October 22, 2005: IBM Employee News and Links

Wall Street Journal: How Safe Are Your Retiree Health Benefits? By Ellen Schultz. Excerpts: For instance, the retirees most vulnerable to cutbacks are not union retirees -- like those affected by the GM move -- but former salaried employees. And even if your retiree health coverage doesn't disappear, there is a growing danger the costs will rise so high that you can't afford to pay the premiums. What's more, the new Medicare prescription-drug coverage, which was supposed to ease the burden, is not likely to lower costs for most workers. [...]

The most vulnerable are former salaried employees. The courts have generally allowed employers to reduce or eliminate the benefits for nonunion retirees, even years after they've retired, and even if they were promised the benefits in writing. General Motors, for example, once promised lifetime health coverage to nonunion retirees, often to encourage them to retire early. But then the company began cutting the benefits of 85,000 salaried retirees, and they sued. In 1998, the Sixth Circuit appeals court ruled that even though GM advised prospective retirees that health coverage would be provided "at GM's expense for your lifetime," a clause in the technical plan summary noted that GM reserved the right to alter the benefits. After that key decision, salaried retirees, including those at Unisys Corp., have steadily lost their cases. Bottom line: If you're a salaried retiree, or will be one, your employer can cut your benefits, even if promised in writing, as long as the plan has "reservation of rights" language in it. [...]

My premiums have quadrupled. Why? There are several likely reasons. At least half of employers, including General Electric Co., Halliburton Inc. and IBM, have established ceilings on what they will pay for retirees' coverage. Once this cap is reached, all the extra costs may be passed on to the retirees. Thanks to these caps, employers are largely protected from rising health-care costs -- but retirees aren't. Meanwhile, many employers have begun to segregate retirees into their own risk group, rather than include them in a larger group that includes active workers. When retirees are segregated into their own pool, the per-capita costs rise, because an older, sicker population may need more medical care. As costs rise, healthy people drop out to get cheaper coverage elsewhere. But sicker retirees, and those with pre-existing conditions that make them uninsurable, remain in the health plan, driving up costs. When Xerox Corp. split the retirees into a separate risk pool in 2003, the move caused retirees' costs to nearly double. Employers benefit when retirees drop coverage. Not only do they save cash, but they can reverse a liability they have recorded for all the estimated future payments. Under accounting rules, this generates gains that indirectly boost income.

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Washington Post: Government's Disgrace. Excerpts: For a window on politics and all its failings, consider the current fight over pension reform. It's a fight that reveals the cowardice of the Bush administration and the venality of Congress. It demonstrates the government's inability to grapple seriously with public policy -- even when the case for action seems too obvious to ignore. The story begins with the hole in the nation's defined-benefit pension plans, the type that -- unlike 401(k) plans -- promise a fixed proportion of salary upon retirement. The rules governing these plans are dysfunctional: They allow companies to promise workers lavish benefits while setting aside too little money to pay those benefits when the time comes. Rather than keep workers happy with wage increases, which would have to be paid for with real money, financially pressed firms often bribe them with false promises of big pensions. When these firms go bust, employees get smaller pensions than cynical managers had promised them. And taxpayers, who guarantee pensions up to some $45,000 per retiree, have to rescue the bankrupt pension plans. [...]

Then they hit a speed bump. In the Senate, which had already thrashed out two bills, passed them through two committees on a bipartisan basis and produced a "final" compromise, Sens. Mike DeWine (R-Ohio) and Barbara A. Mikulski (D-Md.) upset plans for a floor vote by demanding still more dilutions. These lacked majority backing, so the senators exploited the Senate's absurd rules to block the legislation indefinitely until their business allies got what they wanted.

You get a taste of the relationship between senators and lobbyists from an e-mail sent out by the American Benefits Council on Oct. 7. "With the active support of the Council, Senator Mike DeWine (R-OH), along with Senator Barbara Mikulski (D-MD), continues to press for an amendment," the group reported to its members. "DeWine called the Council to personally thank us for our steadfast support," it continued. That same day another business lobby, the ERISA Industry Committee, informed its shock troops: "Sen. DeWine has directly asked for our help in getting cosponsors" for his diluting amendment. Mr. DeWine and other senators will no doubt be rewarded for their efforts. On Thursday the American Benefits Council will host a thank-you lunch for Sen. Mike Enzi (R-Wyo.), the chairman of the Senate pensions committee. The invitation includes a line that reads: "Requested contribution: $1,000 PAC/$500 personal."

