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Highlights—August 23, 2008

  • Rochester (NY) Democrat and Chronicle: Rochester-area retirees suffer from loss of benefits. By Matthew Daneman. Excerpts: After 33 years at Eastman Kodak Co., Don Herring left pretty satisfied. He had climbed fairly high on the job ladder before health problems made him retire from his process engineering job. He had made good money and he was leaving with some guarantees about his future. Then he and tens of thousands of other Kodak retirees received a letter earlier this month informing them that those guarantees about health care and life insurance were gone.

    "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.

  • Yahoo! IBM Retiree Information Exchange: "pension increase" by "thomas365us". Full excerpt: I got my notice, got a whole $83.00 increase after 8 years since last increase. Thought I might get a little more as I have been gone 22 years.
  • Yahoo! IBM Retiree Information Exchange: "Re: pension increase" by "Wilmer Haas". Full excerpt: Just received my "Randy MacDonald" Letter! My "pension adjustment" will be all of $44.99 (before taxes etc) starting in Sept.2008. From here that will allow me to just buy 10 gallons of gas to take my wife to the doctor and return without running empty! I retired in March 2000 and don't remember getting any "pension adjustment" since then, only medical costs adjusted upward. Thanks Randy! Will Haas
  • Yahoo! IBM Retiree Information Exchange: "Re: pension increase" by "vaporbenefits". Full excerpt: In a letter received today (8/20/08) from R. MacDonald (dated only as August/2008) My pension has been increased just under $50 per month. (based on my situation.) First "adjustment" in 18 YEARS.
  • Yahoo! IBM Retiree Information Exchange: "Re: pension increase" by "Gene Ehrich". Full excerpt: Got mine too for just a penny more. $45 per month before taxes.
  • Yahoo! IBM Retiree Information Exchange: "Re: pension increase" by "flatsflyer". Full excerpt: The "Scumbags" running IBM are cheap except when dealing with themselves. If Sam, Randy or any of the other 3,500 Greedy Bastards gave up 1% of their perks, bonuses, etc. everyone could have been granted a 25% increase. I say FUCK them...
  • Yahoo! IBM Retiree Information Exchange: "No Money for Me" by "ramacjoe". Full excerpt: I just called IBM HRC and found out that I will not receive an increase because my Core Benefit amount is above the cut off level of $1833.33. They also said that no notices would be sent out explaining why one was not receiving an increase. My Core Benefit with 50% survivor is above that amount. What I actually receive is less than the "Cut Off" amount because of the calculation for my survivor. I retired in Dec '89 If you haven't received a notice, suggest that you call them at 1-800- 796-9876 Joe in Fort Lauderdale
  • Yahoo! IBM Retiree Information Exchange: "Re: No Money for Me" by "tradewinds022002". Full excerpt: I haven't received any letter so I can assume that no raise is coming. I am disappointed but I blame myself for not having enough money to live decently. Instead of buying dark suits, white shirts and black shoes and a new car every 3 years, because my car had excessive mileage, sending our daughter to a collage, I should have save the money for our old age, but then again I listen to my manager who told me repeatedly that IBM will take care of me in my old age, so basically it is clear to me that it is my fault. Disappointed George
  • Fairfield County Business Journal: A new Gilded Age emerging. By Maureen Morgan. Excerpts: Holly Sklar, co-author of “Shifting Fortunes: The Perils of the Growing American Wealth Gap,” has a stunning example of just how in orbit the pay for CEOs has risen. When Coca-Cola CEO Douglas Ivester resigned after only a two-year stint he had accomplished a negative 7.3 percent for shareholders. For that benefit to the company he was rewarded with stock, options and other benefits worth $120 million. Meanwhile, Coca-Cola is laying off thousands of workers and facing a lawsuit alleging the company discriminated against black employees in promotions, pay and performance. As Sklar points out, average workers are digging their way out after years of falling real wages, and now falling housing prices and rising food and fuel prices, while CEOs pay packages are soaring to heights once reserved for a handful of robber barons. Many have called this period a new Gilded Age.

