I apologize for yet another OT posting, but this is an update of an earlier thread about IBM's efforts to "welsh" on the pension agreement it had with its long term employees.
For a while this had been blocked because of age discrimination claims as the long-term employees were older. IBM found a judge [what this cost was not announced] to rule that the discrimination was not age related, which is prohibited, but rather length-of service related, which is allowed. In other words, because IBM would treat employees that started working for IBM when they were 10 years old, the same as they were treating workers that started when they were 25 or 30 years old, there was no age discrimination.
This is a unilateral revision of explicit written agreement changing the pension plan from a defined benefit plan based on years of service with IBM to a cash-balance plan, and there was no offer by IBM to refund the wages foregone by the affected employees on the assumption of later pension payments.
In total this will result in cutting the long-term IBM employee pensions by 20 to 50%, which is the other way of saying it will save IBM 1.4 billion dollars. It is not at all clear what will happen to the 1.4 billion dollars hijacked from the pension funds.
It should be noted under this latest decision, there is nothing to stop IBM and the other corporations from reducing or eliminating their pension plans, as long as they screw all the employees equally.
This yet another warning to our younger workers that a corporation's or company's (or government's) promises mean nothing, even if these are in writing and signed by an officer of the corporation. As in the old joke, you will *NOT* be respected in the morning. Get the money up front, keep it in your name and under your control. Attaboys and certificates of appreciation do not put beans on the table or gas in the tank.
Unka George (George McDuffee)
...and at the end of the fight is a tombstone white with the name of the late deceased, and the epitaph drear: ?A Fool lies here, who tried to hustle the East.?
Rudyard Kipling The Naulahka, ch. 5, heading (1892).
no problem, I think everyone knows by now that this is not a metalworking newsgroup, it's a political newsgroup whose contributors are primarily metalworking folk
If we any leadership worth a dang we wouldn't have to even consider it.
GEEZ people we've GOT to take our country back !!!
Forget Republicans and Democrats.....they've sold us down the river.
By the way I notice on this new construction site I'm on...a big distribution center for a big well known clothing business....the contractor that is putting together the conveyor lines....they're crew is nearly all Mexican, don't speaky a word of english.
These are good paying jobs ! Not "jobs Americans won't do".......the biggest lie of the decade.
Just for interesting reading, I went back and read several FDR speeches from the 1930's. One common theme concerned manipulators like Lay as well as a variety of "schemes" where large corporations and investment firms made mountains of profit on the backs of the rest of us...it's not fair profits we're speaking of, it's gigantic profits by misleading people similar to Enron, large companies dumping their pensions on the public dole, manipulating commodity supplies, etc. History does repeat itself.
Yea, I know that most on the right see FDR as the devil himself and want all that happened during his time erased. However, even a "righty" might be interested in reading some of those old texts to see the kinds of things that corporatism and politicians in bed with each other caused. You may not agree with Roosevelt, but much of what is happening now is a repeat of what happened then with the result of a massive depression...a handful came out like bandits while the public generally had to scrape by.
I believe even Gunner would agree with much of the philosophy expressed by FDR (read it and decide for yourself), although not the implimention of policies.
Any idea if the installer is also the conveyor supplier? I'd be curious to know what company that is (we do some conveyors also so just poking my nose in).
And you are right..anyone who says "jobs that Americans won't do" actually means "jobs that Americans won't do for depressed wages".
There never was an explicit written agreement with employees.
That's not how corporations (and this one in particular) work.
The original conversion to defined contribution plan was done at the specific request of Lou Gerstner. There was a class action lawsuit by the folks who were just about to retire at the time, and IBM settled that one right away. They then rolled back their plans for a while because of the bad press. Apparently Lou was incensed that he had to kowtow, there was about to be a meet with a senator from Vermont when they provided another rollback on their plan which shortstopped the woodshed trip.
Another story was that they sized the plan to catch too many first line managers in the net. First line managers are like sargeants int he military - without them, nothing happens. If you piss them off, there will be trouble. The story was they sized the rollback to placate them especially.
The sorry thing was, he (gersnter) could have accomplished nearly the same thing by simply applying the 'new' pension rules only new employees. Being a hotheaded asshole he made them across the board - except for executive management, of course. Everyone knows that times they are a-changing and the issue of fairness was paramount for all employees at the time. There was a strong perception that the changes were unfair and that promises were broken. Not real promises, but the promise that the company was an equitable, sensible, fair place to work. It was _the_ wake up call for a lot of workers there.
