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"They changed the deal," said Herring, 61, of Greece. "I earned it. I worked for it. That was the deal. I don't like feeling powerless."
Former Kodakers like Herring are part of an increasingly large club of the nation's retirees who find themselves without the post-retirement health-care benefits that their employers had previously promised. Kodak, which has provided such benefits since 1954, is eliminating dental coverage and its life insurance plan, phasing out dependent coverage and shifting future health care cost increases to retirees. ...
The trend of whittling away company-sponsored retiree health care started in 1982, said Dallas Salisbury, president of the Employee Benefit Research Institute. At that time, financial accounting standards changed to start requiring that companies put a dollar figure on the expected future costs of medical coverage and insurance. While the Employee Retirement Income Security Act of 1974 safeguards pensions, American Benefits Council President James Klein said there are no legal barriers to companies changing retiree health care offerings as long as they have reserved the right to do so with some kind of language in their human resources paperwork — something most every company has been doing for years.
One would have thought that in fairness the workforce should have benefited from the increased productivity during the last four decades. It didn’t happen. During the dynamic period in the 1990s, the earnings of mathematicians and computer scientists increased by only 4.8 percent, while earnings of engineers actually declined by 1.4 percent. Could this be the reason this country is running out of engineers? Meanwhile, the earnings of CEOs have increased by 100 percent. The growing mismatch between skills and economic rewards, a cornerstone of the American work ethic, has become wildly out of sync. As discussed in “Unequal Democracy,” by Larry M. Bartels – “On the one hand, labor productivity and output growth exploded; on the other hand median family income fell by 3.8 percent from 1999 to 2004.” ...
Bartels notes that while there is certainly no uprising in the population over the growing inequity now obvious to everyone, there is still substantial resentment that the rich and the corporations do not pay their fair share and that the tax system is not progressive enough. Nonetheless, Americans, on average, have a higher tolerance for income inequality than our European counterparts. Americans focus on equality of opportunity, while Europeans tend to see fairness in equal outcomes. Unsurprisingly then, CEO pay packages in Europe have not seen the astronomic increases that we see here at home. Which raises the question – are CEOs in this country that much more productive than those, say, in Europe or in Japan? Hardly! There is nothing to suggest such a conclusion. If workers were paid way beyond what their perceived productive worth to the company there would be a great hue and cry. Not so with extravagant CEO pay. Not only are the lofty pay rates currently offered to CEOs unrelated to productivity, it is not affected by losses that occurred under the CEO’s watch, as witnessed by Ivester.
For the most part, the true size of these packages is unknown outside of the boardroom because it involves the right to buy shares at a below-market rate. This is a clear cost to the corporation because it involves issuing new shares of stock, thus lowering the value of the existing shares. An attempt on the part of the Financial Standards Board to declare this practice constitutes an expense to the corporation and should be treated as such, was beaten down by the ubiquitous lobbyists. Corporate executives claimed that accurate accounting would significantly lower their share prices, therefore the publicly stated profit. Well, exactly. So much for fiduciary accuracy in the corporate world. ...
Incredibly, there is little outrage in the nation as CEOs continue to hollow out U.S. corporations. There is little redress in Congress where elected officials tend to have little time for members of the middle or lower classes, giving the most attention to those members of the public who may be donors in the next election. Until the public begins to put together the picture of an economy that has forgotten what it is to be American and figure out how to vote its own interests the country is truly in serious trouble.
Economists and policymakers are fond of referring to the fact that the overall economy is growing and that, of course, a rising tide lifts all boats. “Picture a buoyant luxury cruise ship surrounded by dilapidated dinghies, full of holes and on the verge of sinking. The fact that the tide has lifted them does not mean they are doing well.”
But the average target fund has an annual expense ratio of 1.22%. That's cheaper than the 1.37% for the average diversified U.S. stock fund, but ideally you should expect to pony up less than 1%, Carlson says. "With a fund designed to be held for decades, costs can really make a big difference."