    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.”

  • MoneySmart: Target-Date Fund Fees Can Add Up. By Paulette Miniter, Excerpts: One-stop shopping often means lower prices. Wal-Mart for groceries, Orbitz for travel, Schwab for financial services. But it's not always the case. Take the increasingly popular "target date" mutual funds that are luring investor dollars by the billions these days. These funds divvy up your money for you according to when you plan to retire, growing more conservative as you get older. By putting money into just one of these guys, you get exposure to a range of assets — from domestic and international stocks, to corporate and government bonds. Hence the one stop. ...

    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."

  • BusinessWeek: Now Wall Street Wants Your Pension, Too. JPMorganChase, Citi, Cerberus, and Morgan Stanley are among the firms lobbying Washington to let them take over and run corporate pension funds. By Matthew Goldstein. Excerpts: The folks who brought you the mortgage mess and the ensuing hedge fund blowups, busted buyouts, and credit market gridlock have another bold idea: buying up and running troubled corporate pension plans. And despite the subprime fiasco, some regulators may soon embrace Wall Street's latest scheme. ...

    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.

  • Yahoo! IBM Pension and Retiree Issues message board: "Re: Financial Firms Trying To Buy Out Frozen Pension Plans" by "emmkaytee". Excerpts: When I got around to reading my BW last week and saw this article I literally thought I was going to throw up. Then I got *really* mad. The people who brought us the subprime meltdown should be in jail, but, no, instead our government is considering rewarding them by handing our pensions over to them. Seriously, when I read this in the middle of the night I considered attempting to ferret out the home phone number of my (vacationing) Rep and calling him then and there...'til I remembered that he's a multimillionaire in a city hundreds of miles away (gerrymandering), who doesn't give a rat's ass whether I starve to death.

    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.)

  • Yahoo! IBM Pension and Retiree Issues message board: "Re: Financial Firms Trying To Buy Out Frozen Pension Plans" by "more4data". Full excerpt: Is everyone sure that unloading pension obligations to a third party is such a bad idea - it might be worth some more analysis and discussion.

    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.

  • Yahoo! IBM Pension and Retiree Issues message board: "Re: Financial Firms Trying To Buy Out Frozen Pension Plans" by "madinpok". Full excerpt: History has shown time and again that the banks and brokerages can not be trusted to manage your money without putting their interests ahead of yours. Just recall the S&L scandal, mutual funds trading after the markets closed to allow certain people to make guaranteed profits, the current mortgage meltdown... the list goes on. In most cases, when things collapsed, the little guy is hurt the most - not the bankers or brokers (although a few had to do some prison time, most got away scot free with a ton of money). If you think that IBM has little interest in the retirees' welfare, I would say that Wall Street has even less. They smell big money and are looking at how much they can steal, pure and simple.

    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.

  • Yahoo! IBM Pension and Retiree Issues message board: "Re: Financial Firms Trying To Buy Out Frozen Pension Plans" by "emmkaytee". Full excerpt: I don't think it would be that blatant. That would require even more legal changes. I'm assuming that they are hoping to repeat exactly the scenario that they used for mortgages--some sort of CDO scam. In this case the "collateral" would be our pensions.

    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.

