Home

Page 2
Page 1

2002:
Page 4
Page 3
Page 2
Page 1

2001:
Dec.
Nov.
Oct.
Sept.
Aug.
July
June
May
April
March
Feb.
Jan.

2000:
Dec.
Nov.
Oct.
Sept.
Aug.
July
June
May
April
March
Jan., Feb.

1999:
1999

Pre-1999:
Pre-1999

NEW YORK -- The Ontario Securities Commission and the Toronto Stock Exchange have begun proceedings against 22 individuals and RT Capital Management Inc., the pension and investment management arm of Royal Bank of Canada, after a year-long investigation into alleged stock-price manipulation.

Royal Bank is the country's largest in terms of assets.

The commission alleges that nine employees and directors violated the Ontario Securities Act. The allegations involve "high-closing trading" on 26 stocks in 1998 and 1999. High-closing trading is a practice aimed at boosting the closing price of a stock to prop up the value of an investment portfolio at the end of a quarter. Regulators consider it a form of stock-price manipulation.

FAIRFIELD, Conn. (AP) -- At least three of the unions representing General Electric Co. workers urged their members Wednesday to accept the company's final contract offer.

The old contract expired at 12:01 a.m. Monday. The new agreement, which would last through June 2003, was endorsed by negotiators for the International Union of Electronic Workers, the United Electrical Workers of America and the International Brotherhood of Electrical Workers.

In all, 14 separate unions representing about 40,000 employees are negotiating with the company under an umbrella Collective Bargaining Committee. Together, the IUE, UE and IBEW represent about 28,000 of those workers.

The proposed agreement is the company's final offer and includes improvements in pensions, job security and wages and holds the line on health care costs, IUE spokeswoman Lauren Asplen said.

The proposal offers pension increases of about 15 percent for current workers who retire under the new contract, Asplen said. The agreement could add as much as $3,000 to annual benefits, she said.

The offer also would double the warning time GE would have to give before plant closures, from six months to a year.

Wages were not a significant issue, since GE usually provides a strong economic package in its contract offers, Asplen said.

But the union rejected company initiatives to transfer a greater share ofhealth care expenses to the workers, and those demands were not included in the company's final offer, she said.

DENVER, June 28 (Reuters) - Qwest Communications International Inc. and its merger partner U S West were scheduled to meet on Wednesday with the Arizona Corporation Commission to clarify language on pension and health benefits once the merger goes through.

Language was added by one Arizona commission member saying the merged company will continue to honor commitments to retirees' pension and health benefits.

The 16,000 U S West retirees are afraid the new company will try to "wiggle out" of its obligations to pensioners, Nelson Phelps, executive director of the Association of U S West Retirees told The Denver Post.

"HARTFORD, Conn., June 27 /PRNewswire/ -- Americans are interested in expanding their Internet use beyond buying the latest CD or book and are looking to the Web for access to their pension and 401(k) plans, according to a study released today by CIGNA Retirement & Investment Services.

"The CIGNA-sponsored national survey reveals:
More than one-third (35%) of employees who have Internet access at home have access to their retirement information online; 38% of those who have Internet access at home, but don't have online access to their retirement information from their employer, say they would like to have it online.

"The survey also found that 38% of individuals ages 18-24 expressed the greatest interest in receiving Internet-based retirement information from their company, rather than through phone and paper-based methods, followed by 35% ages 35-49; 32% ages 25-34; 29% ages 50-64; and 28% over 65.

"The results of the survey reflect an increasing interest among employees in gaining greater control over their retirement situation by becoming more proactive in different aspects of retirement planning."

All we get are obscure choices (other than DUK). Even timely quotes are impossible to obtain. Talk about missing the boat on every issue.

OSHA has unveiled the Workers' page. It offers electronic complaint filing, a library, a news room, regulations, links to other federal sites, and more.

OSHA Site

In the battle for workforce share, employers are throwing millions of dollars at costly new amenities such as pet walking and concierge services. But simply providing new perks won't do any good if employers don't first pay attention to basics, according to Aon Consulting's newly released research on workforce commitment.

The fourth annual United States @Work(TM) study (formerly known as "America @ Work"), conducted by Aon Consulting's Loyalty Institute, surveyed 1,800 workers about what keeps them committed to their workplace.

"Organizations need to take a good, hard look at the basics before launching new and trendy benefits or other human resources practices," said Dave Stum, president of Aon Consulting's Loyalty Institute. "Start by ensuring that you offer a safe, secure work environment and equitable compensation and benefit packages," advises Stum. "These are your foundation, and there's no sense building upon a foundation if it's faulty."

The stakes of keeping workers are high, considering that the cost of replacing an employee in today's market is roughly one half of that person's annual salary - a figure that doesn't include the loss of intellectual capital that results from each departure.