In preparation for that moment, the world's biggest big investment banks, insurers, hedge funds, and private equity shops have been quietly laying the groundwork for such deals over the past year. They would be a big prize for Wall Street. The $2.3 trillion pension honey pot has $500 billion in "frozen plans" that are closed to new employees and whose benefits are capped, including those at IBM, Hewlett Packard, Verizon, and Alcoa.. And that figure could triple by 2012, according to consulting firm McKinsey. By managing those troubled plans, Wall Street also gains entrée to an appealing set of customers to whom it can sell a broad array of fee-generating products. "We have identified several clients who would be willing to be first to sell a plan," says Scott Macey, a senior vice-president at Aon Consulting. "But the question is, when is a good time for this?" ...
But the gambit to turn pensions into for-profit enterprises raises troubling questions. Critics, including some on Capitol Hill, worry that financial firms don't have workers' best interest at heart, which would put some 44 million current and future retirees at risk. "We think it's just a terrible idea," says Karen Friedman, policy director for advocacy group Pensions Rights Center. "In the wake of the subprime crisis, it would be crazy to allow financial institutions to manage these plans." ...
Wall Street's Dumping Ground Historically, pension funds have been managed conservatively, in keeping with the broad goals of long-term wealth accumulation. Alternative investments such as hedge funds, derivatives, and asset-backed securities represent less than 25% of pension assets. If financial firms get involved, exotic investments could swell to 50% of pensions assets by 2012, predicts McKinsey. The biggest fear is that Wall Street could use retirement portfolios as a dumping ground for its most toxic and troublesome investments. It's not unlike what regulators allege UBS officials did with its stockpile of risky auction-rate securities by trying to off-load them to wealthy clients.
If Wall Street gambles with those pension assets and loses, U.S. taxpayers would probably foot the bill. When a company with a pension goes belly up today, the PBGC, under federal law, has to take on the fund's obligations and dole out money to its beneficiaries. It's a costly burden: The PBGC currently runs a $14.1 billion deficit.
These guys (investment "banks") have run out of money to play with to justify their high salaries, which are awarded based on fees for flipping money around, not for increasing the value of the money. Some of them actually make more money if the principal *loses* value. They just need something to bet with/on, and they have lost all credibility with which to attract legitimate investments. (And the top execs, of course, simply get money for nothing--huge piles of it--even if their enterprises lose every single asset and collapse around their feet.)
For me, who is expecting a substantial early retirement benefit, if IBM were to run into financial problems down the road - say 10 or 20 years from now, having the PBGF take over my pension would be a disaster, and IBM won't give me anything close to the cash value of the annuity they will pay me, so at the moment I'm stuck with the prospect of IBM managing my pension. On the other hand, If IBM were to purchase an annuity from a large financial company (Citigroup, NY Life, Met Life, etc.) some of which are multi-trillion dollar companies, it might actually be a safer situation than leaving it with the IBM management team who has little interest in retiree welfare.
At any rate, it would essentially finalize the "divorce" from IBM and I have no problem getting a check from a non-IBM source. On the other hand, it would practically eliminate the possibility of getting a benefit increase in the future, although I'm surely not counting on that anyway.
The most critical part of this seems to be what are the legal responsibilities of the third party, and how can regulations be formulated to make this third party option safer. There are no guarantees for the future, but I might be tempted to trust a bank or insurance company rather than IBM (even with the ERISA pension rules in place) - maybe that's a sad commentary on current affairs.
As far as IBM purchasing an annuity from an insurance company goes, I'm not so sure it would be any safer. The insurance companies seem to be able to get themselves in financial trouble almost as easily as the banks do. And, in order for IBM to provide you with an insurance company annuity equal to your pension, it would probably would cost them more than it would if they simply paid you directly. The insurance company needs to make a profit, you know. So I doubt IBM would do it.