  • Reuters: Carlyle Chairman Gerstner to retire. By Megan Davies. Excerpt: Carlyle Group CYL.UL, one of the world's largest private equity firms, said on Tuesday Chairman Louis Gerstner will retire and become a senior adviser to the company's buyout funds. Gerstner, who held the post from January 2003, said in the statement he had a number of goals and interests yet to fulfill "requiring me to step back at Carlyle."
  • Yahoo! IBM Pension and Retiree Issues message board: "Re: Carlyle Chairman Gerstner to retire" by "ibmmike2006". Full excerpt: Probably the 20 Million shares of IBM stock options he awarded himself in 1998 that matured June 30, 2008 at a $53 strike price has filled up his retirement sock well enough so he will not have to worry about gas prices, inflation, medical costs or foreclosure on his home.
  • Yahoo! IBM Pension and Retirement Issues message board: "Re: Question about the grandfathered health plan" by "madinpok". Full excerpt: The old health plan and the newer FHA plan are identical in terms of the coverage options they provide. The difference is in what they will cost you. Retirees under the old plan get a subsidy from IBM, while the FHA plan retirees pay the full cost (with some help from their FHA account for as long as the money lasts). IBM's subsidy for the retirees covered under the old plan is capped at an average of $7000 per year for pre-medicare retirees and $3000 for retirees covered under medicare. How much IBM is really paying towards the subsidy is the subject of much debate.

    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:

    • IBM USHR113, which is the summary plan description for the pension plan.
    • SHR112, which describes other, non-pension benefits for retirees, such as the health plans.
    • he 2008 retiree benefit enrollment guide, which shows you the options that were available for the current year. The 2009 version will be coming out in a few months.
    • A file showing the 2008 costs for the FHA and non-FHA medical plans.

  • New York Times editorial: The Corporate Free Ride. Excerpts: Here is a crazy idea to address the United States’ gaping fiscal deficit: persuade corporate America to start paying taxes. An investigation by the Government Accountability Office found that almost two-thirds of companies in the United States usually pay no corporate income taxes. Big companies, those with more than $50 million in sales or $250 million in assets, are less likely to avoid Uncle Sam altogether. Still, about a quarter of them report no tax liability either. ...

    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.

  • New York Times op-ed: It’s the Economy Stupor. By Paul Krugman. Excerpts: By rights, John McCain should be getting hammered on economics. After all, Mr. McCain proposes continuing the policies of a president who’s had a truly dismal economic record — job growth under the current administration has been the slowest in 60 years, even slower than job growth under the first President Bush. And the public blames the White House, giving Mr. Bush spectacularly low ratings on his handling of the economy.

    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.

  • New York Times: Obama Camp Puts Forward More Modest Tax Changes. By Larry Rohter. Excerpt: Senator Barack Obama appears to be altering his proposals for extending Social Security payroll taxes and raising the capital gains tax, by delaying the increases or scaling them back. Mr. Obama, the presumptive Democratic nominee for president, has not abandoned either his support for a higher tax rate on capital gains or his proposal to subject individual wages above $250,000 to the Social Security payroll tax. But recent statements by campaign aides suggested that the latest iterations of the plans are more modest. On Thursday, for example, Mr. Obama’s chief economic adviser, Jason Furman, said that the Social Security payroll tax extension favored by Mr. Obama would only go into effect in a decade, after he had left office.
  • U.S. News & World Report: 3 Reasons Pensions Need Less Funding per Worker Than 401(k)'s. By Emily Brandon. Excerpt: 401(k) plans save employers money because workers fund a portion of them. But a new analysis says 401(k)'s are an inefficient way to finance a secure retirement. The nonprofit National Institute on Retirement Security calculated that a 62-year-old with a final salary of $50,000 would need to have $550,000 in a 401(k) to have an adequate retirement income, determined by the authors to be $26,684 a year. To achieve the same income, a traditional pension would need to have only $355,000 set aside for that worker, nearly $200,000 less.
  • Associated Press, courtesy of the New York Times: Washington offers no relief for savers. Two giant mortgage companies get into hot water over risky investments. The government steps in to throw them a lifeline should they need it.

    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.

  • New York Times op-ed: Now That’s Rich. By Paul Krugman. Excerpts: Last weekend, Pastor Rick Warren asked both presidential candidates to define the income at which “you move from middle class to rich.” The context of the question was, of course, the difference in the candidates’ tax policies. Barack Obama wants to put tax rates on higher-income Americans more or less back to what they were under Bill Clinton; John McCain, who was against the Bush tax cuts before he was for them, says that means raising taxes on the middle class.

