April 3, 2010

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Highlights—April 3, 2010

Associated Press, courtesy of Forbes: Ex-IBM exec pleads guilty in inside trading case. By Larry Neumeister. Excerpts: A former IBM senior executive pleaded guilty Monday to federal charges arising from what prosecutors call the largest insider trading case in hedge fund history. Robert Moffat, 53, of Ridgefield, Conn., pleaded guilty to conspiracy to commit securities fraud and securities fraud, charges which carry a potential penalty of 25 years in prison.
A plea agreement, though, contained language indicating he may end up serving six months in prison or less.

Moffat, once considered a candidate for chief executive officer at IBM, was considered the highest level executive arrested in a case that resulted in 21 arrests. He is the 11th person to plead guilty. He remained free on $2 million bail. Sentencing was set for July 26. His lawyers said he was not cooperating with the government's probe.

During a hearing in U.S. District Court in Manhattan, Moffat told the magistrate in a shaky voice that he provided inside information between August and October 2008 to Daniele Chiesi, a friend and a co-defendant in the case. At the time, Moffat was senior vice president and group executive at International Business Machines Corp.'s Systems and Technology Group. ...

Chiesi and Rajaratnam were heard on a government wiretap of a Sept. 26, 2008, phone conversation discussing whether Moffat should move from IBM to a different technology company to aid the scheme, according to the papers. "Put him in some company where we can trade well," Rajaratnam was quoted in the court papers as saying. The complaint said Chiesi replied: "I know, I know. I'm thinking that too. Or just keep him at IBM, you know, because this guy is giving me more information. ... I'd like to keep him at IBM right now because that's a very powerful place for him. For us, too." According to the court papers, Rajaratnam replied: "Only if he becomes CEO." And Chiesi was quoted as replying: "Well, not really. I mean, come on. ... you know, we nailed it."
Associated Press, courtesy of Forbes: IBM spent $1.1 million on lobbying in 4Q. Excerpts: IBM Corp. spent $1.1 million on lobbying Congress and other government agencies in the fourth quarter, slightly more than what the technology company spent in the same quarter last year. One focus of IBM's lobbying has been on legislation surrounding the rollout of "smart" power technologies, such as new meters that transmit data to utilities in real-time. ...
IBM also lobbied Congress, the Department of Commerce, the Department of Homeland Security and other agencies regarding U.S. trade agreements and other issues involving international sales.
Poughkeepsie Journal: IBM competitors' headcount reports show offshoring trend. By Craig Wolf. Excerpts: While IBM Corp. says it's not the only big company that doesn't give out its United States head count, it turns out that many comparable companies still do. IBM's decision to stop revealing its U.S. head count and report one global number this year came with a simple rationale: "IBM disclosed global head count only in the Annual Report this year which is how many of our competitors report their head count," spokesman Douglas Shelton said in an e-mail. But half the companies surveyed by the Poughkeepsie Journal last week do provide some idea of their domestic employment.
Jobs, and where they're being created and lost, have become an increasingly sore point with many Americans as unemployment remains stubbornly high and offshoring of work to other countries becomes more common. IBM's decision comes as the percentage of its work force based in the U.S. shrinks to a new low. IBM now has about 25 percent of its nearly 400,000-person work force in this country and 75 percent in other countries. In the 1990s, it was about 50-50. ...