Yahoo! message board post by Kathi Cooper Full excerpt: Future Health Account But some of us like to refer to is as the Future Hell Account. It is a notational account in your name that contains IBM script that you use after you retire to pay for your retiree medical premiums. IBM contributes to your notational account after you turn 40. You must reach 30 years or age 55 with 15 years of service to get the script. IBM started the FHA in 1999.

You see, IBM doesn't treat all retirees the same. In fact, employees being hired since 2004 don't get retiree medical at all (assuming they make it to retirement). IBM went from 'full retiree medical' to 'no retiree medical'.

Yahoo! message board post by "madinpok". Full excerpt: For those that may not be familiar with the FHA plan, for those covered by the FHA, IBM contributes $2500 per year from ages 40 to 50 to a fictional account which earns low interest until you retire. By the time you are eligible to retire, say at age 55, the account will have $30k or so in it. The money can only be used to purchase health insurance from IBM. At current prices, the account will last 2 years or so for an employee plus spouse. After that, you pay 100% out of your own pocket.

Yahoo! message board post by "madinpok". Full excerpt: If you retired in 1998, you do not have access to the FHA account. You're one of the lucky ones! The FHA plan was created in 1999 and only employees who were within 5 years of retirement were allowed to stay in the old plan. The FHA represents a major cut in retirement medical benefits and that fact was not clear to most employees back when it was announced.

For example, under the old plan, if an employee retired at age 55, IBM would contribute $7000 per year for medical benefits for 10 years until the employee became eligible for medicare at age 65. After that, IBM would contribute $3000 per year. If the employee lived until age 81, that would represent a total cost to IBM of $118,000.

Under the FHA, IBM cut the amount they contribute to about $30,000 ($25,000 plus interest earned on the account). Most employees had no idea IBM was taking away a benefit that could be worth over $88,000 and they would have to make up the difference out of their own pocket.

Yahoo! message board post by Janet Krueger. Full excerpt: The Future Health Accounts weren't created until July 1, 1999 -- IBMers who retired before then, and IBMers who were within 5 years of retirement eligibility at that time, were grandfathered into the 'old' health care plan. The 'old' health care plan gives you access to health care coverage until you die, but IBM gets to charge you whatever they choose each year as a 'contribution'.

You don't ever get access to a 'funny money' account, so it never runs out. But IBM doesn't have to limit your share of the health insurance they provide to the amount you get in your pension check. There are already a number of retirees who send IBM a check each month, instead of receiving a pension. Good deal, huh?

Manufacturing and Technology News: Political Appointees Re-Write Commerce Department Report On Offshore Outsourcing; Original Analysis Is Missing From Final Version. Excerpts: The Commerce Department has responded to a half-year-old request by Manufacturing and Technology News for the release a long-awaited study on the issue of "offshore outsourcing" of IT service-sector jobs and high-tech industries. But the 12-page document represented by the agency as its final report is not what was written by its analysts. Rather, it was crafted by political appointees at Commerce and at the White House, according to those familiar with it. At an estimated cost of $335,000 -- or $28,000 per page -- the document MTN received from the Commerce Department's Technology Administration contains no original research and forsakes its initial intent of providing a balanced view of outsourcing, according to those inside and outside the agency. [...]

The 12-page version that was released focuses on the allegedly positive impacts for the U.S. economy of the offshore outsourcing -- and "insourcing" -- of jobs in the IT, semiconductor and pharmaceutical industries, argue those who have read it. The report quotes research conducted by organizations and individuals that have been funded by multinationals that benefit from shifting jobs overseas. No mention is made of the conflict of interest inherent in the studies cited by the Commerce report.

Atlanta Journal-Constitution: Delta's retired pilots set to fight. Pension cuts spark feelings of betrayal. Excerpts: When his monthly pension of $6,500 was slashed by 73 percent two weeks ago, retired Delta Air Lines pilot Wendell Lewis decided to make a statement. He put his pilot's uniform up for sale on eBay with a starting bid of $1 — along with a heartfelt description of what the suit had been through before the Boeing 777 captain retired last December. "Suit comes with a promise of a pension if you provide years of dedication and service," wrote Lewis, of Duluth. "THE PROMISE MAY BE AS EMPTY AS THE SUIT." [...]

Some recently retired pilots have lost 100 percent of their monthly checks, Gray said. Marcy Eisenburg of Fayetteville comes close. His monthly pension was cut 95.5 percent, from $6,500 to $300. [...] Like many Delta families, they are angry that former Chief Executive Leo Mullin and certain other executives walked away with millions in bankruptcy-proof pensions under a controversial 2002 executive compensation plan. That plan put the nonqualified benefits of Mullin and about three dozen executives into personal trust funds that became theirs when they left. Executives who'd retired before that plan, on the other hand, are in the same boat with pilots when it comes to the cutoff of their nonqualified monthly pensions.