IBM's pension fund has been managed pretty well over the years. Since the pension plan is now frozen, the door has been pretty much closed to IBM increasing profits by reducing pension benefits. They can still profit indirectly with tax credits by having a surplus in the fund, but having a surplus is also in the retirees interest
If the pension fund drops below the 100% funded level, IBM is still obligated to make contributions to the fund to bring it up to 100%. If the fund were to be sold off to Wall Street, who would be on the hook in that case? You can bet that the banks and brokerages will do some heavy bribing (uh... lobbying) of our elected representatives to make sure that they aren't on the hook in that case.
If IBM were to go bankrupt, it does not necessarily mean that the pension fund would also be in trouble. They are two separate entities. If IBM is in financial trouble, it cannot touch the pension fund. As long as the pension fund is 100% funded, you would not see any reduction in your pension, even if IBM were to go bankrupt.
The steel companies, airlines, etc, got into trouble with their pension funds because they allowed them to become severely underfunded and then the companies were in too bad a shape to fix the funding problem. With the tighter pension regulations that have been put in place, hopefully, that will not happen in the future - to IBM or any other company.
Before 2000, the mortgage scam was illegal, as is this pension scam currently, which is where Congress comes in. The Bush Administration tried a head on move to turn our pension funds over to these guys, and Treasury said "Nope, that's not legal. Legally, IBM, or whoever, is responsible for paying these pensions." The next step is to get Congress to change the law (as they did for mortgages in 2000), so that IBM is no longer responsible, and can turn that responsibility over to Bear Stearns. Oops, out of business. Make that JP Morgan...plus the US taxpayer.
Since the same people who ran the mortgage scam are still scamming, I assume they would just try the same deal over again, if Congress allows it, and this time they would throw all the pensions into a big pot, slice it up like meatloaf, and sell off the pieces as securities. As with mortgages, eventually the pot would become overloaded with shaky pensions, or even sham pensions (as happened with mortgages), and the whole thing would collapse. I don't know how long it would take to play out. The mortgage debacle became legally possible in 2000, started going south in about 2003, and crashed in 2007.
Until the meltdown, you wouldn't see any change in your pension (unless Congress also gets rid of the other pension protections that are in place--I really don't trust these guys). After the meltdown, assuming the PBCG is still in place, you would probably start getting a reduced pension. BUT...the bailout would be huge, and frankly I don't think we-the-people would be able to afford it, so you might end up getting a *really* reduced pension. Under the current laws, IBMers are covered better by the PBCG than many others because our pensions suck. If I had a high-dollar pension I would be *really* worried.
Not to get too political, but we *do* have a different slant in Congress at this point and a much higher level of awareness in the public. In 2000, nobody knew what Phil Gramm and his pals in Congress were up to when they cleared the way for Bear Stearns on mortgages. Now, however, we even have institutions like BusinessWeek saying "You want to do WHAT????". So, in reality, I think this might be a pretty hard sell with Congress.
As Kathi and others are saying, though, we need to keep an eye on them and make sure that they know that we understand how the mortgage meltdown played out, and that we will seek retribution if the same thing happens with pensions.
Then again, I could be wrong about exactly why they want to get their hands on this money. Maybe it's more like a check-kiting scam, and they just want to temporarily cover more bad debts. The real question is: Why would anybody trust these organizations with a big pile of their money?
It's very hard to find anybody who will admit to having understood the whole mortgage scam as it was happening. If it happens again, though, we really don't have any excuse. *We* are responsible this time.
Each year, you have the option to enroll in the IBM plan that you think is best for you. If you have coverage from another source, such as another employer or a spouse's plan, you can choose to opt out of the IBM plans for that year. You can re-enroll in the future, as long has you have had continuous coverage elsewhere in the interim.
I've created a folder in the files section of this group titled "IBM Retirement Benefit Info." In this folder are:
We find it hard to believe that some two-thirds of American companies fail to turn a profit. What we find easier to believe is that corporations have become increasingly skilled at tax-avoidance strategies, including transfer pricing — overcharging their American units for products and services provided by subsidiaries abroad to artificially reduce their profits here.