Aon's survey uncovered some surprisingly fundamental practices that will help management navigate the current retention crisis - America's tightest labor market in more than 30 years.

Among the key findings from this year's survey: management's ability to create a "sense of pride and spirit" in an organization is the most effective way to recruit, retain and motivate a high-performance workforce.

"American companies have fueled the `Me, Inc.,' attitude of the last decade because they have not given employees a reason to be committed to the organization," said Stum. "Unless employers build pride in their organization, employees will continue to be lured away by small pay increases and glitzy benefits."

According to the United States @Work research, workers whose organizations took measures to create a sense of spirit and pride were much more likely to recommend their employer as one of the best places to work. Stum notes that building a sense of spirit and pride among employees is an effective step toward unifying individual, team and organizational goals.

To help employers map out the steps to creating a committed workforce, Aon has created the "performance pyramid" of workplace practices. This five-level pyramid of sequential steps helps management determine where to begin:

-- Safety and Security, addressing the basic needs of a safe, non-threatening work environment;

-- Rewards, including pay and benefits;

-- Affiliation, identifying with and having a sense of belonging to the organization--a critical step in building pride and spirit among workers;

-- Growth, including an environment where workers are being challenged and learning new things, and employees feel they have a role in helping the company grow;

-- And finally, at the top of the pyramid, Work/Life Harmony. Do workers believe their personal and work lives are in harmony?

While all five levels are important to commitment and retention, the key is for organizations to pinpoint where the workforce is not having its needs met. Improvement at that level will provide the greatest return on human resource and workplace practice investment in terms of increasing workforce commitment. Only then should management assess its performance at the next level.

Aon's United States @Work study found that employees who were satisfied at all levels of the performance pyramid were the most committed to the workplace. People who did not feel safe or secure in the workplace had a Workforce Commitment Index(TM)(WCI) (TM) of 55. In contrast, those who felt confident in all areas including work/life harmony had a WCI of 109.

The WCI is an annual measure developed by Aon Consulting's Loyalty Institute to track employee loyalty and the business practices that drive it. It is based on six questions asked in the areas of productivity, pride and retention. This year, the overall WCI is down to 98.8, from 100.3 one year ago. The study was benchmarked at 100 in 1997, the first year it was published.

Other Findings

Aon's United States @Work study found that workers who do not feel safe and secure - including being harassed or feeling like they were going to be fired or downsized without warning - are the least committed. Workers who don't feel that their pay or benefits are adequate were also lower on the commitment scale.

Overall, nearly 20 percent of American workers feel their pay and benefits are below expectations, and 13 percent feel they are not safe and secure in the workplace. The percentage of satisfied employees drops dramatically in companies that have gone through downsizing. In these organizations, 27 percent feel their benefits plan is below expectations, and one-third do not feel that their jobs are secure.

In 1999, nearly 15,000 American companies (14,909) laid off at least 50 workers, according to the U.S. Department of Labor.

"Management gurus pretty much agree that trust in the workplace has been eroding since the 1980s, largely due to the layoff and acquisition binges and the accelerating pace of change."

"NOW THAT IT'S GONE, many workplace experts are waking up to how important trust is, especially in a tight labor market. The Aon research shows that trust is such a basic requirement that without it a company's other benefits and programs won't raise employee commitment very much. Watson Wyatt also found a correlation between trust and profit. Companies where employees trusted top executives posted shareholder returns 42 percentage points higher than companies where distrust was the rule."

"A common view among managers is that it's unwise, impractical or impossible to try to cultivate trustamid nonstop change and reorganizations. But that's a misfire, says the Loyalty Institute's David Stum. "The American worker knows quite well that change is never-ending. How it's handled is what can lead the worker to be secure or insecure." The basic question, Mr. Stum says, is, "Do I trust my company to be fair and honest as it goes through changes?"

Having already seen earnings boosted by stock-market-fueled pension-plan surpluses, some financial-service firms are finding more ways to use employees' retirement funds to add to their bottom line.

Cross-Border Investing Is Nearer for Europe's Big Pension Funds

Beginning July 1, 46,104 participants in Bank of America Corp.'s $4.7 billion 401(k) retirement-savings program will have a one-time option to roll their accounts into the company's roughly $8-billion-in-assets pension plan, joining thousands already holding this option. While there are some advantages for employees in making the switch, one clear benefit belongs to the company: The new assets likely will generate far more in investment returns than the company ultimately will be obligated to pay out to the employees. This will help to generate pension "income," which, through an accounting wrinkle, could help boost the Charlotte, N.C., bank's earnings this year and in years to come.