New York Times: The Big Squeeze. By Paul Krugman. Excerpts: But Delphi's bankruptcy is a much bigger deal than your ordinary case of corporate failure and bad, self-dealing management. If Delphi slashes wages and defaults on its pension obligations, the rest of the auto industry may well be tempted - or forced - to do the same. And that will mark the end of the era in which ordinary working Americans could be part of the middle class. There was a time when the American economy offered lots of good jobs - jobs that didn't make workers rich but did give them middle-class incomes. The best of these good jobs were at America's great manufacturing companies, especially in the auto industry.

But it has been a generation since most American workers could count on sharing in the nation's economic growth. America is a much richer country than it was 30 years ago, but since the early 1970's the hourly wage of the typical worker has barely kept up with inflation. The contrast between rising national wealth and stagnant wages has become even more extreme lately. In 2004, which was touted both by the Bush administration and by Wall Street as a year in which the economy boomed, the median real income of full-time, year-round male workers fell more than 2 percent. [...]

During the 1990's optimists argued that better education and worker training could restore the economy's ability to create good jobs. Mr. Miller of Delphi picked up that argument as part of his public relations campaign for wage cuts: "The world pays knowledge workers far more than it pays manual, industrial workers," he said. "And that's what's sweeping over here." But that's a very 1999 sort of answer. During the technology bubble, it was easy to believe that "knowledge workers" were guaranteed good jobs. But when the bubble burst, they turned out to be as vulnerable to downsizing and layoffs as assembly-line workers. And many of the high-paid jobs that vanished when the technology bubble burst have never come back, partly because they have been outsourced to India and other rising economies.

New York Times: Saturday Interview with Nandan M. Nilekani, Merely Following A Megatrend. Excerpts: Is your job at risk? If it's the type of work that can be done over a wire, then probably yes, says Nandan M. Nilekani, the chief executive of Infosys Technologies. Infosys is India's second-largest outsourcer. After achieving success in software engineering and back-office service, it has now begun to compete with companies like I.B.M. for more lucrative consulting work. This week, Infosys reported that its second-quarter earnings rose 36 percent. It raised its earnings forecast for the full year on stronger demand and a weaker rupee. In a recent interview, Mr. Nilekani, a chief executive who makes $60,000 a year at a company worth nearly $20 billion, spoke about Infosys's success and the danger that it and other companies like it pose to American competitors.

The New Yorker: The Moral-Hazard Myth. The bad idea behind our failed health-care system. By Malcolm Gladwell. Excerpts: The U. S. health-care system, according to “Uninsured in America,” has created a group of people who increasingly look different from others and suffer in ways that others do not. The leading cause of personal bankruptcy in the United States is unpaid medical bills. Half of the uninsured owe money to hospitals, and a third are being pursued by collection agencies. Children without health insurance are less likely to receive medical attention for serious injuries, for recurrent ear infections, or for asthma. Lung-cancer patients without insurance are less likely to receive surgery, chemotherapy, or radiation treatment. Heart-attack victims without health insurance are less likely to receive angioplasty. People with pneumonia who don’t have health insurance are less likely to receive X rays or consultations. The death rate in any given year for someone without health insurance is twenty-five per cent higher than for someone with insurance. Because the uninsured are sicker than the rest of us, they can’t get better jobs, and because they can’t get better jobs they can’t afford health insurance, and because they can’t afford health insurance they get even sicker. John, the manager of a bar in Idaho, tells Sered and Fernandopulle that as a result of various workplace injuries over the years he takes eight ibuprofen, waits two hours, then takes eight more—and tries to cadge as much prescription pain medication as he can from friends. “There are times when I should’ve gone to the doctor, but I couldn’t afford to go because I don’t have insurance,” he says. “Like when my back messed up, I should’ve gone. If I had insurance, I would’ve went, because I know I could get treatment, but when you can’t afford it you don’t go. Because the harder the hole you get into in terms of bills, then you’ll never get out. So you just say, ‘I can deal with the pain.’ ”