The first place to look for money to close the budget deficit should be among the high-income individuals who have been treated so generously by the Bush administration. But corporate America has been getting a free pass for far too long. And the seeming ease with which corporations escape the taxman altogether compounds a fundamental unfairness in the American economy. Even as corporate profits have soared — reaching a record of 14.1 percent of the nation’s total income in 2006 — the percentage of these profits paid out in taxes is near its lowest level since the 1930s.
Meanwhile, The Times reports that, according to associates, Mr. McCain still “dials up” Phil Gramm, the former senator who resigned as co-chairman of the campaign after calling America a “nation of whiners” and dismissing the country’s economic woes as nothing more than a “mental recession.” And Mr. Gramm is still considered a top pick for Treasury secretary.
Hundreds of thousands of Americans buy homes more expensive than they can afford. Congress approves a rescue package.
Troubles erupt at a Wall Street investment firm that made bad bets on mortgage investments. The Federal Reserve steps in and provides financial backing for the company's takeover.
Meanwhile, tens of millions of people pay their mortgages on time, don't max out their credit cards and put money into retirement funds. They may even save a little extra on the side.
In return, they get rates on their savings that don't even keep up with inflation. They also are witnessing the horror of their nest eggs shrinking as the value of their homes plummets and the stock market tumbles.
Washington policymakers seem more focused on rescuing those who behave badly by putting at risk taxpayers who've played by the rules and shunned the get-rich-quick schemes of Wall Street croupiers. If the government can toss a lifeline to troubled mortgage underwriters Fannie Mae and Freddie Mac, they why won't they do something for Americans who save their money? ...
The average rate on a one-year CD these days is around 2.3 percent, according to Bankrate.com. However, inflation has been rising closer to 5 percent over the past year, so savers are seeing their returns wiped out. ''Savings are taking it on the chin,'' says Greg McBride, senior financial analyst at Bankrate.com. ''The Fed's rate cuts geared to aiding ailing homeowners with adjustable-rate mortgages have come at the expense of savers and retirees dependent on fixed income,'' he said. ''For the past 12 months, there has been a double whammy for savers as interest rates have fallen and inflation has increased.'' ...
Middleton, 32, who once worked in the information-technology field and is now self employed, says he was spurred to put on an ''activist hat'' earlier this year. That's when the Fed provided a loan of $28.82 billion as part of JPMorgan's takeover of the ailing Bear Stearns. ''I was outraged. These companies make their decisions and their bets and they should be responsible for that. They should not be bailed out on the backs of the taxpayers,'' he said.
Mr. Obama answered the question seriously, defining middle class as meaning an income below $150,000. Mr. McCain, at first, made it into a joke, saying “how about $5 million?” Then he declared that it didn’t matter because he wouldn’t raise anyone’s taxes. That wasn’t just an evasion, it was a falsehood: Mr. McCain’s health care plan, by limiting the deductibility of employer-paid insurance premiums, would effectively raise taxes on a number of people.
The real problem, however, was with the question itself. When we think about the middle class, we tend to think of Americans whose lives are decent but not luxurious: they have houses, cars and health insurance, but they still worry about making ends meet, especially when the time comes to send the kids to college.
Meanwhile, when we think about the rich, we tend to think about the handful of people who are really, really rich — people with servants, people with so much money that, like Mr. McCain, they don’t know how many houses they own. (Remember how Republicans jeered at John Kerry for being too rich?)
However, even Allen, a white-collar worker for decades, isn't so happy with what General Motors is doing with his retirement benefits. He's checked. If he wanted to replace his health policy, it would cost $790 a month. That wouldn't include his wife. But it will exclude pre-existing illnesses, and Allen is a diabetic.