Other companies are watching to see what happens under the new arrangement. If no regulatory impediment arises, it could trigger a wave of asset transfers from 401(k) programs into pension plans, pumping billions more into already-overfunded pension plans, pension experts say.

An official at Bank of America noted that the new option is one of many changes being made to the company's pension and 401(k) plans as a result of NationsBank Corp.'s 1998 merger with Bank of America, including simplifying and changing the contribution formula in the company's newly combined "cash balance" pension plan and improving the 401(k) contribution for the newly combined 401(k) plan. "The aggregate design of the revised retirement plans will result in an increased cost for the company over time," said Valerie Usilton, senior vice president of personnel at Bank of America.

Bottom Line Boost

Just prior to the merger with Bank of America, 74% of the participants in NationsBank's 401(k) transferred $1.4 billion of their money into the pension plan. Via pension income, the infusion increased Bank of America's operating income by $13 million in 1998, when the bank posted pretax profit of $8 billion, and $25 million in 1999, when pretax profit was $12.2 billion, according to the company. Total pension income was $28 million in 1998 and $149 million in 1999. A company spokeswoman said that the pension income was "an insignificant percentage of the bank's pretax income" in both years.

In a 1998 internal memo dealing generally with the subject of 401(k)s rolled into pension plans, consultants at benefits-consulting firm Towers Perrin noted, "From an employer's perspective, the motive for this arrangement is financial. ... From an employee's perspective, the motives for electing a transfer aren't so clear."

Gordon Gould, chief actuary of Towers Perrin, said, "To the extent that, long term, a company can leverage assets and reduce pension costs," it's a win-win situation for both employer and employees.

While companies usually don't draw attention to it, many bottom lines have benefited during the past several years from pension income. Thanks to the bull market, the expected returns on pension assets have exceeded many plans' annual costs, and, under accounting rules, this leads to income-statement relief. Benefit cuts also have played a strong role in reducing pension expense during the past several years.

'Virtual' Mutual Funds

Bank of America employees who move their 401(k) money into the pension plan will be able to allocate it among "virtual" mutual funds, which are hypothetical portfolios tracking the return on the bank's in-house mutual funds currently offered in the 401(k) plan.

The "virtual fund" concept is raising eyebrows at the Securities and Exchange Commission. "It's highly controversial. At the very least, there are disclosure and registration requirements" that could be triggered, one regulator said. "We're looking to see if it involves securities laws issues." The Bank of America spokeswoman said the company received all the necessary regulatory approvals for its new plan.

The arrangement raises a novel potential conflict of interest: Bank of America stands to earn a bigger investment spread if employees who transfer their 401(k) money choose the most conservative options, which often isn't in the best interests of employees saving for the long term. The ideal situation for the bank would be for all the employees to invest in low-risk funds, said Norman Stein, a law professor at the University of Alabama at Tuscaloosa, Ala. "They'd be nuts to encourage employees to invest in stocks," he said.

Exposure to Funds With Stocks

The Bank of America spokeswoman said the bank will provide extensive investment guidance and won't steer people to too-conservative options. She noted that 19% of the 401(k) assets are invested in fixed-income or money-market options, while 79% are invested in mutual funds that include stocks as part or all of their investments, and company stock. The default investment option for employees who make no investment election is the stable-capital fund, which has returned an average of 6.13% over the past three years.

One benefit for employees who transfer their 401(k) savings into the pension is that the value of the amount they transfer is locked in as of the transfer date, a benefit stemming from federal pension law. So, if someone transfers, say, $10,000 from his 401(k) plan, he is guaranteed he can ultimately withdraw $10,000, regardless of the investment performance of that money. Another motivation for transferring 401(k) money into the pension plan: The employees will be able to borrow their money from the pension plan, but no longer will be allowed to borrow from their 401(k).

Even though the employees' transferred money will be in the virtual funds, the actual fund shares currently owned by participants in the 401(k) program will be transferred into the pension plan. As a result, asset levels in the real mutual funds won't be disrupted by switches, and the bank will continue to earn investment-management fees, which are based on assets under management, from them.

As Americans flock to the Internet to investigate nearly every problem of modern life, lawyers are greeting them with invitations to sue someone. Skeptics of the plaintiffs' bar might call this development online ambulance chasing. Legal-ethics experts, however, say that like old-fashioned advertising on billboards or in the Yellow Pages, Web solicitation is, in most cases, constitutionally protected speech.

A former money manager for New York Life Insurance Co. on Wednesday sued the company on behalf of participants in the company's pension and 401(k) plans, alleging that the insurer broke federal laws when it diverted millions of dollars from the plans to jump-start a group of company-owned mutual funds.

The case is likely to add steam to the burgeoning debate between large corporations and their employees over how retirement money should be managed.