One of the great mysteries of political life in the United States is why Americans are so devoted to their health-care system. Six times in the past century—during the First World War, during the Depression, during the Truman and Johnson Administrations, in the Senate in the nineteen-seventies, and during the Clinton years—efforts have been made to introduce some kind of universal health insurance, and each time the efforts have been rejected. Instead, the United States has opted for a makeshift system of increasing complexity and dysfunction. Americans spend $5,267 per capita on health care every year, almost two and half times the industrialized world’s median of $2,193; the extra spending comes to hundreds of billions of dollars a year. What does that extra spending buy us? Americans have fewer doctors per capita than most Western countries. We go to the doctor less than people in other Western countries. We get admitted to the hospital less frequently than people in other Western countries. We are less satisfied with our health care than our counterparts in other countries. American life expectancy is lower than the Western average. Childhood-immunization rates in the United States are lower than average. Infant-mortality rates are in the nineteenth percentile of industrialized nations. Doctors here perform more high-end medical procedures, such as coronary angioplasties, than in other countries, but most of the wealthier Western countries have more CT scanners than the United States does, and Switzerland, Japan, Austria, and Finland all have more MRI machines per capita. Nor is our system more efficient. The United States spends more than a thousand dollars per capita per year—or close to four hundred billion dollars—on health-care-related paperwork and administration, whereas Canada, for example, spends only about three hundred dollars per capita. And, of course, every other country in the industrialized world insures all its citizens; despite those extra hundreds of billions of dollars we spend each year, we leave forty-five million people without any insurance. A country that displays an almost ruthless commitment to efficiency and performance in every aspect of its economy—a country that switched to Japanese cars the moment they were more reliable, and to Chinese T-shirts the moment they were five cents cheaper—has loyally stuck with a health-care system that leaves its citizenry pulling out their teeth with pliers.

Computerworld: Senate panel votes to boost H-1B visa limit by 30,000. By Grant Gross. Excerpts: The committee yesterday approved legislation that would expand the cap on H-1B skilled-worker visas from 65,000 to 95,000 in the U.S. government's fiscal year 2006. The legislation, supported by several IT vendors, expands the H-1B cap by "recapturing" unused visas from past years going back to the early 1990s. [...]

Technology trade groups, including the Information Technology Association of America and Information Technology Industry Council Inc., had pushed for more H-1B visas, saying U.S. companies need to be able to recruit workers from around the world to compete in a global economy. The Software & Information Industry Association (SIIA), another trade group, and Microsoft Corp. applauded the committee's support of more visas. [...]

In June, the U.S. Department of Labor's Bureau of Labor Statistics reported job losses in five major engineering and computer job classifications in the first quarter of 2005. Compared with the 2004 average employment, the number of U.S. computer hardware engineers dropped by 18,000 in the first quarter of 2005, a loss of 19% of those jobs from the same period in 2004. The number of employed computer software engineers dropped by 13,000, and the number of computer programmers, electrical and electronics engineers, and computer and information systems managers also dropped in the first quarter, according to government statistics.

Rediff India Abroad: IBM unveils global centre in Bangalore. Excerpts: Global giant IBM on Wednesday announced the opening of a global service delivery centre (GSDC) in Bangalore, India, significantly expanding its existing operations to meet the growing market demand for IT outsourcing and management services. The centre will provide local and global clients with command centre services, including remote monitoring of servers, security operations and network operations, data centre services, including server hosting, server management and storage management, and IT help desk services.

Reuters: IBM workers to get online access to health records. Excerpts: IBM, the world's biggest computer company, will give its U.S. employees online access to their medical records, making it one of the first large companies to put workers' health data on the Internet. IBM's roughly 133,000 workers in the United States will have the option to enroll in the online information system, IBM said in a memo scheduled to be sent to employees early on Wednesday. They can also sign up their dependents. IBM said in the memo that workers' health records will be kept strictly confidential. Only employees will have access to their medical records, which are protected by federal privacy and security rules as well as IBM's own policies.

BusinessWeek: Penthouses at 30,000 Feet. The superrich are increasingly buying widebody planes, remodeled to their own preferences for luxurious living aloft. By Carol Matlack. Excerpts: Think a luxuriously appointed private Gulfstream or Lear jet is the ultimate way to fly? Not any more. Increasingly, the world's superrich are buying big, big planes -- the same kind of widebody Boeing (BA) and Airbus jets the airlines use on long-haul flights -- and outfitting them with everything from his-and-hers bathrooms to onboard movie theaters. "Private jets are becoming flying apartments," says Jacques Pierrejean, a French designer who specializes in aircraft interiors. [...]

These airborne penthouses cost plenty. New widebodies, such as the Airbus A340 and the Boeing 777, list for well over $100 million. Even the oldest secondhand widebodies cost at least $10 million. A customized interior adds $25 million to $30 million, says Edése Doret, a New York-based designer who has outfitted several big planes for private use. [...]

Time-pressed executives and celebrities also like to bring spouses and friends along when they travel. The widebodies have space for several guest rooms, as well as entertainment facilities such as big-screen TVs and video-game consoles. Not all the fun is family-style: New York designer Doret says one of his clients wants to install a pole in his plane so he can watch strippers dance.