The goal, Mr. McCain said, is to give those without company-provided health insurance the same tax advantages as those with coverage through work. It would also encourage individuals to shop for less expensive insurance, his supporters say, pushing prices down. ...
But some do say the plan, which Mr. McCain detailed in July, would encourage young and healthy workers to forgo company coverage, purchasing insurance on their own rather than paying income taxes on the benefit. That would leave employers with only the costly sick workers to insure. And that, they said, could eventually lead to the death of company-provided health plans. ...
Critics question whether individuals – especially those with chronic or pre-existing medical conditions – would be able to find health plans they could afford. Mr. McCain addresses this question by saying he would create a federally supported plan to insure those denied coverage. Opponents also say the amount of the tax credit will not be enough to purchase comprehensive coverage.
What’s this? Why would a generous offer from a health insurer to assist an insured in receiving maximum coverage benefits be included in a health policy forum? The reason is that the apparent intent of this request is very different from its true purpose, and that difference exemplifies one of the most fundamental flaws in our current health care financing system.
The three page questionnaire enclosed with the letter asks for extensive detailed information on matters such as employer, number of fellow employees, insurance company, group number, member/plan ID, Rx PCN, Rx Bin, Person Code, etc. The same questions are asked about the spouse’s employer and coverage as well. There are detailed questions about other supplemental drug coverage, about Coal Miner’s Medical Benefits, and about coverage under no-fault or automobile insurance. There is a detailed question about present or pending Workers’ Compensation claims, including the name and address of your attorney. There is another question about any illness or injury for which another party could be held liable, also including a request for the name and address of your attorney. ...
There could not be a more clear distinction between the business model of private health plans in the United States, and the social insurance models of private health plans used in other countries. Private plans unified in a social insurance program assist patients in paying for the care they need. Our private insurers, such as Anthem Blue Cross, use every devious method they can to avoid paying for the care that patients need. And they add more wasteful administrative complexity to the health care financing process, made even worse by the fragmentation of the financing system.
"Health-care costs are climbing much more rapidly than incomes or the growth in the overall economy," said Sara R. Collins, assistant vice president of the foundation and one of the authors of the study. As gas and food prices have soared and real estate values have fallen, the federal minimum wage is now $3 an hour lower, in real terms, than it was 40 years ago, the study said. "What is notable is how these problems are spreading up the income scale," Collins said.
Two-thirds of the working-age population was uninsured, underinsured, reported a medical bill problem or did not get needed health care because of cost in 2007.
More than two in five adults in the 19-to-64 age group reported problems paying medical bills or had accumulated medical debt in 2007, up from one in three in 2005. Their difficulties included not being able to afford medical attention when needed, running up medical debts, dealing with collection agencies about unpaid bills, or having to change their lifestyle to repay medical debts.
According to the EBRI analysis, one of the difficulties in using an HSA to save money for premiums and out-of-pocket expenses during retirement is that individuals also can (and might need to) use the money in the account to pay for health care services during their working years or to pay COBRA premiums and insurance premiums during periods of unemployment.
However, during a roundtable discussion with women on Monday morning, Obama said, "You've got a whole system of institutions that have been set up," adding, "People don't have time to wait. They need relief now. So my attitude is let's build up the system we got, let's make it more efficient, we may be over time -- as we make the system more efficient and everybody's covered -- decide that there are other ways for us to provide care more effectively.
According to the Journal's "Washington Wire," many "liberals have long embraced" a single-payer health care system, "saying it would cover everyone, take the profit out of health insurance and allow for greater efficiencies," but "Republicans cringe at such deep government involvement in the private sector, calling it socialized medicine." Obama's plan would create a government-sponsored marketplace where people could purchase coverage, either from private insurance plans or a new public plan like Medicare (Chozick, "Washington Wire," Wall Street Journal, 8/19).