Robert Djurdjevic, president of Annex Research in Maui, Hawaii, said the underlying reason for IBM's move is likely the usual one: "In every case, it's a marketing motivation." In the corporate world, "If the number makes them look good, they publish it. If not, they hide it," he said. Djurdjevic said IBM's global perspective is not only for real but more real than many of its competitors. "IBM may have been among the first to recognize the importance of being global in every respect," he said. But this does pose an inherent conflict, Djurdjevic said. "You don't belong to any flag. That is going to rile the politicians anywhere," he said.
Glassdoor IBM reviews. Selected reviews follow:
- IBM Senior Technical Staff Member in Austin, TX: (Current Employee) “Not headed in the right direction.” Pros: The technical talent at IBM is unparalleled. Working with smart engineers and developers is one of the primary perks of IBM. Cons: The company is being taken in an unfortunate direction by upper management. Aggressive attrition of the US workforce is causing loss of incredible talent, and leaving abysmal morale. Advice to Senior Management: Your technical talent is your biggest asset. Lose it at your peril.
- IBM Anonymous in Toronto, ON (Canada): (Current Employee) “Good resume builder.” Pros: Lot's of networking opportunities, lot's of travel as a consultant (can be a pro or con). Cons: Lack of proper compensation, or career planning. You're pretty much on your own. Advice to Senior Management: to better take care of people who are giving their best to the company.
- IBM Service Delivery Manager in Atlanta, GA: (Current Employee) “Working for IBM used to be a source of great pride...” Pros - Great Benefits (Medical, Dental, Vision, etc.) Cons: Wage increases haven't met the increases in cost of living for years. Outsourcing to BRIC countries continues to cause IBM US employees to lose jobs and as a result those who remain are forced to pick up more duties to make up for the losses. Although IBM touts itself as 'work/life balance' friendly the hours employees are required to work are not friendly to that balance. Cost control has reached the point that the company is spending more money auditing costs than the actual costs involved. Business and Audit control requirements are becoming so overwhelming that it's become impossible to keep up with the reports and systems to track these items. Senior Management is out of touch on the affects of Outsourcing and cost cutting to the employees and as a result to the customers. Advice to Senior Management: Take a good look at the true costs of outsourcing. The loss of knowledge of your customers systems, the loss of the ability to communicate with your customers, and the affect you're having on the US economy (and as a result the customers you support who will then turn around and demand more cost cuts.... ever hear of a vicious circle?). Stop putting so much overhead work for audits and business control reporting.
- IBM Project Manager: (Past Employee - 2010) “IBM - Look for the RA call every 3 months.” Pros: You have the ability to work remote. Cons: Lack of work life balance. Same ratings even if you work hard or perform average work. Benefits get scaled back each year. Advice to Senior Management: Stop outsourcing good resources to lower paying countries. You end up having to hire 3x as many resources to fill the knowledge gap that you RA'd out in the US.
- IBM Advisory Software Engineer in Somers, NY: (Current Employee) “Shrinking US workforce places excessive stress on current talent.” Pros: Solid, well known company. Performing well over the last few years ... they "beat" the recession. Lot's of information available to those who want it. Cons: US workforce has been shrinking for years, the typical development team has to coordinate with teams in India, China, and Brazil. Bonus and salary pools have been shrinking for years. Bonuses are typically prefaced with "Be happy you are getting a bonus, I had to lay two people off yesterday" Top appraisals being severely limited in the US and Europe. Management is unable to offer deserving people an appropriate appraisal. Advice to Senior Management: You can only improve your bottom line for so long without seeking organic growth as well. Top talent is fleeing and as such that organic growth will be more difficult. Encourage local teams where people can collaborate face-to-face more frequently.