    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?)

News and Opinion Concerning Health Savings Accounts, Medical Costs and Health Care Reform
Minimize
  • Tampa Bay Tribune: When A Promise Isn't Kept. By Kathy Waters. Excerpts: At the end of the interview, it was time to get their pictures taken. "Don't put me in front of a Ford," Bill Allen protested. He retired from GM in 1987, but his brand loyalty still shows.

    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.

  • Dallas Morning-News: McCain's health insurance plan: More radical than Democrats'? By Jason Roberson. Excerpts: Democratic health care proposals may have gotten more attention during the primaries, but Republican John McCain's plan just might be more revolutionary. The GOP nominee-to-be wants to tax workers on the value of the insurance they receive from employers. At the same time, everyone would be offered a federal tax credit to help them pay for insurance – whether a company plan or one purchased on their own. Buyers could subtract up to $5,000 from their federal tax tab come April 15. Or they could simply sign over the credit to an insurer in order to purchase coverage. ...

    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.

  • Physicians for a National Health Program: Maximum coverage as defined by Anthem Blue Cross. By Don McCanne, MD. Letter From: Anthem Blue Cross, Oxnard, California To: Don McCanne. Dear Don, Enclosed you will find a Part D Coordination of Benefits Survey. By completing the survey, it will help assure that you receive the maximum coverage benefits from your drug plan. … http://www.anthem.com/

    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.

  • Washington Post: Lack of Insurance, High Medical Costs Put More in a Bind. Debt Mounts, Care Forgone, Study Says. By Sopan Joshi. Excerpts: Americans are struggling to pay medical bills and are accumulating medical debt at an increasing rate, according to a survey released today. "A perfect storm of negative economic trends is battering working families across the United States," said the survey by the Commonwealth Fund, a private foundation that supports independent research on health care.

    "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.

  • Spencer's Benefits Reports, courtesy of CCH Internet Research Network: HSA Savings Insufficient To Fund Retiree Health. Excerpts: While health savings accounts (HSAs) can be used to save for health care expenses in retirement, the maximum savings that can be accumulated in an HSA will be far from sufficient to fully cover the savings needed in retirement for insurance premiums and out-of-pocket expenses, according to a recent analysis by the Employee Benefit Research Institute (EBRI).

    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.

  • Health Affairs Journal: Health Information Technology: A Few Years Of Magical Thinking? [PDF] Technology and standards alone will not lead to health IT adoption, let alone transform health care. Abstract: One of the biggest obstacles to expanding the use of information technology (IT) in health care may be the current narrow focus on how to stimulate its adoption. The challenge of thinking of IT as a tool to improve quality requires serious attention to transforming the U.S. health care system as a whole, rather than simply computerizing the current setup. Proponents of health IT must resist “magical thinking,” such as the notion that technology will transform our broken system, absent integrated work on policy or incentives. The alternative route to transforming the system sets all of its sights on the destination.
  • Kaiser Daily Health Policy Report: Presumptive Democratic Presidential Nominee Obama Discusses Single-Payer Health Care System. Presumptive Democratic presidential nominee Sen. Barack Obama (Ill.) earlier this week during a town hall meeting on the economy in Albuquerque, N.M., discussed prospects for the implementation of a single-payer health care system over time, the Wall Street Journal's "Washington Wire" reports. He said, "If I were designing a system from scratch, I would probably go ahead with a single-payer system."

    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).

  • The Economist: Importing competition. The coming boom in medical travel could help both rich and poor. Excerpts: Health care has long seemed one of the most local of all industries. Yet beneath the bandages, globalisation is thriving. The outsourcing of record keeping and the reading of X-rays is already a multi-billion-dollar business. The recruitment of doctors and nurses from the developing world by rich countries is also common, if controversial. The next growth area for the industry is the flow of patients in the other direction—known as “medical tourism”—which is on the threshold of a dramatic boom.

