admit that most employers did not provide the kind of transitional protections included in the Senate Finance Committee bill. In other words, they will also have to persuade Congress to eliminate transitional protections against wearaway and other abuses or they won't get any benefit from retroactivity language inserted in the bill.
- Yahoo!
message board post by Jimmy Leas. Full excerpt: A Senate staffer is
looking to talk to IBMers whose job was sent to another country or who helped train them to
take over jobs. Please forward this to others you may know who either lost their job to offshoring
or who helped train Indians or Chinese to take over the jobs of American IBMers.
Please contact Liz Urschel at Senator Dorgan's office. This senator is very interested in the offshoring issue. Her phone number is 202 224-4354 and her email address is liz_urschel@dorgan.senate.gov. Thanks very much. - Benefits Restoration, Inc. is an organization devoted
to the restoration of retiree benefits with a focus on Legislation, Media Awareness, Shareholder
Resolutions and Litigation. Their August
newsletter is now available on their Web site. Excerpts: To all of you, my apologies for
being among the missing for the past two months. I had found it necessary to take on full time
work in Asia ….in order to be able to pay for the family’s Medical Contributions!!
I had foolishly thought that I could continue to at least get out a newsletter while traveling
but as you know by now, I failed in accomplishing this. When I left, as things were going,
Medical Contributions to IBM were continually increasing while retirement income was remaining
unchanged causing many of us to cut expenses, find work or sell homes and “downsize”.
Now, however, we all face a new threat…the potential erosion and/or reduction in our
pensions. Those of you who have been paying attention have seen the move to convert your pensions
(known a Defined Benefit Pensions) to Cash Balance Pensions. Others have been carrying the
banner while I have been gone; it is time now for everyone to weigh in on this issue.
Janet Krueger, Kathi Cooper and the folks at Alliance@IBM have been very active in ensuring that the issue of Cash Balance Pensions and the legislation that is being considered in Washington has been loudly communicated. This is not a time for you to sit on the sidelines and wait for someone else to carry the banner. I already have a case of the guilts for having been AWOL while all of this has been going on. Please keep in mind the way this works….each change that takes place is very small. The culmination of all of these small changes results in major impacts to retirees. Think of your medical benefits; each year beginning in 2000, you were asked to pay a little more, then a little more. Finally, in 2004, there was the big change…IBM realized that we retirees were not paying attention and were not organized to oppose them!For a very detailed analysis of the various bills that have been introduced, immediately following this brief introduction is a fine piece of work done by the National Retiree Legislative Network (www,nrln.org) that describes the bills and the NRLN position on each. Benefits Restoration has added highlights and italics in those areas that we feel are of particular importance.Lastly, there is a list of Senators who make up the Committee on Health, Education, Labor and Pensions. I heartily encourage you to write to each of these people, whether your own Senator or not, stating your objection to any form of Cash Balance Pension that does not fully protect retirees and those close to retirement. Keep in mind Gary Sullivan’s closing remarks in our last newsletter...“In conclusion, just in case you think this can’t happen with our gilt-edged IBM pensions, recall what happened to our ‘medical benefits for life’.”Some of you have written regarding the Medicare Modernization Act and the letter sent out by IBM’s own Randy MacDonald earlier this year. Farther down, Art Richter, our New York Director includes a piece on this ….why do I hesitate to call it legislation? Well, read Art’s piece and you will get the idea. While we are under no immediate threat, rest assured this is an upcoming battle that we will have to face and in the not too distant future. Stay aware and stay alert. Sandy Anderson.
- Wall Street Journal: Three Republican Governors Hit Unions. Bargaining Rights Are Rescinded For State Employees, One of Big Labor's Last Strongholds. By Joi Preciphs. Excerpt: Several Republican governors are trying to weaken organized labor in the one place it has remained strong: representing public employees. First-term Missouri Gov. Matt Blunt rescinded collective-bargaining rights for state employees this year, undoing an executive order issued by a Democratic predecessor, and has eliminated a state board overseeing union elections for public employees. Indiana Gov. Mitch Daniels, a former Bush White House budget director, overturned an executive order that for 15 years provided collective-bargaining rights for that state's public employees. And Maryland's Robert Ehrlich, backed by the state Supreme Court, suspended a 2% pay increase unions had negotiated for state employees with his predecessor.
- New York Times: Death
Tax? Double Tax? For Most, It's No Tax. By Edmund L.