Federal rules permit financial services companies such as New York Life to invest workers' retirement assets in their own mutual funds, legal experts say. But workers' advocates said the New York Life case raises questions about potential conflicts of interest when companies profit from the management of their workers' money.

The suit, filed in U.S. District Court in Philadelphia, alleges that many of New York Life's MainStay Institutional funds, started over the last decade, depend on the captive retirement account assets for their business. That has cost plan participants because the fund fees they've paid have been higher than what they could have paid other money managers or mutual funds, the suit says.

The insurer allegedly shifted $385 million in pension plan assets into the new MainStay funds in 1991 and an additional $125 million in 401(k) assets in 1994 and 1995.

Fees on the funds helped compensate New York Life executives, who put their needs ahead of the workers participating in the plans and breached their duty under the Employee Retirement Income Security Act, or ERISA, the suit contends. By using the pension and 401(k) assets to the company's benefit, the suit alleges, New York Life executives also violated the Racketeer Influenced and Corrupt Organizations Act, or RICO.

Sprenger & Lang, one of the firms representing Mehling, filed a similar suit against SBC Communications Inc. in April on behalf of employees of its Pacific Bell subsidiary.

Mehling, of Pennsylvania, was fired in March 1999 and sued the company in October over his own retirement benefits. Mehling said in an interview that he was fired over an e-mail memo he sent to top managers questioning some New York Life investment practices. His lawyers amended the suit in Wednesday's filing, bringing the new allegations relating to the retirement plan investments.

NEW YORK -- Federal prosecutors Wednesday charged 120 people, including members of all five reputed New York City organized crime families, in one of the biggest securities-fraud cases in U.S. history.

They then sought to control and infiltrate broker dealers to defraud union pension plans, using traditional "boiler-room" operations and Internet techniques to carry out their crimes, prosecutors said in a statement. When those techniques failed, they resorted to threats, extortion, physical intimidation and the solicitation of murder to further their goals, they said.

WASHINGTON -- The Supreme Court made it easier for employees to prove they were victims of workplace age discrimination.

Ruling unanimously Monday, the justices said a 57-year-old worker at a Mississippi toilet-seat manufacturer offered sufficient proof that he was fired because of his age.

Writing for the court, Justice Sandra Day O'Connor said indirect evidence of bias can be enough to prove illegal age discrimination. Cases can be bolstered, O'Connor wrote, when workers can show their employers' reasons for the firings were bogus.

"A plaintiff's prima facie case, combined with sufficient evidence to find that the employer's asserted justification is false, may permit the trier of fact to conclude that the employer discriminated," O'Connor wrote.

The case involved Roger Reeves, who worked at Sanderson Plumbing Products Inc. for four decades before he was dismissed in 1995 for what the company said was "shoddy record-keeping." He was replaced by a younger worker. Reeves sued, claiming the company was motivated by his age. One piece of evidence: A supervisor complained only months earlier that Reeves was "too damn old to do his job" and "must have come over on the Mayflower."

The ruling comes as the number of job-bias complaints has soared in recent years. The Justice Department said there were 21,540 employment discrimination suits of various stripes filed in federal district courts in 1998, three times the number filed in 1990.

Reeves claimed his Columbus, Miss., employer violated the Age Discrimination in Employment Act.

Sanderson Plumbing said Reeves and another supervisor were dismissed after an audit found they had falsified and made errors on employee attendance records.

A jury sided with Reeves, and he was awarded $98,400 in damages and lost wages.

But the Fifth U.S. Circuit Court of Appeals threw out the award last year. The appeals court acknowledged the reasons the company gave for firing Reeves might be untrue, but said Reeves had nonetheless failed to offer "sufficient evidence" of age discrimination.

Reeves' attorneys had argued that because he was replaced by a younger worker, and because there was evidence Sanderson lied about why Reeves was fired, there was "a logical inference that age is the reason for termination." Any doubts, they said, should be decided by a jury.

The government filed a brief backing Reeves' appeal.

"In rejecting the jury's verdict, the court of appeals improperly invaded the province of the jury," Justice Department attorneys wrote.

A pension revolution is sweeping the USA.

It has attracted union members and white-collar managers, retirees and workers of all stripes. Their weapons range from shareholder resolutions and lawsuits to old-fashioned rabble-rousing demonstrations. Whether they are battling a controversial cash-balance pension plan or pushing for a cost-of-living increase, they have a common goal: retirement security.

Some examples of the militancy:

To protest IBM's new cash-balance pension plan, employees flew a banner over the company's plant in Austin, Texas, last summer when CEO Louis Gerstner was visiting. It said: "Hey Lou, thou shall not steal."

About 100 General Electric retirees and workers rallied the day before the company's annual shareholder meeting in Richmond, Va., last April. They carried placards and wore lime-green T-shirts emblazoned with one of their goals: a minimum of $26 per month, per year of service for all retirees.