    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.

  • The Economist: Operating profit. Why put up with expensive, run-of-the-mill health care at home when you can be treated just as well abroad? Excerpts: The future of health care, long one of the most local of all businesses, promises to be increasingly global. Over the next few years the world is likely to see a lot more investment, medical staff and patients crossing borders—bringing economic benefits and greater access to care as they do so. Even a modest surge in global medical tourism could prove a powerful catalyst for government bureaucracies and sclerotic American health-maintenance organisations to think afresh about what they do. It may even introduce competition to private health care in America and elsewhere. ...

    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”.

  • The Henry J. Kaiser Family Foundation: The Medicare Part D Coverage Gap: Costs and Consequences in 2007. Excerpts: This study quantifies, for the first time, the number of Medicare Part D plan enrollees in 2007 who reached a gap in their prescription drug coverage known as the "doughnut hole," as well as the changes in beneficiaries' use of medications and out-of-pocket spending after they reached that gap. The analysis excludes beneficiaries who receive low-income subsidies because they do not face a gap in coverage under their Medicare drug plan.

    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.

  • The Commonwealth Fund: Losing Ground: How the Loss of Adequate Health Insurance Is Burdening Working Families. By Sara R. Collins, Ph.D., Jennifer L. Kriss, Michelle M. Doty, Ph.D., and Sheila D. Rustgi. Editor(s): Deborah Lorber. Overview: The economic downturn is forcing working families across the United States to make tough financial choices, often involving sacrificing needed health care and health insurance. Using data from four years of the Commonwealth Fund Biennial Health Insurance Survey, 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. As result, more families are experiencing medical bill problems or cost-related delays in getting needed care. In 2007, nearly two-thirds of U.S. adults, or an estimated 116 million people, struggled to pay medical bills, went without needed care because of cost, were uninsured for a time, or were underinsured (i.e., were insured but not adequately protected from high medical expenses).

    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.