Tens of millions of middle-class Americans are uninsured or underinsured and soaring health costs are pushing them and cost-conscious employers and insurers to look abroad for savings (see article). At the same time the best hospitals in Asia and Latin America now rival or surpass many hospitals in the rich world for safety and quality. On one estimate, Americans can save 85% by shopping around and the number who will travel for care is due to rocket from under 1m last year to 10m by 2012—by which time it will deprive American hospitals of some $160 billion of annual business. ...
The flight of America’s “medical refugees” is indeed a symptom of a troubled health system back home. Yet medical tourism need not be a distraction from necessary reforms, but could be a catalyst to them. The prospect of losing revenues to India or Thailand is already shocking hospital administrators and insurers into raising standards, increasing price transparency and lowering costs. It may even bring the growing political pressure for reform to a head.
What is getting people excited today is the promise of a boom in mass medical tourism, as a much bigger group of middle-class Americans prepares to take the plunge. A report published last month by Deloitte, a consultancy, predicts that the number of Americans travelling abroad for treatment will soar from 750,000 last year to 6m by 2010 and reach 10m by 2012 (see chart). Its authors reckon that this exodus will be worth $21 billion a year to developing countries in four years’ time. Europe’s state-funded systems still give patients every reason to stay at home, but even there, private patients may start to travel more as it becomes cheaper and easier to get treated abroad. ...
Until recently, few Americans went abroad for medical treatment. Over the past decade, however, that has begun to change. Americans seeking medical care are increasingly making trips far from home, often at their own expense—not just short hops to Caracas for a nip and tuck or dashes across the frontier for cheap Mexican pills. As Mr Steele’s testimonial suggests, they are now travelling across the world for knee and heart surgery, hysterectomies and shoulder angioplasties. ...
Over 45m Americans are uninsured, and many millions more are severely underinsured. Such people may find it cheaper to fly abroad and pay for an operation out of their own pockets than to find the money for deductibles or “co-payments” charged for the same procedure at home. Arnold Milstein of Mercer, a consultancy, calls them America’s “medical refugees”.
This study of Part D prescription drug utilization finds that one in four (26%) Part D enrollees who filled any prescriptions in 2007 reached the coverage gap. This also includes 22 percent who remained in the gap for the remainder of the year, and four percent who ultimately received catastrophic coverage. Applying this estimate to the entire population of Part D enrollees, the analysis suggests that about 3.4 million beneficiaries (14% of all Part D enrollees) reached the coverage gap and faced the full cost of their prescriptions in 2007.
Executive Summary: A perfect storm of negative economic trends is battering working families across the United States. The federal minimum wage is now three dollars an hour lower, in real terms, than it was 40 years ago; gas and food prices are soaring; home values are declining; growth in health care costs is far outstripping income growth; and people are increasingly going without the protection of health coverage—nearly 9 million have lost their health insurance since 2000. Families are facing financial crises and are forced to make hard choices among life's necessities, often sacrificing health care and health insurance along the way.
Using data from four years of the Commonwealth Fund Biennial Health Insurance Survey—2001, 2003, 2005, and 2007—this report examines the status of health insurance for U.S. adults under age 65 and the implications for family finances and access to health care. Insurance coverage deteriorated over the past six years, with declines in coverage most severe for moderate-income families. The share of insured adults who spend more than 5 percent or 10 percent of income on health care and insurance rose across all income groups between 2001 and 2007. As a result, the number of underinsured adults (i.e., those with health coverage that does not adequately protect them from high medical expenses) climbed to 25 million people in 2007, up from 16 million in 2003.
Vault's IBM Business Consulting Services message board is a popular hangout for IBM BCS employees, including many employees acquired from PwC. A sample post follows:
This site is designed to allow IBM Employees to communicate and share methods of protecting their rights through the establishment of an IBM Employees Labor Union. Section 8(a)(1) of the National Labor Relations Act states it is a violation for Employers to spy on union gatherings, or pretend to spy. For the purpose of the National Labor Relations Act, notice is given that this site and all of its content, messages, communications, or other content is considered to be a union gathering.