In May, nearly 10,000 current and retired New York state workers demonstrated across from the State Capitol in Albany to press for permanent cost-of-living increases.

The pension movement is powered by such people as Helen Quirini, 80, who worked at General Electric's plant in Schenectady, N.Y., for 39 years until she retired in 1980. Years ago, she became a union activist to combat discrimination against women. Now, she's fighting for better cost-of-living increases for GE retirees. "A lot of my fellow retirees are (military) veterans. What a hell of a way to treat them. We built this company. We built this country, damn it."

It may seem odd that the pension movement has emerged when jobs are plentiful and millions of Americans have seen their retirement savings enriched by a long-running bull market. But the good times are fueling the discontent.

Those same stock market gains, combined with smaller, downsized workforces that require smaller pension outlays, have created huge pension surpluses at many U.S. companies. For example, GE has $50 billion in pension assets, about twice as much as it expects to need to meet its pension obligations.

"It is shameful that our pension fund has a $24.7 billion surplus while retirees are being paid such pitiful pensions," says Quirini, who receives a pension of $736.60 a month.

GE says that it has given retirees six increases since 1980, including one in April. "We think our pensions are equal to or better than most of our competitors,' " spokesman Gary Sheffer says. But Karen Friedman, director of the Fairness Project at the Pension Rights Center, a non-profit advocacy group, says corporations with big pension surpluses shouldn't aim for the lowest common denominator. "They should be leading the way."

As of Dec. 31, the average company in the Dow Jones industrial average had $123 in pension assets for every $100 in liabilities, according to Gordon Gould, chief actuary at Towers Perrin, a benefits consulting firm. That's a sharp increase from an average of $104 in assets per $100 in liabilities a year earlier.

Companies have good reason to want to hold on to their pension surpluses. Although they generally can't plunder excess pension income without getting hit with a big excise tax, they can add it to their bottom line, thereby boosting earnings - and perhaps drive up the stock price. In 1998, pension income accounted for 3% of operating income at the companies in the Standard & Poor's 500 index, according to a study by Pat McConnell, an accountant at Bear Stearns.

Pension surpluses aren't the only catalyst for the pension movement. Among others:

The graying of America. By 2030, 20% of the population - 69.4 million people, most of them baby boomers - will be 65 or older.

The Internet. Access to the Web has enabled millions of workers and retirees to quickly share information, organize and mobilize. "We can move a lot of material a lot more quickly than if we had to wait for the postal system or fax machine," says Paul Edwards, chairman of the Coalition for Retirement Security, a national grass-roots organization. "We're firing on all cylinders." The coalition's Web site: www.pensions-r-us.org.

Greater awareness of retirement issues. The explosion in self-directed 401(k) retirement savings plans has put the onus on workers to learn more about retirement and investing, says David Certner, senior coordinator in economic issues at AARP.

Broken promises. Many workers and retirees say they have gotten involved in the pension movement because they feel betrayed by cuts in benefits.

Last year, IBM sparked an employee backlash when it announced plans to switch its pension plan to a cash-balance plan, a change that could have saved the company $200 million a year. Cash-balance plans favor younger, mobile workers, because benefits build steadily each year, and employees can usually take them if they leave the company. Older IBM workers had the option of keeping the traditional pension plan, but many midcareer employees complained that they were being shortchanged.

When Rep. Bernard Sanders, I-Vt., held a town meeting last summer to discuss the pension plan, about 700 employees from IBM's Burlington plant attended. "That was unprecedented," says Jimmy Leas, an advisory engineer who has worked for IBM for 18 years. "Employees never had a tradition of organizing on their own."

Last fall, the company agreed to revise the plan so that anyone 40 or older with at least 10 years of service could remain in the old plan. "We listened to our employees and adjusted our plan accordingly," says spokeswoman Jana Weatherbee, who also notes that the $200 million savings was used to increase salaries and provide stock options for more employees.

But the controversy didn't end there. In April, employees introduced a shareholder resolution at the company's annual meeting to let all workers choose the old plan. Though it fell short of a majority, it received nearly 30% of the vote. Now there is a movement to unionize workers at IBM.

White-collar activism

At other companies, managers are also starting to organize around pension issues. "There has been the birth of a new form of white-collar activist," says Friedman, of the Pension Rights Center. "That is going to have an impact on Corporate America in ways we haven't seen in the past."

Ray Larson, who retired from US West in 1993 after 39 years with the company, doesn't consider himself an activist. But he got involved with the US West Retiree Association because the company hasn't given retirees a cost-of-living increase in about 10 years. While inflation eats away at retiree benefits, the company sits on a $5.7 billion pension surplus, he complains.