New on the Alliance@IBM Site:
Minimize
  • Is IBM offshoring the IBM Payroll Help Desk to Manila, Philippines? If you have documentation please send to: Allianceibmunion@gmail.com
  • Job Cuts Status & Comments page
    • Comment 08/17/08: Our 1st line mgr has told us to shine our resumes and keep them up to date. Re-orgs in IGS are going to be happening in October, followed by layoffs. More jobs will go off-shore, and US employees will be out of a job for Christmas. Happy Holidays from IBM. -tai mai shue-
    • Comment 08/17/08: Talked with a friend this weekend and Nichole Williford told one of her managers that he should start looking for another job. Whatever little operations monitoring and production control work is left behind (targeted for GDF's in Fishkill/Boulder) will gradually be sent to India within 1-2 years and the 100% of all operations will be gone. Accounts which have gov't regulations will stay in the US but will be transitioned to a contract vendor in the US without any IBM employee support. -Buckleup-
    • Comment 08/19/08: The Year 2010 for the IBM in USA. In order to get to "IBM's blueprint for revenue and profit growth" they are escalating cost cuts (now USA employees salaries are being cut) and once there is no more to cut past the bone the blueprint will be brought to reality. If you're still around in IBM in the USA by that date your one of the select chosen few. You'll be an IBM survivor for all it is worth (maybe not for much though). -Anonymous-
    • Comment 08/19/08: ITD cut came for me on the 11th. No warning. They make it sound like an honor to get permanently laid off. -Anonymous-
    • Comment 08/20/08: ITD got me on the 12th, effective in Oct. -black and blew-
    • Comment 08/20/08: John Ditoro is planning another lay off at the Burlington Vermont plant. My source of information is my former 2nd level manager. This site really sucks. Long term plan is to pull out of the main site and sell it. Williston will follow next. IBM has no interest in Vermont. I hate my job and hate IBM. Sam Palmacrapo can go to hell. Please join the Alliance and help turn this injustice against the Vermont IBMers around. -Joe B-
    • Comment 08/21/08: I know of other ITD employees (in the Collins-Smee organization) that have been given 30 days to find a job. Their jobs being outsourced to lower salaried employees (I believe in Boulder, Brazil and Argentina). There is the standard package..up to six months pays, medical coverage and education money. This current layoff effected about 110 people. Apparently, another layoff in this group will happen later this year. I know this for a fact because my wife is one of those who is losing her job. In the package my wife received was a cover letter from Collins-Smee. After reading that piece of crap I was so pissed off I immediately joined the union. -Anonymous-
    • Comment 08/21/08: Your wife gets the boot and now you 're pro union? Have you been reading what has been going on for years? The time to join up and make a difference is long before big blow does these things, not just when they finally happen to you. Without a union you are all grunts standing in line for your turn to go. -NG_MAN-
    • Comment 08/21/08: My salary was cut by 15% and I was put into a no-exempt level. My job requires me to be on stand by… Now I am being told I still need to carry my pager, but will only get paid if I get called. Basically I have to be on call 24/7 without getting the proper compensation.(Stand by pay) This is illegal, but if I say something my job will be sent to India quicker than I can say ___________! -Has been reduced-
    • Comment 08/21/08: Just heard some new news out here, new round of layoffs coming including opps managers, operators, and schedulers. -Short timer-
  • General Visitor's Comment page:
    • Comment 08/14/08: IBM is a hellhole. Sign your authorization card, and let's make this place a great place to work again. We can do it. -tai mai shue- Alliance reply: Thanks for commenting on the authorization form on our front page. For now, typing in your information, and then printing, signing, and mailing the form to us; is the quickest way to increase our numbers toward a vote. Remember: You must SIGN and date the form before you mail it. You are absolutely right! We CAN DO it!!
    • Comment 08/17/08: I was walking down the aisle in Southbury the other day with an RS/6000 display console. Two IBM management-type "stuffed shirts" walked past me. One of them said to the other: "what's that?" the other said not so sarcastically "a boat anchor!". That's the problem with this IBM. We got naive, ignorant folks that have no real skills. They are killing this IBM. These two guys must be making six figure salaries and myself has a 15% pay cut "remix" and I'm making about half of that. Where is the justice? I'll tell you. I'm in the Alliance. Damn proud of it too! We need a union to save this IBM. Without a union this IBM is sad history! All of you that feel IBM doesn't need a union will be history soon. These stuff shirted types will make sure of it. -Southbury_guy-
    • Comment 08/19/08: Dear TIP, The fact that the FAB workers did not hit the Big RED off buttons and shut down the fab when they got the cuts means a lot. It shows management that the employees will do nothing to help themselves or others so management can do as they please. Our fellow workers did nothing when the IT people got a pay cut, why should they support us. We remain divided and toothless. -In Fishkill-