- IBM Marketing Manager: (Current Employee) “Don't walk! Run!” Pros: Good compensation. Fairly easy to move around to gain job experience. Cons: I have never met so many incompetent high level managers in my entire life. I've worked in corporate america for a long time and at this point I thought I've seen it all, but apparently I was wrong. In the area I work, the workers are terrified of their high level management and cater to them constantly (they say jump and they jump whether it makes sense or not) - it's almost as if we're living in a dictatorship. Meetings and phone calls take up most of our time so we can't be productive but we sure talk a lot. Objective feedback isn't heard by management because people are too scared to speak their mind and the ones that do aren't really heard or eventually fired. The business is losing money but It's much easier to just talk than do something to make things better. If you're in a company getting acquired, you'll know what I mean soon enough but if you're actually wanting to start a career, look elsewhere. This is an awful place to work. Advice to Senior Management: Fire yourselves.
- IBM Customer Service Representative in Brno (Czech Republic): (Current Employee) “Easiest way to earn quick money.” Pros: A lot of things to learn, lots of training. Career path available. Good name on the CV. Easy way to get in. Cons: Salary is too low. Total bureaucracy. Technical incompetence of peers. Management shouts on people. Lots of stress. There is a gap between hiring story and reality. Advice to Senior Management: At least have some basic understanding of management. Currently it looks like good deal left from old times, but degenerating monthly. Most of people would fail ECDL test!!
- IBM IT Specialist/Architect in Burlington, VT: (Past Employee - 2009) “Other places are better.” Pros: Flextime is available, but that is almost a standard in the technical world, so I'm not sure it's much of a pro. Lot of smart people to work with, but I've found lots of smart people to work with in other places too. Educational opportunities, but such cost controls that one can never participate in really valuable education. Cons: No way for advancement without significant job change and likely a relocation. Money is sub par compared to other companies Poor morale due to severe cost controls that hit everything from "thanks" and other awards to simple team pizza lunches. Long hours and good work go unrewarded. IT equipment is sub par compared to other companies. Lack of resources to do the work. Constant feeling of impending doom as you wait for the outsourcing axe. Advice to Senior Management: Take some management classes. Be more creative rather than walking the corporate line.
- IBM Anonymous: (Past Employee - 2010) “Good work, poor opportunity.” Pros: Interesting and challenging work, smart people to work with, great opportunity to learn. Cons: Promotions are rarely given and salary increases are small, if given at all. The US work force is shrinking to cut costs. Advice to Senior Management: Pay more attention to what's in the long term interest of IBM's stakeholders instead of just focusing on short term satisfaction of Wall Street.
- IBM Anonymous: (Current Employee) “The good the bad and the ugly.” l Pros: Free Coffee, free tea, flexible working hours, uncensored internet at work, gym at the lab, tim hortons in the building. Cons: minimal raises, minimal bonuses, no overtime pay, constantly asked to work weekends, little feedback on work, company strategy not discussed. Advice to Senior Management: developers are easily bribed with technology, a frustrated developer is a grumpy developer and a grumpy developer is an unproductive developer.
- IBM Software Developer in Vancouver, BC (Canada): (Current Employee) “Good place to work.” Pros: Our team is small and we are left alone to do what we do best. Good management and a solid team = good place to work. Cons: Same as all large corporations, some decisions are made for political reasons. Also since we have zero turn over its hard to advance. Advice to Senior Management: N/A
- IBM Anonymous in Research Triangle Park, NC: (Past Employee - 2009) “Doing less with more.” Pros: Ability to work at home. Cons: Reduction in US employees means working with India, Argentina, Brazil, etc. Constant change and turnover of those employees. Lack of communication and management to the US employees; Micro management; Resource Actions - continuous reduction of employees. Advice to Senior Management: Understand that the employees who are performing the jobs need to be listened to - they are in the trenches and understand what is going on. Not everything can be done with a global view.