"I was a management person, and I told the people I supervised that we were paying lower salaries and wages than comparable jobs because part of the money was going into the pension plan," Larson says. "I don't think the company has treated us fairly. We have some older retirees who are right on the verge of poverty."

US West says its retirement package has been ranked among the nation's best by Towers Perrin. "And the surplus is a good thing," says spokeswoman Audrey Mautner. "It provides the security that earned pension benefits will be there when retirees need them."

Now that US West is planning to merge with Qwest Communications, the retiree group is concerned that the pension surplus will go to Qwest employees, who have no pension plan. The retirees have asked public utilities commissions in several states to intervene and protect the pension surplus. At a hearing June 6, the Minnesota Public Utility Commission approved the merger without responding to the retirees. "We have three more states to go," Larson says. "We haven't given up."

Getting organized

The Coalition for Retirement Security helps groups mobilize to get improvements in retirement benefits. "The only way to make significant changes is to have movement on all fronts: litigation, legislation and education," Edwards says.

Coalition members include the Bell Atlantic Coalition for Retirement Security, the AT&T Concerned Employees Council on Retirement Protection, the Association of Former PanAm Employees and New York Transit Police retirees.

Their goals range from improving retiree pension benefits to recovering benefits they say they've been denied. For example, about 23,000 former PanAm workers say they lost 34% of their benefits after the company folded in 1991.

While some groups are concerned about the impact of company mergers on their pensions, others are battling cash-balance pension plans imposed by their employers. And at least two lawsuits accuse companies of mishandling 401(k) plans.

That is another battleground for the Pension Rights Center, Friedman says. "We're fighting on two fronts. We want to expand coverage to companies without pensions, but we also are trying to say that where there are pension plans, they should be fair and adequate and keep the promises they make."

Cash-balance plans debated

The focus of some of the most heated pension battles today is the cash-balance plan.

Employees who have spent years at a company, however, complain that they lose out. And some pension experts say the plans discriminate against older workers.

The Equal Employment Opportunity Commission is investigating the plans, and the IRS has put a moratorium on approval of any more cash-balance plans while it reviews whether they qualify for favorable tax treatment.

Employees at many companies not only complain about the structure of cash-balance plans, but some say there has been a lack of clear disclosure about them.

Are you in a 401(k) plan that invests heavily in your own company's stock? You, and your company, ought to take another look. You're gambling with your future, at doubtful odds.

So far, most employees have loved their stock. By the tens of thousands, they've hit the jackpot and retired well. Oh, to have had half your money in Intel or General Electric for the past 10 years.

But that's hindsight. Going forward, you have no idea which stocks will be successful and which won't. The more you depend on a single stock, the greater the risk of a ruinous loss.

Consider Cendant Corp., the consumer-finance firm. After a merger in 1997, phony accounting came to light. The stock price was promptly chopped in half--sad, for those near retirement who had chosen it for their 401(k)s.

And consider IBM, whose stock price plunged by two-thirds in the years after the 1987 crash. A planner told me about a client, an IBM retiree, who used to take walks past the house he'd planned to buy but no longer could afford.

By law, employee retirement plans can hold as much company stock as they want. Your regular contributions might be matched with stock. Or you might buy it with the money you put in.

Some plans are more than 50 percent invested in company stock. At Coca-Cola, it's a whopping 83 percent. In firms with Employee Stock Ownership Plans (ESOPs), all of your money typically goes into the stock.

That's incredibly imprudent, by any normal investment standard, says Norman Stein, law professor at the University of Alabama in Tuscaloosa. The company thinks you'll work harder if you feel like an owner. But what's good for the company isn't always good for you.

In theory, 401(k) plans have a duty toward the employees. The company is supposed to put your interests first. If it doesn't, and you lose money, the company could be liable.

There's hardly any law in this area yet. Most 401(k)s have done so well that workers haven't had anything to gripe about.

But if employees lose money because of the way a company handles its plan, I predict that they'll call the lawyers in.

Already, some ESOPs have been hauled into court. These plans are designed to specialize in company stock. But judges have let employees sue, if the company was failing and the plan's trustees still kept your money there.

The courts are also looking at the tricky question called "self dealing." What does it take, to show that a company twisted its 401(k) to serve its own corporate interests?

Two cases are currently testing these waters, both brought by the Washington, D.C., law firm, Sprenger & Lang.

One case involves 45,000 workers whose firm was merged into SBC Communications, the nation's largest local phone company. In their previous 401(k), these workers had owned stock in AirTouch Communications. But SBC competes with AirTouch and--not surprisingly--got rid of it. Employees got SBC stock instead.