    • Comment 08/20/08: Sent in my Authorization form, spread the word to your fellow employee's. Layoffs are coming again! Don't just sit and do nothing, At least sign the form and send it in. Top brass is ruining this once great company. It's up to us to get things built back up. Employees built this company and steered the ship for many years. We gave up the helm to incompetent Captains over the past years. If were going to get canned lets make it difficult! -EFK'ED- Alliance reply: Thanks for sending the form. Mass mailings of forms, flyers, No Pay Cut bumper stickers and other info are going out to workers at EF and BTV. If you did not get a mailing send us an email at allianceibmunion@gmail.com
  • Pension Comments page
    • Comment 8/17/08: Friends of mine who retired earlier than 1993 have been notified they are receiving a raise in their pension. My husband died in 1993 while working at IBM after 31 years. When I called HR to find out why I hadn't received a raise, the girl said that those who received one would be notified. I have not been notified, nor have I ever received a raise (my friends have received several!!) yet, the year of my husband's death should have qualified me if I use the criteria stated. She kept the reason a BIG SECRET! Can I find out why or why not I am not eligible for such an increase? HR was certainly not helpful. Thanks. -Anonymous-
    • Comment 8/19/08: -Anonymous- I really hate to hear things like this and the treatment you are getting: you deserve much better. Call Randy MacDonald. If he doesn't help you then your probably SOL. With a union the union would be more than an effective liaison to IBM HR and would get fair treatment for all: employed, retired, and for IBM dependents and survivors. -Anonymous-
    • Comment 8/19/08: It would be nice if you provided Randy Macdonald' s number for the poor lady whose deceased husband worked for IBM. She probably has no access to company directories or even a local manager as she was not an employee. She absolutely does deserve better by the way. Certainly better than being told she is probably SOL.. -Exodus2007-
    • Comment 8/20/08: Employee phone numbers and email addresses are publicly searchable by anyone: http://www.ibm.com/contact/employees/us/ -Anon-
  • Raise and Salary Comments
    • Comment 08/17/08: -sid- I heard of someone in EFK that spoke his mind about losing the AWS differential to the affect that "IBM will go down in flames". IBM management didn't take too kindly to his remark and grilled him on it. No wonder. It's not far from the truth. You know why? IBM powers that be are scared. Since they know they are screwing the workers and playing with fire. They think they can get away with it all without collective action to try to challenge it. Is IBM really going down in flames? Literally no, figuratively yes. IBM is like Rome burning. The big wigs and those that think they are big wigs will try and resort to anything to pad their pockets before Nero plays his last tune on the fiddle. It's time to organize folks. NOW. Not tomorrow. NOW. -Anonymous-
    • Comment 08/21/08: I wonder if anyone affected by the AWS pay cut did or will send an email to Palmiselloff asking if the chief of BTV/EFK/POK had his pay cut as well? We all know he is so busy with new cost cut schemes and actions and has no time to even open his own Notes emails; but maybe if he gets tons of spam he might just finally open his long deaf ears. -anonymous-
    • Comment 08/21/08: Hey anonymous: Stop wondering about sending emails to Sam Palmisano. You're wasting your time, mental energy and intelligence. Tons of SPAM will never reach his eyes. Instead, join Alliance@IBM, then start sending emails to your co-workers about the effectiveness of taking actions as a group. Work toward getting a committee of co-workers together at a meeting, outside of IBM. Contact Alliance@IBM for some ideas how to get IBM's and Sam's attention. Here's an idea: start handing out or sending out information about fighting back, and organizing. Alliance has plenty of informative fliers and posters, etc. that they will gladly share with you. This web site even has forms to download and sign-up your co-workers. All you do is pass them out at lunch or on your break or after work. These actions are a helleva lot more effective than sending SPAM to Sam's email or hoping (guilt) that he sleeps well at night... BTW.. He has an email address that no one else knows, outside of his inner circle. The email address that is listed in the Employee directory (if it's even still there) is totally monitored by one of his corporate lackeys. Get wise... organize. -IBMer Action-
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Vault Message Board Posts:
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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:

  • "On the Bench?" by "Darwin's Radio". Full excerpt: How many of you all are on the bench? Seems like there's a lot of people there.
  • "In which practices/specialties?" by "Frank Cary". Full excerpt: In 2001 Supply Chain Management had no bench: they (including B Anderson and J Gutierez) simply laid off everyone who came off of a contract after July 4. Stuff like ERP should be doing well. Outsourcing is probably not so hot.
  • "AIS" by "Darwin's Radio". Full excerpt: is doing crappy - the whole org is a mess.
If you hire good people and treat them well, they will try to do a good job. They will stimulate one another by their vigor and example. They will set a fast pace for themselves. Then if they are well led and occasionally inspired, if they understand what the company is trying to do and know they will share in its sucess, they will contribute in a major way. The customer will get the superior service he is looking for. The result is profit to customers, employees, and to stcckholders. —Thomas J. Watson, Jr., from A Business and Its Beliefs: The Ideas That Helped Build IBM.

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