Andrews. Excerpts: WHEN Congress comes back from its summer recess, one of the first things
Senate Republicans will try to do, again, is kill the estate tax.
Perhaps no other tax has so many passionate, persevering and politically organized opponents
as the estate tax, or "death tax," as they have branded it. As Michael J. Graetz
and Ian Shapiro of Yale recount in "Death by a Thousand Cuts" (Princeton University
Press), their entertaining account of the repeal movement, opponents of the estate tax have
already achieved a remarkable political feat by building broad public support for abolishing
a tax that currently affects only 2 percent of all estates.
But repeal would be costly - more than $70 billion a year, once it was complete - and
many of the populist arguments in favor of repeal are misleading. If estate or inheritance
taxes were frozen at today's levels, they would have almost no impact on family farmers
and most small-business owners. [...]
But despite the populist rhetoric and oft-repeated horror stories about families being forced to sell their farms in order to pay estate taxes, the battle is over a very large amount of money held by a very small number of families. A report last month by the Congressional Budget Office found that in 2000 only 2 percent of all estates - about 52,000 - were subject to any estate tax. At that point, taxes were imposed only on estates worth $675,000 or more. The limit rose to $1.5 million in 2004, and if that limit had been in effect in 2000, only 13,771 estates - fewer than 1 percent - would have been subject to the tax. All but 740 of them would have had enough in liquid assets to cover estate tax liabilities, the office estimated.
- New York Times: Announcing
an Award for Greed. By Nicholas D. Kristof. Excerpts:
I'm pleased to announce the first annual Michael Eisner Award for Corporate Misgovernance.
Last week, a Delaware judge sent a warning shot over corporate boards everywhere, chastising
Mr. Eisner, the C.E.O. of the Walt Disney Company, for having "enthroned himself as the
omnipotent and infallible monarch of his personal Magic Kingdom." Ultimately, however,
the judge turned down a shareholder suit against the Disney board for giving Michael Ovitz
a $140 million severance package as a reward for having failed catastrophically in just 14
months as the company's president.
So I've decided to offer my own prize for executive greed. My aim is to honor those who, in the spirit of Mr. Eisner's pioneering achievements in rapacity, have been so visionary in ripping off shareholders and aggrandizing themselves that they deserve special recognition. The winner of the Eisner award will receive a shower curtain, in honor of the $6,000 floral-patterned shower curtain that Tyco's shareholders unwittingly bought for their former C.E.O., Dennis Kozlowski. This year's grand-prize shower curtain is a lovely translucent model that comes with metal grommets to prevent tearing, suction cups to stick to the wall, and even an antimildew treatment! And it cost just $5.96. [...]Corporate America has nurtured a cult of chief executives, hailing them as geniuses and then excusing their misconduct and megalomania. Corporate documents released this spring show that the Fog Cutter board awarded Mr. Wiederhorn $6.3 million in total compensation for 2004 and for the nine months of prison time in 2005. I can't think of a board that has ever so disgraced the principles of corporate governance by overpaying a C.E.O. even as he sits in prison. So as Mr. Wiederhorn uses his prize shower curtain (which I'll send to his office, to await his release), I hope he'll reflect on the need of the business world not only to celebrate genius, but also to feel shame.
- New York Times: One
Global Game, Two Sets of Rules. By William J. Holstein.
Excerpts: GLOBALIZATION is imperfectly understood by many American policy makers, with dangerous
consequences for the United States economy, says Clyde Prestowitz, author of "Three Billion
New Capitalists: The Great Shift of Wealth and Power to the East" (Basic Books, 2005, $26).
A former trade negotiator in the Reagan administration, he is president of the Economic Strategy
Institute in Washington. Here are excerpts from a conversation: [...]