As luck would have it, AirTouch soared and SBC fell. So the workers screamed. SBC says the sale was routine, and that the company had a legal reason to sell. That's what's being tested in court.

The second case involves the First Union Corp., a major bank based in Charlotte, N.C. First Union manages its own 401(k) as well as a number of 401(k)s for outside firms.

The lawsuit alleges that the captive, in-house plan is forced to pay higher fees than comparable outside plans. What's more, the in-house plan offers only First Union mutual funds--mediocre funds, offered chiefly for the bank's benefit, Sprenger attorney Eli Gottesdiener claims.

First Union's attorney, Gregory Braden, of Alston & Bird in Atlanta, denies the charges and says First Union's funds were chosen "with the primary goal of maximizing performance."

So far, suits against 401(k) plans have been rare and rarely won, says David Wray, president of the Profit Sharing/401(k) Council of America in Chicago. Most of the plans have been well run. Nevertheless, it's smart to reassess your risks.

Best advice for employees: If your employer matches your 401(k) contribution with company stock, invest your own money in something else. In fact, switch out of most of the stock, if the plan allows.

Best advice for employers: If you match your employees' contributions, do it with cash, not stock. If you use stock, allow them to switch into something else. If they own too much stock voluntarily, explain the risk. Lawsuits are rare today--but if the market turns, watch out.

A 28-year electric utility employee told Congress the company's conversion to a new cash-balance pension plan will cost him $400,000 in benefits, which he said is evidence the popular plans discriminate against older workers.

"For me, this is a very serious loss," James Bruggeman, 51, of the Central and South West Corp. in Tulsa, Okla., told the Senate Aging Committee. "It may very well change my retirement plans. I would have to work several more years to make up the loss."

Bruggeman said that because of his long service, retirement benefits he expected under the company's previous traditional pension plan would have been 30 percent higher than under the new plan. And due to what's known as "wearaway," the initial cash balance in his new pension account was $56,000 less than the equivalent lump sum in the old one and will require two years to recoup.

"It seems to me that something somebody is entitled to is lost," said Sen. Charles Grassley, R-Iowa, chairman of the panel.

Similar complaints have been raised by hundreds of veteran employees around the country as more than 450 companies converted to the new plans.

The plans frequently save employers money and provide younger workers with pensions that are more flexible, easier to carry from job to job and simpler to administer.

Advocates for older people, however, say they violate anti-discrimination laws because, in cases like Bruggeman's, promised pension benefits are reduced for workers with long service.

"There is very definitely, for an older worker, less accumulation than there is for a younger worker," said Joseph Perkins, immediate past president of the AARP. "We worry about the fact that it's the older worker who gets the raw end of the deal."

Several bills have been introduced in Congress on the issue, some focusing on greater disclosure of how changes would affect individual workers and others requiring that companies give workers greater choice between new and old plans. In addition, several Clinton administration agencies are trying to determine if age discrimination laws are being violated.

CBS blasted IBM on June 1. Now, the "New York Times" has blasted them for using employee's pension money to boost the bottom line. General Electric is also mentioned as being guilty of using this ploy. Duke Energy may be trying to turn invisible, but they will not escape scrutiny for their deeds. After our pension money was taken, Rick Priory felt comfortable making big profit promises to Wall Street investors. Read the article below:

At first glance, the 30 percent growth in operating income that I.B.M. booked last year looks impressive.

Closer inspection, though, shows that just under a third of the increase came from I.B.M.'s employee pension plan. The combination of a roaring stock market and lower costs associated with I.B.M.'s controversial switch to a new sort of pension plan generated $799 million in 1999. Accounting rules let such gains go into a company's income statement, although the company cannot spend the money for anything but pensions.

Gains like these are doing more and more for corporate earnings. In 1996, pension fund growth amounted to just 1.8 percent of I.B.M.'s operating income. Last year, the pension contribution was 6.7 percent.

Because these gains are typically buried in financial statements, shareholders may not understand how a company's earnings are augmented by pension gains.

To highlight this and other financial reporting concerns, Lynn E. Turner, chief accountant of the Securities and Exchange Commission, sent a letterto the American Institute of Certified Public Accountants last December. Well before annual report season, Mr. Turner identified problem areas that could obscure a company's true financial picture. He warned auditors to be alert to the issues when preparing financial statements for their corporate clients.

Mr. Turner's letter said that if a company changed its pension plan, or if the plan's gains or losses were likely to have a material impact on the company's financial condition, liquidity or results, the information should appear up front in the "Management's Discussion and Analysis" section of the annual report, not back in the footnotes.

To be sure, I.B.M. is just one of many companies that continues to bury details about its pension plans' gains. But Big Blue could be clearer. Though still in a footnote, General Electric was much more direct, for example. G.E.'s report made it obvious at a glance how much pension income contributed to operations.