Another issue is one of labor relations. The HR folks said that if they had not rolled back the pension takeaway, it would be a slam-dunk that a union would try to organize the company, and there was a better than even chance they would succeed. There was a huge push by the CWA to get a foothold in the door, and workers were quite receptive because of the feelings the company was out of control. The CWA put out a lot of mailings to the workers, and there were (are) a couple of web sites to organize employees - most not affilliated with the CWA, btw.
One of the fine points in the class action suit that was won (the one that is at this time reversed on appeal) that made it easy for the court to find against the company, was the fact that much of the 'savings' from the first takeback went *directly* to fund enhanced executive pensions. That's a matter of record.
Pensions are apparently a thing of the past. Nobody's looking out for you, Watson and Watson Jr. are dead and gone. It's a different company and you are on your own. I think that one main reason they did this right now is to attract new talent, and convince the older workers to get out. It had that effect. However the bloom is off the rose, and when prospective employees show up you can tell that they're put off by the repudiation of the company's former core values. The whole 'respect for the individual' thing. That's gone for the most part. As a result the hot new talent isn't showing up the way it used to. They can get abused elsewhere just as well. The ones that do show up find the new retirement benefits quite portable, as they were designed to be. So they're happy to go work elsewhere if the fancy strikes, or if the pay is an iota better.
The net effect of all the various changes is to destroy moral and destroy company loyalty.
That's OK. I need no court decision to tell me that the company overall does not care for its workers. That was clear the minute Lou Gerstner turned the lever that took the pensions away.
But wait a minute, that is exactly what a cash-balance plan normally does, it gives you some cash today rather than a promise of (much more) cash later.
Defined contribution (cash balance) plans are a raw deal for the worker. It is a plan that transfers all future financial risk from the company to the worker.
Read about what a fiasco San Diego city pensions has become. Seems there is a 1.2 billion dollar shortfall. They just paid some accounting firm
20 million bux to confirm this. All the while some city employees are getting nearly double in pension payouts than they were earning on the job. I do believe my property taxes are gonna be a little late this time around.
I don't have an opinion on cash-balance plans, but not all defined-contribution plans are cash-balance plans. And I doubt that all cash-balance plans are the same.
What is happening quite rapidly is that traditional pensions (a form of defined-benefit plan) are rapidly being replaced by various kinds of defined-contribution plan (including but not limited to cash-balance plans and 401Ks).
Leaving aside for the moment issues of evil companies, this is still a good idea. Why? Because a traditional pension plan (and anything similar) is a very shaky bet, a bet that my company will remain healthy and able to fund my dotage for the next twenty or thirty or even forty years, no matter what. This is a very brave bet.
Well, even if the management is evil, they usually don't want the company to die, but it happens all the time, for many different reasons.
If management is stupid, the company fails all the sooner, but evil versus saintly isn't the issue. If the world changes and causes the fundamental business model to fail, so will the company, and the management can do nothing about it.
And the management of failing companies often loots the pension plan, out of desperation, often with the best of intentions. But the pension plan is nonetheless broke, a ward of the state.
So, what to do? First of all, the money for my dotage must be out of the reach of desperate managers, be they evil or well-meaning. If they are evil, the ancient games to deny long-term employees their pensions often appear, but even if this isn't the case, the company may come into hard times. All this means that the money must be held by a third party, an independent fiduciary of some kind
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Second, if I force the fiduciary (or my company) to bear the financial risk of the stock and bond markets, the fiduciary will extract a very large price from my hide. The fiduciary will *not* lose money. That's a given. In fact, a fiduciary is almost forbidden by law to lose money. Think insurance companies and trust departments in banks. Not a good deal. So, I want to bear the risk myself, and be paid for it. After all, this is a retirement account, I have a time horizon in the decades, and compound interest is *very* powerful.
The advantage of 401K plans is *immense*, because the interest on the interest is not taxed until many years later. The explanation is quite mathematical, but even if the tax rate when the money is taken out is the same as while it was in the 401K plan (and thus not taxed), the deferral yields far more after-tax dollars that one would have if the tax were paid each year.