We have a very distorted global economy. It is tilted. There's one consumer, which is the United States. All the other major countries are producers and net exporters. The United States consumes far more than it produces and has to borrow money from the rest of the world to finance that consumption. The rest of the world, particularly Asia, and particularly the central banks of Japan and China, provide a kind of vendor financing to the United States to enable it to continue buying their exports. You have a kind of Ponzi scheme that constitutes the global economy. Like any Ponzi scheme, it's not indefinitely sustainable. At some point, the world will run out of savings to finance American consumption, or the rest of the world will begin to doubt the ability of the United States to make good on its obligations. There will be a collapse of one kind or another. [...]Q. Why is it a problem if other people want to sell the United States their things and finance the purchases? A. It's not a problem for a while. In fact, it feels really good for a while because you get free consumption. But as Warren Buffett has pointed out, in the long term, it turns you into a sharecropper. To finance the consumption, you keep selling off your assets. You sell the garage. Then you sell the guesthouse. After a while, there's nothing left to sell and you have to go to work and earn real money to pay your debts. Your kids and grandkids will have less opportunity and lower standards of living. [...]Q. Aside from fiscal policies, what are the other elements of a response? A. We need to have a strategy. When I.B.M. sold its PC division to China, C.E.O. Sam Palmisano told The New York Times that I.B.M. wants to be part of China's strategy. I don't blame him. If I were the head of I.B.M., I'd want to be part of China's strategy, too. But it raises an interesting question: If you ask an American C.E.O. if he or she wants to be part of America's strategy, none of them can answer the question. Because America doesn't have a strategy.
- Asbury Park Press: Many
employers say they need visas to bring in high-tech workers from abroad. But critics contend
the process has been abused. By Lorraine Ash. Excerpt: The
way Manoj Prasad sees it, he came to the United States from his native India to fill a void.
When he came to the United States in 1995, he was one of 65,000 specialized workers who got
an H-1B visa that year to work at a specific job.
Like all H-1Bs, he was not considered an immigrant. His stay had a time limit — three
years, with the likely promise of a three-year extension.
Filling voids, supplementing the American work force. That was the intent of H-1B legislation in the United States where, some industry leaders contend, there is a dearth of workers capable of filling cutting-edge positions in technology, science and engineering. But not every economist is so sure that is how H-1Bs are playing out. [...]The ideal staff, then, for Prasad and for others in the tech industry, is a mix of workers — local and H-1B. As a business owner and an American, he prefers bringing in an H-1B worker to fill a domestic job than offshoring that job.But Eileen Appelbaum, an economist and member of a National Research Council committee that studied the impact of H-1Bs on the U.S. economy, does not accept the way the H-1B option is typically framed: One can have an H-1B worker in an American job, or lose that job to exportation. "Industry said in 2001, "Let us have the H-1B visas and we'll do the work here, or you can say no and we'll just move the work offshore,' " she said. "Well, they got all the H-1Bs they wanted, and they still moved work offshore. In 2005, that's an argument industry can't make with a straight face."
- New York Times: Social
Security Lessons. By Paul Krugman. Excerpts: Social Security
turned 70 yesterday. And to almost everyone's surprise, the nation's most successful government
program is still intact.
Just a few months ago the conventional wisdom was that President Bush would get his way on
Social Security. Instead, Mr. Bush's privatization drive flopped so badly that the topic
has almost disappeared from national discussion.
But I'd like to revisit Social Security for a moment, because it's important to remember what Mr. Bush tried to get away with. Many pundits and editorial boards still give Mr. Bush credit for trying to "reform" Social Security. In fact, Mr. Bush came to bury Social Security, not to save it. Over time, the Bush plan would have transformed Social Security from a social insurance program into a mutual fund, with nothing except a name in common with the system F.D.R. created. [...]Last week Jo Anne Barnhart, the commissioner of Social Security, published an op-ed article claiming that Social Security as we know it was designed for a society in which people didn't live long enough to collect a lot of benefits. "The number of older Americans living now," wrote Ms. Barnhart, "is greater than anyone could have imagined in 1935." Now, it turns out that an article on the Social Security Administration's Web site, "Life Expectancy for Social Security," specifically rejects the idea the Social Security was originally "designed in such a way that few people would collect the benefits," and the related idea that the system faces problems from "a supposed dramatic increase in life expectancy in recent years." And the current number of older Americans as a share of the population is just about what the founders of Social Security expected. The 1934 report of F.D.R.'s Commission on Economic Security, which laid the groundwork for the Social Security Act, projected that 12.7 percent of Americans would be 65 or older by the year 2000. The actual number was 12.4 percent. [...]But the campaign for privatization provided an object lesson in how the administration sells its policies: by misrepresenting its goals, lying about the facts and abusing its control of government agencies. These were the same tactics used to sell both tax cuts and the Iraq war. [...] Forewarned is forearmed: the real goals of reform won't be as advertised, the administration will say things about the current system that aren't true, and the Treasury Department will function in a purely partisan capacity.