"I.B.M.'s annual report is one of the most complicated," said Brad Perry, former chairman and now consultant at David L. Babson & Company, an investment advisory firm in Cambridge, Mass. "Obfuscation is the name of the game, not just for I.B.M. but for a lot of companies."

Perhaps the S.E.C. will follow up its words with action. But shareholders should be vigilant for accounting gimmicks regardless. After all, not all earnings are equal.

Read the article below and see how many similarities you can find between IBM's money grabs and Duke Energy's. IBM's employees have been exposing their senior management for over a year. The media now has discovered the truth of what the employees have been saying all along! It is now payback time for IBM. Payback in the form of negative publicity. It would be difficult to put a price tag on this publicity, but IBM has earned it. Duke Energy's senior management has been slopping at the same trough with IBM. Rick Priory has been traveling the world over pandering Duke stock. Wall Street investors will believe the media over Mr. Priory any day. These companies may now enjoy the fruits of their manipulative actions. They can enjoy the appetizer anyway, because there is more to come.

PORTLAND, ME (CBS.MW) -- When we look at CEO pay packages, we often think of Lily Tomlin's comment that all her life she wanted to be someone, and now she realizes she should have been more specific.

It seems that all our lives we have wanted CEO pay to track CEO performance, and now we realize we should have been more specific.

Most rankings of CEO pay are strictly quantitative, matching total compensation to total shareholder returns. On this kind of ranking, Lou Gerstner, CEO of IBM, does pretty well. During his seven-year tenure, he has made $560 million, because profits have more than doubled and the stock has increased by 828 percent.

But our review is more qualitative. We try to determine whether the CEO's actions are likely to build shareholder value over time or whether he is just propping up the stock price long enough to trigger his bonuses and make way for his successor. And by that standard, Gerstner's performance is less impressive.

It can be very difficult to judge a CEO's actions from outside the company, especially when those actions relate to the company's operations, product mix, and overall strategy. But at IBM, by most performance measures, there is cause for concern. The core computer hardware business is faltering and the stock is down 19 percent from its 52-week high. The CEO has responded with two actions that benefit the bottom line over the short term, but do not address operational or strategic issues.

Bought back stock

First, he bought back stock, $32 billion worth since 1995. What does that tell us about the company's strategy and its long-term vision? The CEO of this great company at the core of today's strongest market sector decided that it has no better use for its resources than buying back $3.5 billion of its stock at 25 times earnings. This is an easy accounting trick to make earnings per share look more robust by the simple expedient of reducing the number of shares.

But it is expensive. Debt rose by 31 percent. More important, it does nothing to aid in development of new products or more efficient operations. Surely for $560 million, Mr. Gerstner could have thought of a better use of that investment capital.

Second, he simply raided the employees' cookie jar. As Doonesbury's Uncle Duke said so memorably, "But the pension fund was just sitting there!" The company has prepaid pension assets of $5.6 billion and fair value in excess of benefits of almost twice that. These reserves could be used for several purposes -- primarily to pay pension and health liabilities, but also to off set market declines and adjust payments for inflation.

Changed employee compensation

Instead Gerstner has determined to change the compensation that it offers its employees, reneging on promises to employees who have been with the company for decades. After substantial protest in 1999, the benefits were returned to those 40 and above.

Gerstner is involuntarily switching the employees to a new "cash" pension plan to carry out this policy. That should be good for the stock price. This preserves for the company a refilling well to subsidize earnings.

There is a certain amount of hypocrisy in the company's argument that the new plan will benefit the youngest and most junior employees. If they believe that, why not let them make a choice? Why not let current employees decide for themselves, making the new plan the only options for new hires?

Perhaps it is because if current employees opt to keep the new plan, it would drain the huge pension surpluses that add such buoyancy to the bottom line. Despite Gerstner's claims that this change is required by competitiveness, the only "problem" it addresses is the need to keep the pension surpluses intact as a supplementary source of earnings.

Gerstner has highest cash compensation

Gerstner has the highest cash compensation in the highest-compensated industry: $9.2 million in salary and bonus last year. His pay has gone up with the stock. But pay expert Bud Crystal says when the stock goes down, his pay should go down, not just go up more slowly.

In his old publication Crystal Reports on the Internet, he wrote that Gerstner's employment contract, as amended on Sept. 29, 1997 shows the dark side of options: "If IBM's total shareholder return during the life of the grant amounts to only 6.3 percent per year -- the level of return a shareholder could receive, without taking any risk at all, from 10 year Treasury bonds -- Mr. Gerstner's options will produce for him a gain of $147 Million."

The tragedy is where that $147 million comes from -- the pockets of his employees and his shareholders. That is not the kind of performance anyone should reward.