There needs to be competition, or we will reinvent Social Security, which is rapidly failing for two reasons. First, the demographics no longer work -- too many geezers, too few kids to support them. This will not change (unless we let many tens of millions of new immigrants in, which doesn't seem likely). Second, there is no way a government agency like SSA will ever be good at investing, and they will get far too much "help" from Congress -- choices will be political, not investment based.
This all means that the money is held in what amounts to 401K brokerage accounts, and is invested in some combination of stocks and bonds. I'm too busy to manage the details myself, so it'll have to be some kind of low-fee mutual fund, a fiduciary. And many people are just terrible at investment, so there would need to be a core that was managed by the fiduciary and not by me, to ensure that I don't blow it all on Enron futures.
Third, the most effective long-term investing strategy is called "dollar averaging", where one adds a fixed amount of money (typically a fixed percentage of income) to the retirement accounts month after month, year after year, without regard to the always varying states of the stock and bond markets. If one does this for oneself, it's called an investment plan. If a company does this for you, it's called a defined-contribution retirement plan.
So, to summarize, if I were King, Social Security and all pension plans would be replaced with 401K plans held by third-party fiduciaries, into which employees and employers would both tithe. The money would vest (belong to) the employee immediately upon payment, and could not be taken back by the company for any reason. One could move your account to another fiduciary or fiduciaries for any reason or for no reason, so the fiduciaries would be very motivated.
I can sort of relate to this nastyness because I worked for IBM in the
60's and 70's. Back then there was this whole gestalt that you are part of a family. Do good work and behave as a family member, and your IBM family will take care of you.
I should mention that, back then, I did hear good stories about how IBM went out of their way during the depression in the 30's to treat all their employees as good as possible and not drop or selectively penalize anyone because of the horrible economics.
For my own reasons, I left the fold and joined others who were writing off long-term promises for short term possibilities. It turned out to be a good time to go it alone, and after some years with great satisfaction from accomplishments, more than one job, I eventually got lucky and am pretty well set.
Now, pretty much all the companies treat, or want to treat, their employees as disposable assets. If IBM can do it, expect pretty much all companies to do the same. Ethics and long term promises to employees seems to be volatile and disposible.
Trust the long-term promises from your employer with similar odds that your marriage will be existant and happy after 10's of years.
It could happen, but the odds are more and more against it.
Yes, I don't think 401K funds are in jeporady. The whole 401K thing is just a way to defer taxes. I can't see any way even the most greedy politician could or would rape these tax benefits. They are more likely to continue to rape and mismanage your alleged SS benefits.
Of course a 401K is a personal investment. It has the same risks as any other investment. Employers frequently offer stock bonuses for their own stock. This can be great but if you leave all, or a lot, of your eggs in one basket you are exposed. No one prevents you from being stupid with your money and if your program doesn't have sufficient good investment options, you could get into trouble.
I'm not sure, but I think, you should be able to move your assets from a company-managed 401K into your own 401K if you are nervous.
The 401K is fine with its tax deferral, but suffers the same risks as any other investment. Lots of foolish people get in trouble by removing a big chunk of money from a 401K early without understanding the tax issues.
The IBM raw deal is for older workers who planned their retirement strategy based on the pension plan promised when they hired on. Switching them to a cash-balance plan late in the game screws them out of what they were led to believe was an entitlement for long service as deferred compensaton during that long service.
When the good company where I'd happily worked for 35 years got "modern" with acquisition and greed-driven nest-feathering top management in 1999, I retired early. I grabbed my pension, such as it was at age 57, and ran. I've never for a second regretted that decision.
Companies have never owed the worker anything more than promised. I had no problem with that. Bidness is bidness, a deal's a deal, pick yer pony and take yer ride. Now many companies don't seem to think they owe even what was promised, do whatever they can get away with to screw employees, customers and vendors.
A cash-balance plan really does make most sense in this environment, because it requires no trust of the employer. Take yer cash and manage it yourself. No problem for younger workers who have time to make it work, if they can forgo instant gratification enough to make it work.
Things do change, but changes in tax law are rarely punitively retroactive. It wouldn't be politically smart to advocate such a move. That said, ya do gotta keep paying attention but that's always a good idea.
Whether this cellphone generation will "have time" to pay attention may be another matter......
You cut off the last part of that statement which reads....
".....unless, of course, you are Barney Frank or Ted Kennedy - in which case any mention of said behavior by left-wingers will be treated as so much right wing political muck-raking."
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