- Reuters, courtesy of the New York Times: Democrats
Demand Conditions on Social Security. Excerpts: On the eve of Social Security's 70th anniversary, Democrats said on Saturday
they are ready to move toward revamping the financially troubled retirement program but warned
against stripping away benefits to retirees and relying on private accounts for funding. "We
have a moral obligation to stand up and protect Social Security for the next 70 years and beyond
-- that means stopping privatization and dropping partisan demands for private accounts,"
said Rep. John Salazar, a Colorado Democrat, in his response to President George W. Bush's
radio address. [...]
"Social Security has never failed to pay promised benefits, and Democrats will fight to make sure that Republicans do not turn a guaranteed benefit into a guaranteed gamble," said House Democratic leader Nancy Pelosi of California. "Democrats stand ready to address the challenges facing Social Security's solvency, but this cannot begin until Republicans begin talking about ways to make Social Security stronger, not weaker," she said.
- New York Times: The
Promise and the Pitfalls of Health Savings Accounts. By
Michelle Andrews. Excerpts: HEALTH savings accounts, a sort of I.R.A. for health care, let
people set aside money tax-free to pay for medical expenses, both now and later. But the accounts
have been controversial since their introduction in January 2004. Depending on whom you ask,
they are either a wonderful tool to help Americans become wiser, more price-conscious health
care consumers, or just another way for employers to pass along more health care expenses to
their workers. Critics also contend that the accounts are basically a tax-shelter gimmick for
people who are healthy and wealthy enough to invest in them but don't have to rely on them
to cover their care costs. [...]
Some people are discovering downsides to the accounts. Ric Joyner, president of the National Association of Professional Benefits Administrators, says he has received frequent calls from companies and individuals interested in setting up the accounts. But lately, Mr. Joyner, who is also president of eflexgroup.com, a benefits administration company in Madison, Wis., says he has been getting calls from people complaining that their account balances are shrinking even though they have not used the money. "The money they're setting aside for health care is being eaten up by fees," he said. [...]But even if you deposit the maximum amounts and don't touch the money to pay for health care before you are 65, you won't accumulate enough to cover medical expenses in old age, according to an analysis by the Employee Benefit Research Institute, a nonprofit research organization based in Washington. In a model created by the institute, a 55-year-old who set aside the annual maximum - as well as catch-up contributions - starting in 2004 would save $44,000 in 10 years, assuming a 5 percent return. If that person lived to 80 and had retiree health coverage, he would need anywhere from $137,000 to $337,000 to cover premiums and out-of-pocket medical expenses, according to the institute's analysis. Investing in a health savings account at an earlier age won't solve the problem, said Paul Fronstin, the institute's director of health research and education and a co-author of the report.
- New York Times: Patients Turn to Advocates, Support Groups and E-Mail, Too. By Jan Hoffman. Excerpts: Privately hired patient advocates can, among other things, research medical options, make appointments and negotiate with insurance companies. The advocates, who include doctors, nurses and lawyers, charge anywhere from several hundred dollars for a consultation to the $30,000 initiation payment and $25,000 annual fee for a soup-to-nuts service for the wealthy. There are also nonprofit advocacy centers. Patients can find advocates through the Internet or through support programs for their conditions.
- The Century Foundation: Health
Care: Universal Coverage. Four Plans for Health Care Reform. Excerpts: s the crisis in U.S. health care worsens, ideas for universal health
coverage have returned to the headlines. Despite the passage of only a dozen years since the
failure of President Clinton's health care reform effort, several key trends have emerged which
may point to a more receptive reform environment in the near future.
- Untenable costs for businesses. Employer-based coverage is eroding rapidly and employers are increasingly dissatisfied. The cost of employer premiums is up 59 percent since 2000 alone, and employers are increasingly paring back or dropping coverage and shifting risks to employees.
- Financial strain for the middle class. Previously, most Americans have been pretty satisfied with their own health insurance even as they've sympathized with the problems of the uninsured. But as the numbers of uninsured rise and employers cut back, this is increasingly a pocketbook issue for the squeezed middle class.
- Industry cooperation. There's an increasing possibility that a coalition of interests in the healthcare industry will band together to seek reforms in place of combined interests or a single powerful interest thwarting reform.
- Consensus on the financial wisdom of reform. The trend is moving away from the conventional wisdom that achieving universal coverage would be a fiscal black hole. A recent report (PDF) from the National Coalition on Healthcare estimated that comprehensive reforms of different kinds, different models, would run up some $75 billion, roughly, in initial costs. But by year ten of these reforms, $125 billion to over $180 billion could be saved, largely through increased administrative efficiency.