- IBM Senior Software Engineer in Austin, TX: (Past Employee - 2008) “Great benefits, awkward teams.” Pros: Benefits are wonderful. Lots of job security once you're in and doing well. They keep you till your old. Pay is pretty competitive. Team leaders are brilliant people. Cons: Extremely bureaucratic and political. You work with some developers who aren't the sharpest at their game, but surprisingly no one gets let go. Some code so slowly or use outdated tools it's amazing anything ends up working. Products ship with many deferred defects because some developers can't get their work done. Advice to Senior Management: Periodically train developers with new technologies or recommend tools to keep them from becoming inefficient.
- IBM Development Manager: (Current Employee) “Not a bad place to work...” Pros: Big company with lots of opportunity and chances to do new things. The are constantly adding new businesses, and it's not hard to get transferred if you're interested. Cons: They are very cheap! Make it very hard to do your job by not allowing you to buy hardware or software. Advice to Senior Management: Your lack of investment in hardware and lab resources makes it very hard for your software staff to build products and test them in real-world situations.
- IBM Project Manager in Austin, TX: (Current Employee) “Not a US company anymore.” Pros: Flexibility around managing my work day and time. Worked with great people. Good benefits package - health care, dental, vacation. Cons: Required many hours of un-paid overtime to meet project goals. Very few class-room training sessions available in the US. Only had access to on-line, self-directed training. Many, many US jobs being off-shored. Advice to Senior Management: Stop sending so many jobs overseas.
LinkedIn: The Greater IBM Connection. You have an Hour One on One with Sam Palmisano. What Would You Tell Him? (Selected comments follow).
- I left when I could see it was going to just get worse going forward (1989); having said that I received some Excellent training at IBM, almost all of my colleagues who elected to stay after the 06.28.1988 announcement of reductions/closure of Tucson and Boca Raton were let go prior to full retirement vesting....interesting...no ???
- I am one of many many former IBM'ers that are disgusted over the way we have been forced out. The old "Respect for the Individual" was trashed when Akers left. I understand the needs of the business, the issue is the style and lack of respect during the process. I think IBM has not anticipated the backlash from the tens of thousands of former IBM'ers who now influence IT systems, solutions and services decisions. I personally avoid the LOGO as much as possible these days. Far too expensive.
Huffington Post: When It Comes to Innovation, Is America Becoming a Third World Country? By Arianna Huffington. Excerpts: Once upon a time, the United States was the world's dominant innovator -- partly because we didn't have much competition. As a result of the destruction wreaked by WWII, the massive migration of brainpower to the U.S. caused by the war, and huge amounts of government spending, America had the innovation playing field largely to itself. None of these factors exist as we enter the second decade of the 21st century.
America now has plenty of countries it's competing with -- many of which are much more serious about innovation than we are. Just look at the numbers:
- A report by the Information Technology and Innovation Foundation looked at the progress made over the last decade in the area of innovation. Out of the 40 countries and regions it examined, the U.S. ranked dead last.
- A study on innovation by the Boston Consulting Group concluded that America is "disadvantaged in several key areas, including work force quality and economic, immigration, and infrastructure policies."
- In 2009, patents issued to American applicants dropped by 2.3 percent. Those granted to foreign-based applicants increased by over 6 percent.
New York Times: Growth of Unpaid Internships May Be Illegal, Officials Say. By Steven Greenhouse. Excerpts: With job openings scarce for young people, the number of unpaid internships has climbed in recent years, leading federal and state regulators to worry that more employers are illegally using such internships for free labor. Convinced that many unpaid internships violate minimum wage laws, officials in Oregon, California and other states have begun investigations and fined employers. Last year, M. Patricia Smith, then New York’s labor commissioner, ordered investigations into several firms’ internships. Now, as the federal Labor Department’s top law enforcement official, she and the wage and hour division are stepping up enforcement nationwide.
Many regulators say that violations are widespread, but that it is unusually hard to mount a major enforcement effort because interns are often afraid to file complaints. Many fear they will become known as troublemakers in their chosen field, endangering their chances with a potential future employer. ...