- New York Times: The
Binge Continues. Excerpt: When a country buys more from foreigners
than it sells to them - as the United States does - the result is a trade gap that must be
plugged by selling off American assets, mostly corporate and government bonds. We've seen that
system, for lack of a better word, function swimmingly in the past few days. [...]
More disturbing still, the trade gap itself is likely to grow substantially and require ever greater foreign financing. The deficit in June was measured before the price of oil rose in July and August. Factoring in higher energy costs, future deficits are likely to be higher than June's by tens of billions of dollars every month for the near future, if not for a long time to come. Even before the recent spikes in oil prices, the United States was on track for a trade deficit this year of more than $700 billion, easily twice the size that most economists consider sustainable.The United States will always manage to finance its deficits. The question is how high the interest rates will have to go. The answer depends in large part on getting the fundamental weaknesses under control. Unfortunately, the Bush administration is crowing about long-term budget deficit targets it cannot reach under any set of reasonable assumptions, while Congress's response to the trade deficit is to blame China. In the meantime, the interest on the bonds that are financing Americans' insatiable appetite for everything from gasoline to toys is piling up, to be paid by the children and grandchildren of today's consumers.
- Yahoo!
message board post by "bozemansmith". Full excerpt: H-1B Visa's actually HURT
American workers. They are another device to
increase supply so that wages and wage growth are suppressed. They also
provide a pool of workers to "backfill" workers who quit because of a
company's policies or benefits, making it more painless for a company
and thus reducing an employee's negotiating strength. Finally, many of
these workers use US employment to build skills to ensure good job
placement when they repatriate to their home countries, taking the
outsourced jobs with them. Just the thing for a company looking to
outsource: trained on your business, comfortable with US and home
country language and customs, already on the payroll!
Given the significant outsourcing of high tech jobs that has occurred so far and is continuing, does anyone really believe that there is actually a shortage of qualified American workers? There is perhaps a shortage of qualified workers who will accept employment for low wages and no benefits, of course.Yes, fewer American students are pursuing college majors in the high tech arena. Why? If you ask them they will tell you: too many layoffs, too much offshore outsourcing, and too low a return on a very difficult and time intensive education. How does increasing H1-b levels help turn THAT around?There are many reasons for bright and capable people to want to emigrate to the US; if they want to make it their new home they can use the front door like everyone else, not the side door of an H1-b. It is also not clear that folks who lose their H1-b status for whatever reason automatically depart the US, given the overall shambles our immigration control system is in. It would appear that AeA is "not our friend".
- Fortune: Can
Americans Compete? Is America the World's 97-lb. Weakling?
In the relentless, global, tech-driven, cost-cutting struggle for business, America isn’t
ready—here’s what to do about it.
By Geoffrey Colvin. Excerpts: It’s a crisis of confidence unlike anything America has felt
in a generation. Residents of tiny Newton, Iowa, wake up to the distressing news that a Chinese
firm—What’s it called? Haier? That’s Chinese?—wants to buy their biggest
employer, the famed but foundering Maytag appliance company. Two days later, out of nowhere,
a massive, government-owned Chinese oil company muscles into the bidding for America’s Unocal.
The very next day a ship in Xinsha, China, loads the first Chinese-made cars bound for the
West, where they’ll compete with the products of Detroit’s struggling old giants.
All in one week. And only two months earlier a Chinese company most Americans had never heard
of took over the personal computer business formerly owned—and mismanaged into billions
of dollars of losses—by the great IBM. [...]
The result is that many Americans who thought outsourcing only threatened factory workers and call-center operators are about to learn otherwise. That is a giant development, because information-based services are the heart of the U.S. economy. With 76% of its jobs in services, America’s economy is the most service-intensive of any major country’s. Of course many of those jobs can’t be shipped abroad: Chefs, barbers, utility and NFL linemen, and many others know they can’t be replaced by even the smartest person in Bangalore.But growing numbers of other service jobs are not safe. Everyone has heard about the insurance-claims processors, accountants, and medical transcriptionists in India and elsewhere who’ve taken away U.S. jobs by doing the same work for much less money. More alarming is that the value of outsourced jobs is steadily rising. Morgan Stanley is hiring Indian bond analysts, fearsome quants who can make or cost a company millions. Texas Instruments is conducting critical parts of its next-generation chip development—extraordinarily complex work on which the company is betting its future—in India. American computer programmers who made $100,000 a year or more are getting fired because Indians and Chinese do the same work for one-fifth the cost or less.The big question is how far all this will go. A massive new study from the McKinsey Global Institute predicts that some industries could be changed beyond recognition. In packaged software worldwide, 49% of jobs could in theory be outsourced to low-wage countries; in infotech services, 44%. In other industries the potential job shifts are smaller but still so large they’d create major dislocations: Some 25% of worldwide banking jobs could be sent offshore, 19% of insurance jobs, 13% of pharmaceutical jobs. Looking at occupations rather than industries, some fields will never be the same. McKinsey figures that 52% of engineering jobs are amenable to offshoring, as are 31% of accounting jobs.