In California, officials have issued guidance letters advising employers whether they are breaking the law, while Oregon regulators have unearthed numerous abuses. “We’ve had cases where unpaid interns really were displacing workers and where they weren’t being supervised in an educational capacity,” said Bob Estabrook, spokesman for Oregon’s labor department. His department recently handled complaints involving two individuals at a solar panel company who received $3,350 in back pay after claiming that they were wrongly treated as unpaid interns.

New on the Alliance@IBM Site

To Alliance@IBM supporters: The Alliance is the only organization that advocates and supports IBM employees and ex-employees. In fact, there are few like it in the Information Technology field. It is always difficult to keep an organization like this alive, but as a supporter you know how important it is that we exist. We are calling on you today to help keep us alive another year by joining as a member or associate member. See our online forms below. As our membership has dropped, it is imperative that we gain new members or this organization and web site will cease to exist. Help us keep our organizing and advocacy work alive!
General Visitor Comments: Due to a lack of membership growth the comment sections will be closed until we see sufficient growth in full membership, associate membership or donations. Many of you that visit our site have not yet joined, but seem to value its existence. The only comment section that will remain open will be Job Cuts Reports. If you have information that you want the Alliance to know about please send to ibmunionalliance@gmail.com. Information of importance will be put on the front page of this web site. To join go here: Join The Alliance! or here: Join The Alliance!
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Job Cut Reports
- Comment 3/28/10: Severance in Canada - up to 3 weeks. I believe this can be at the discretion of the manager in some cases. Rule of thumb - If you get RA'd in Canada, directly ask if 3 weeks/year is an option or if anyone is getting 3 weeks/year. I think they can increase your severance from 2 to 3 weeks if they think you are going to make a scene in the workplace. I don't believe there is a Canadian law on severance, it is strictly by province....so it depends on what province you are in. -west coast canada-
- Comment 3/29/10: SWG WW support 20 ppl let go from our dept. Now 5 people working with 400 cases, no OT and waiting for India / China team to be trained so that we can be let go. Don't know whether to be happy that I have only 5 months with IBM or be sad that I will be unemployed in 5 months... I am an -IBM Slave-
- Comment 3/29/10: My last day is Wednesday 3/31/2010 after 29 years and 3 months working for IBM. I am 57 years old so that I am able to retire. I was a System X sales specialist in Upstate NY in General Business territory -Anonymous-
- Comment 3/30/10: As with most on here. My last day is tomorrow. Just short of 9 1/2 years here. 37 year old white male. Received from IBM the number of individuals released from my department with their ages and a separate page of who is keeping their jobs, also with ages. Not actual names, just an age and the number of people in that age keeping or losing their job.
  On the one hand I am elated to be leaving. At one point I went 3 years without a raise. Was told on 3 different occasions that I was going to be the replacement for the next lead in my department but 2nd line manager stepped in and over turned the decision by my first line so a friend could have the position instead. No training, no OT and no hope in site in ITD for any advancement.
  
  On the other hand, I am working in a convenient location that coincides with me being able to drop my children off at day care. I have a 401K Loan I am paying off which now since I lost my employment I will be forced to default on the loan which will cost me thousands next tax season. 2010 has shown to be a difficult year for me and my family. This was the one thing I thought I would not have to worry about. I guess things happen for a reason. What that reason is, is beyond me.
  
  I wish all of my fellow RA'ed brethren the best of luck. It is pathetic that one of the the big "3 letter" companies which is suppose to be part of the economic foundations of this country is so horrible to work for. I pray that this all comes full circle for IBM. -Anonymous-
- Comment 3/30/10: Reply to Anonymous commented on 3/20: you are not alone. Last year, my manager used RAd as a cover-up for unlawful discrimination as well. I, who belong to a protected class in my group, was only one terminated after my paternity leave. In fact, my manager hired another person to replace my position couple months ago. I talked to several lawyers and complaint to EEOC. Guess what, those racist managers are shielded by IBM's lawyer. -Singled-out-
- Comment 3/30/10: I was RA'd out of the blue a year ago (pardon the pun). My best to everyone tomorrow. If there is one thing I've learned, you each walk away with something that IBM has lost - integrity. That's priceless in my book -annonymous-
- Comment 3/31/10: Tomorrow will be my last day. I don't know why anyone let go would want to find their way back to this place. This was just a temp stop for me of 4 years and one of the worst experiences of my sales career. My sympathy for everyone's hardships whom have been let go. That said there are many better options out there. This wasn't what I thought it was. Good luck -Sweat Shop Victim-
- Comment 3/31/10: Next round of cuts occur 4-1 this one to include level 1 and level 2 managers.. some have already received their marching orders. The internal plan is for layoffs for each quarter. and GBS has been moved from an asset column to a liability and is scheduled to take at a minimum 20% each quarter... -Anonymous-
- Comment 3/31/10: To all those leaving today: Think of this as when one door closes, another one opens. I thought it was a lousy thing when I was booted but now I have a job that I never think about outsourcing or when my number will be up. IBM was a lousy experience for me. I have never seen so much favoritism by managers and so many suck ups in my life. Stuck in the same job for years while the favorites get to do whatever they want. Now I do whatever I want. Keep your chins up and move forward and remember, they will get theirs, too. -Gone_in_07-
- Comment 3/31/10: I have been with IBM for a little over 9 years. I started off as an SSR in the field then moved to a IT Specialist Position for the last 2 years. I was laid off March 1st. Luckily, I was able to find employment (better pay, better benefits) locally before my last day of work. I found out yesterday that they are replacing my position for a contractor (locally) for $30K more than what I was making - AND they're paying this person OT plus OT Shift Premiums. I was not laid off due to performance reasons and to hear this is absolutely disgusting. IBM doesn't care for their workforce. We're the backbone of their business. Those of you who can afford to look outside of IBM, do it now before you're just another statistic. -AnonymousCanuck-
- Comment 3/31/10: I got sucked into trying to get an IBM job during the 30 days. I got very far along in multiple interviews for a few great fitting jobs and thought I was in excellent shape to land something. Time went on. No decisions. I think they froze out the people on the RA list - especially towards the end. I feel like I just let IBM beat me up some more. After living through this process, I am glad to be leaving. Best wishes to all who got whacked. -lastshots-
- Comment 3/31/10: I've joined as a voting member today. My manager asked me to include in my PBC that I will work 12.5% above and beyond 40 hours/week - unpaid. There is one thing to work extra time if your work requires it occasionally. It is another thing to sign off a document saying you will. My work environment has gone from bitter to toxic. -*toxic*-
- Comment 3/31/10: I had my exit today after 25 1/2 years. I had never met this HR person before. I walked in and called her by name and she called me by the wrong name. Kind of funny. I am honestly happy and relieved and know that since I am not afraid to work, I won't starve. Good luck to all of us laid off for unfair reasons and for all those who will be laid off in the future. Best wishes. -Anonymous-
- Comment 3/31/10: The PLM group which was announced that it was sold back in October officially had their last day on 3/31. That means 692 more people cut from IBM. -byebyeblue-
- Comment 3/31/10: A friend who worked at home and reported to Poughkeepsie NY for the last 25 years handling contracts and computer support problems for IBM was told on March 1st along with several coworkers who worked from their home that today was their last day of employment. Manager called them from Phoenix Arizona and said that US contracts would now be handled in Argentina and to hand in their company lap top computers. Wondering how many work at home employees were not counted in the latest round of so called resource reductions? Is this what they meant by going Globally ? Elected US officials its now time to wake up and smell the coffee! -Gone in the USA!-
- Comment 3/31/10: So just like everyone else. I was RA'ed. Separation package had a sheet stating that my position was being eliminated and 1st line manager said the same thing. I have just learned that they hired 2 contractors to do my job. When I was told I could look for other employment within IBM during the 30 days of learning about my RA I find it odd that I was not aware that my OWN job was available to be filled. What a bunch of low lifes. Looks like someone else will be losing their job in my former department come June. -RA'ed in 2010-
- Comment 3/31/10: They did freeze the list all managers were told a week before the RA that all hiring including all approved hiring is frozen until after the RA has finished... the next round starts tomorrow / monday where level 1 and level 2 managers are on the block.. I confirmed today that RA's will be occurring each quarter this year.. and at a minimum 20% of GBS will be RA'ed. -celticht32-
- Comment 4/01/10: Is Palmisano above the law? He is RAing thousands of American workers cutting their jobs while at the same time taking stimulus money to create jobs and sucking up to Obama. What a two faced slimy jerk. I am ashamed to be associated with this slime ball company. -Sammy is a Slimeball-
- Comment 4/01/10: "I confirmed today that RA's will be occurring each quarter this year.. and at a minimum 20% of GBS will be RA'ed" I've heard, through the grapevine, that the next lay off will be in June. If 20% of GBS is laid off in 2010 -that's around 8,000 people. While I'm not doubting anything with this immoral company; was the source reliable, or just rumors? -Alliance Member-
Editor's note: Many more job cut comments resulting from the March 1st firings are available in the highlights from these weeks:

News and Opinion Concerning Health Savings Accounts, Medical Costs and Health Care Reform