- Physicians for a National Health Program: Taking
away choice. Pick and Lose.
By Jonathan Cohn.
The New Republic. Excerpts: Has any word done more to cloak the modern conservative
agenda than “choice”?
…what conservatives in this country never mention is that giving us these new choices
also means taking something away—typically, programs that make us more secure.
Health care… may be the most vivid example of this. And a new bill quietly moving through
Congress this summer shows why. It is called—what else?—the Health Care Choice
Act. Sponsored by Representative John Shadegg of Arizona and endorsed by everybody from The
Wall Street Journal editorial page to the Cato Institute, it was voted out of committee late
last month. With both Speaker Dennis Hastert and Bush now embracing it, it seems destined for
approval by the full House soon, though its fate in the Senate remains uncertain. [...]
But the best way to fix this isn’t to gut existing regulations. It’s to create one big pool of beneficiaries through some kind of universal health insurance system—whether it’s one that allows people to pick from among well-regulated private health plans (like President Clinton once proposed) or one that simply bypasses insurance companies altogether, giving consumers direct, affordable access to the doctors and hospitals they like best (like many European nations already do). Those aren’t the kind of choices that conservatives want to give Americans, since they happen to require expanding government. But they’re the kind of choices Americans would appreciate most.
- MarketWatch: Time to overhaul HSAs. Health accounts no panacea for retirement. By Robert Powell. Excerpts: Hailed as an IRA for current and future health-care expenses, researchers now say HSAs may not be the greatest thing since electric toothbrushes. HSAs will help retirees pay for just a fraction of future health-care expenses. And those expenses are expected to be huge, according to recent research from the Employee Benefits Research Institute, a Washington-based nonpartisan group. Consider: a person retiring at age 65 in 2015 might need somewhere between $160,000 and $687,000 to pay for health-care expenses during retirement. Or put another way, EBRI says health-care expenses are likely to be higher than most individuals anticipate and could add 20% or more to the amount of preretirement income that workers will need to replace in retirement.
- Seattle Post-Intelligencer: Corporate
Pay: Executive sweets. Excerpts: We learned
earlier this month that 33-year-old Lachlan Murdoch, son of Australian media mogul Rupert,
will probably get the equivalent of his 2005 salary and $7 million bonus (total: $18 million)
after quitting as operating officer of his daddy's company, News Corp.
Having spent three whole months at Morgan Stanley, Stephen S. Crawford walked away with a $32
million payout. After 14 months at Disney, Michael Ovitz received a $140 million pay package.
[...]
The second stab is that chances are that most hard-working, talented people who devote 30 years to a company will never see that kind of cash -- heck, they might not even see their pensions. Executives at companies such as Boeing, Ford Motors and IBM continue to receive staggering paychecks, payouts and bonuses even as employee pension plans are underfunded by billions of dollars. United Airlines flat out defaulted on the pensions of 120,000 employees, while CEO Glenn Tilton's $4.5 million pension remained untouched. Talk about a demoralizing blow to the American work ethic.
- EE Times: IBM opens research center in Bangalore. Excerpt: IBM Corp. today opened a new research center here that will focus on developing innovative technologies and solutions, acting as an extension of IBM’s India Research Lab (IRL) in New Delhi. The IRL is one of eight such labs the corporation has worldwide. The new center here will have on its rolls researchers from distributed computing, software engineering and knowledge management and will be headed by Guruduth Banavar. [...] IBM already has several software development centers in India, employing over 20,000 engineers and is now in the process of scaling up these centers.
- Bloomberg: IBM to Double Number of Employees in Brazil by Yearend 2006. Excerpt: International Business Machines Corp., the world's No. 2 software maker, plans to double its number of employees in Brazil by the end of next year. IBM started the year with 4,000 workers in Brazil and plans to increase that amount to 8,000 by the end of 2006, said Juan Fernandez Oliva, the company's president for Latin America.
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