Wall Street Journal: Companies Take Health-Care Charges. Deere Joins Caterpillar, AK Steel in Toting Up Costs of Overhaul; White House Disputes Accounting. By Kris Maher, Ellen E. Schultz and Bob Tita. Excerpts: In the wake of Washington's health-care overhaul, some companies are taking big one-time charges for anticipated costs, fanning tension with the administration over the legislation's impact on corporate America. Three companies that were among vocal opponents of the legislation have warned they would see an immediate impact on their earnings as a result of the loss of deductions on tax-free subsidies they receive for providing retiree prescription-drug benefits. ...
The subsidy has been controversial from the beginning. Companies have been able to receive subsidies even when retirees pay some or all of the cost of the prescription drugs, and have been allowed to deduct the cost of the benefits that retirees pay for. Now, they'll continue to receive the tax-free subsidy based on their retirees' contributions, but won't be able to deduct the amounts. "Companies not only get the get the subsidy tax-free, but they then deduct the amount. Our bill simply closes the loophole," said White House Press Secretary Robert Gibbs on Thursday.
Yahoo! IBM Pension and Retirement Issues message board: "Re: Ellen Schultz on health-care costs" by "madinpok". Full excerpt: The spin that AT&T, Caterpillar and Verizon are putting out about the "additional costs" of health care reform is really amazing. They claim they are taking these huge charges because of the tax law changes for Medicare Part D. But let's look at what really has happened.
Before Medicare Part D was created, these companies provided prescription drug coverage for their retirees, and paid for it out of their own (corporate) pockets.

Then, Part D came along, and to keep companies that already provided prescription benefits from dumping their employees/retirees into Part D and increasing the total cost to the taxpayer of Part D, Congress decided to give the companies a subsidy to continue their plans.

The Part D subsidy is 28% of the cost the company spends on prescription coverage for Medicare employees/retirees. On average, companies spend about $2000 per Medicare employee/retiree to provide these plans and thus get a subsidy of around $560.

The subsidy is a tax free gift to these companies from us, the taxpayers. The companies are allowed to deduct the FULL COST of the prescription coverage as an expense on their income taxes. Not just the $1440 they had to spend out of their own pockets, but they can also deduct the $560 we gave them!

The health care reform law changes this. Now, companies that receive the subsidy will not be allowed to deduct it as an expense on their income taxes. They can only deduct the $1440 of their own money that they had to spend.

For a company that pays a 30% corporate income tax rate (AT&T paid 32.4% in 2009; Verizon paid 10.5%), this will increase their taxes by $168 per year per Medicare employee/retiree. And these companies are claiming they can't afford that and may have to reduce health care benefits FOR ALL EMPLOYEES AND RETIREES in the future.

Can you say crocodile tears?

There is no reason they have to takes these charges now, since the tax changes don't go into effect yet. But this seems like a good opportunity for them to blame health care reform for benefit reductions they want to make anyway, or to hide other accounting shenanigans from investors.
Yahoo! IBM Pension and Retirement Issues message board: "Re: Ellen Schultz on health-care costs" by "fhawontcutit". Full excerpt: The subsidy is based upon what the employer spends for prescriptions drugs and WHAT THE EMPLOYEE SPENDS. (Caps for emphasis, not for shouting)
Ellen Schultz wrote about this back in 2004: http://online.wsj.com/public/resources/documents/SB107350927860976500.htm. Excerpt:

The new federal program calls for employers to be reimbursed for 28% of the cost for prescriptions of more than $250 per retiree, up to an annual subsidy of $1,330 per retiree, beginning in 2006. The subsidy will be significant at companies with thousands of retirees ages 65 or older, because prescription-drug costs make up a large part of the expenses that employers incur for seniors under their retiree medical plans.

Thanks to a little-noticed provision in the new law, the government will calculate the subsidy based on both what the employer spends for prescription drugs and what the retiree spends.

So if an employer and a retiree each pay $1,000 toward the retiree's medical costs, the employer's subsidy is calculated on the full $2,000, bringing the company a total subsidy of $490, rather than the $210 that it would get if it received a subsidy only on its share.

As a result, when combined with tax and accounting rules, the program allows employers in some cases to use the subsidy to erase the entire cost of prescription drugs for retirees, or even turn a profit from a drug plan. For instance, if a Medicare-eligible retiree's prescription costs are $2,550, and his former employer pays $1,000 of it, under long-standing tax rules, the employer can deduct its full $1,000 for tax purposes, meaning the after-tax cost to the company is $650 at a 35% corporate tax rate.

Meanwhile, the company doesn't pay taxes on the subsidy it receives, thanks to another provision of the new Medicare law. So in this example, the employer would receive a subsidy of $644, based on the full amount paid by both employer and retiree, reducing the company's cost for the retiree to $6 for the year.
Yahoo! IBM Pension and Retirement Issues message board: "Re: Ellen Schultz on health-care costs" by "madinpok". Full excerpt: You're right. I remember reading that back when Medicare Part D was created, but had forgotten about it. What a wonderful loophole for the companies. Not only do they get to deduct money the taxpayers gave them from their income, they also get to deduct money that the employees spend out of their own pocket.
Wouldn't it be great if we could all deduct money that other people spent on our own income taxes? The equivalent of this would be allowing retirees (some of them anyway) to deduct the $7,000 or so that IBM spends subsidizing their medical plan as a medical expense on their tax forms.

If we aren't allowed to do that, why should the corporations?
New York Times: Insurance Pool to Offer Reduced-Rate Coverage. By Robert Pear. Excerpts: In one of its first steps to carry out the new health care law, the Obama administration announced Friday that it was establishing a temporary insurance pool where uninsured people with medical problems could buy coverage at reduced rates. Kathleen Sebelius, the secretary of health and human services, said the program would “help provide affordable insurance for Americans who have been locked out of the insurance market.”
Federal health officials said the program would be available from late June of this year to Jan. 1, 2014, when private insurers will be required to accept all applicants without varying premiums on account of a person’s medical condition.

News and Opinion Concerning the U.S. Financial Crisis

"It is a restatement of laissez-faire-let things take their natural course without government interference. If people manage to become prosperous, good. If they starve, or have no place to live, or no money to pay medical bills, they have only themselves to blame; it is not the responsibility of society. We mustn't make people dependent on government- it is bad for them, the argument goes. Better hunger than dependency, better sickness than dependency."

"But dependency on government has never been bad for the rich. The pretense of the laissez-faire people is that only the poor are dependent on government, while the rich take care of themselves. This argument manages to ignore all of modern history, which shows a consistent record of laissez-faire for the poor, but enormous government intervention for the rich." From Economic Justice: The American Class System, from the book Declarations of Independence by Howard Zinn.

Vault Message Board Posts

Vault's IBM Business Consulting Services message board is a popular hangout for IBM BCS employees, including many employees acquired from PwC. Sample posts follow:

"Raises are effective 7/1" by "bigbertha92". Full excerpt: Don't expect a raise if you're a 2 performer. Only top contributors (1 & 2+) will receive a raise. The raise will most likely be around 1%. No kidding. Executives are not getting raises this year.
"IBM Just don't get it" by " Toa". Full excerpt: If you get the same money for a half ar*ed effort as you do for a good effort then why bother trying to do a good job! I've even seen 2+ being downgraded to a 2 because the manager didn't believe the 2+ was valid.
"Let's Go Global!" by "bigbertha92". Excerpts: Everything is "global" - from EO training to forced-by-mgmt-to-take IBM learning courses. Learn when no means yes, how not to be offensive, and watch slang!
We all have to play nice-nice with our GR (global resource) peers. and when your GR team lead sends notes to IBM US mgmt that they need MORE WORK from their US counterparts, IBM mgmt. rolls over and gives them more work. Reminds me of an old CCR song: Fortunate Son.

And when you ask them, how much should we give? Ooh, they only answer more! more! more. What a sad, pathetic, f'ng company.
"The Truth Can't Be Told" by "Frank_Reality". Full excerpt: Yes, even though the GRs in India can't handle simple tasks on time, with adequate quality and within cost, they are given more and more responsibility they cannot begin to handle. And of course when they screw up and fail as often happens, it's always the US teams' fault. It is pathetic (and clueless) to reward this incompetence with more work and more responsibilities.
What's more pathetic is how India is not held accountable since they are Sam's chosen ones and how anyone who reports problems with India are considered anti-team, racist and uncooperative.

The sacred cows over in India aren't cattle, they're the "office boys" pretending to be IT professionals working for IBM. What a sad, pathetic f'ng company indeed.

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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