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The Groups:
Andy Lang
Duke Pension
IBM Pension

The ONLY major management and human resource consulting firm that has expressed these thoughts publicly (layoffs don’t work) is Mercer.

All the rest are heavily involved in aiding the downsizings and screwing employees in the process - by the tens of millions - AND also in screwing long-term shareholders, AND in making the economy less and less efficient.

It's a funny thing what getting paid big bucks can do to character and ethics and morality.

It has been a great tragedy for the American people two decades now. It threatens our democracy and also our security - both individually, from a retirement standpoint and from an active employee standpoint, as well as a nation.

A nation whose people have little employment security or retirement security and no transparency in financial markets is a nation whose people have become enslaved.

And a nation whose people have become enslaved by the almighty buck, whose political processes have become corrupted by the same thing and which live in an oligarchy of the rich and connected, and which is rapidly destroying the separation of the Church and State, will, in time, if not already, become a major threat to the rest of the world.

(This Is a Reply to: Msg 44029 by deep6ed )

The management consulting industry IS big business - a mere extension of business.

They, and the actuaries who work for them, are the bad guys who have done the cash balance stuff, and all the rest of this nonsense.

In fact, for some major firms, the actuaries work on pensions and health care is the very core of the management consulting business, to start off with. It is ongoing, profitable, and above all, periodic, like an annuity. Most true problem-solving types of assignments are one-time only.

There was a saying at Towers, “He who controls the employee data, and does the pension actuarial valuations, controls the client."

Most business these consulting firms do have links directly back to the pension work - including the excessive special retirement plans for executives, Executive Compensation, Open Window programs (bribes to get people to leave the company, by using the pension plan assets, thus avoiding using cash while avoiding age discrimination lawsuits), holding employer health care costs in check - meaning cost-shifting back to the employees - and a lot more.

Cross-function selling was the biggest way to get rewarded at Towers. A week didn’t go by without at least one meeting on the subject, and often 3-day seminars once a year, off campus, were largely, if not entirely, devoted to it. Pay depended on it.

The biggest person in country opposed to the excessive Executive Comp packages is now Graf Crystal, the former head of that function at Towers, and he once got in BIG trouble - as a Director, no less - for saying to the press that too much time was spent kowtowing to actuaries.

He left the Board soon thereafter, and soon thereafter left Towers – “to pursue other interests,” I think the term was.

He also got pushed off of Fortune Magazine when he wrote an article that listed the top most excessive Executive compensation packages, and had the cohones to name the new Chairman of the Board of the new owners of Fortune (Time-Warner's Chairman)!

Again, the management consulting industry - the large ones who do almost all of the work for the Fortune 1000, ARE the problem - in the audit industry, and the Enrolled Actuary industry. The later are tiny in numbers compared to the former, but control almost every aspect of the defined benefits industry - the largest pool of assets in the world devoted to any one thing.

There is an obvious and major conflict of interest involved in overseeing so-called independent audit work - so important to financial markets, and also in doing the annual actuarial valuation work as an enrolled actuary, supposedly working on behalf of the plan participants - so important to the security of tens of millions of workers across America - and the management consulting work.

Until that link is broken, as Levitt wanted for the accountants, before Bushes defeated it, but also needs doing for the actuaries, our major companies are going to continue to wreak havoc with shareholder money and with their own employees.

Did you know that one can follow one law, but still break another?

Age discrimination is the classic case - but there are plenty more. It seems that some of the boys didn’t know how to use those interest rates properly - there is whole slew of cases that have been lost on only that one point - and maybe the anticutback rules has slipped up some too.

There is a Principal at Mercer - a legal expert in ERISA - who gave a talk a while back on CB plans, before the infamous 'letter' that purportedly said it was 'legal' but really didn't make it so, and thus gave rise to a spate of them - and said in its conclusion that if many more CB conversions take place, he was going to go into business himself as a class action lawyer.

Would you like a copy of the talk? It was in the printed transcripts of an Enrolled Actuaries Meeting.

It delineates the many ways that CB plans likely are illegal. At the heart of many of them, but not all, is what an 'accrued benefit is' and whether many of these CB conversions do cut back accrued benefits.

You do know that that is illegal, don’t you?

Once a jury hears what actuaries say they are really doing in these CB conversions - pulling the wool over the eyes of the plan participants, while cutting costs to plan sponsors - I can't imagine even a higher court overruling a decision against a plan sponsor.

But of course higher courts have been known to go against the law and the people on occasion. But it is getting much tougher every day that goes by - each day revealing more, and more, and bigger, and bigger pension scams.

Why before you know it, there won't be any 401(k)s, no defined benefit pension plans, no Social Security, Medicare, or retiree medical plans either.

Now that wouldn’t be a very nice world, would it?

(This Is a Reply to: Msg 1229 by jercalvin)

News about Enron is worth watching, for many reasons...

Enron is far more than a Texas energy company going bankrupt; it is the first nail in the coffin for the funny accounting practices that many of America's corporations have adopted over the last decade.

In my opinion, it is also going to be the most visible symbol that divides those in Washington who are working towards enriching and protecting corporations from those who care about all Americans -- the lack of commentary from our Republican leaders on the situation at Enron is indeed enlightening, and I would guess they won't be allowed to stay completely silent much longer.

It is also going to help shed more light on what is going on with America's pensions funds; watch carefully to see where Enron's workers end up in the line of Enron's creditors waiting for reimbursement -- it is looking more and more like they will be dead last...

And lastly, there will be some VERY interesting stories coming out over the next month about which corporations shared in these funny partnerships created by Enron -- some of the secret dealings at Wall Street are going to be stopped; the line of dominos falling over is just starting...

Janet Krueger
watching in Rochester...

These two companies are classic cases of what happens when laws designed to protect plan participants have loopholes and are then subverted by companies and top executives, with the aid of you-know-who.

Bethlehem for many years promised lifetime retiree medical benefits.

Recently they lost several major lawsuits when they first tried to avoid these promises through various strategies over a decade, orchestrated by management consultants and their hired guns, actuaries.

So what did they do when their company started to go down the tubes?

Declare Chapter 11 bankruptcy so that:

• these obligations can be placed into the pot of other obligations that can either stand in line with other creditors and hope there are some small part of the assets that they will get, or

• be 'reorganized' and disappear from view so a new company can be formed sans these obligations.

Why?

Because their pension annuities were far greater than the amount that would be covered under the PBGC, around $45,000,and taking the lump sums out avoids that, should the company and the plan terminate.

(The company has recovered somewhat as have the assets of the defined benefits plan, but not much.)

This is one more reason that lump sums should not be permitted in defined benefits plans - others being that:

• the higher costs of this provision, along with the added contributions, are rarely if ever reflected properly by the Enrolled Actuary - the higher costs being related to the much shorter time the assets remain invested in the plan, thus reducing prospective investment returns, which should be reflected in a lower actuarial interest assumption, and

• most people will spend the lump sum every time, rather than use it for retirement - life annuities being the best and cheapest way to do this.

Andy, you wrote, "When the Mafia control say the hazardous materials disposal industry or even something as prosaic as the garbage industry, by dumping the stuff more cheaply where they shouldn’t be, it lowers the cost so much it drives others out of business and before you know it, they are either doing the same thing or simply get bought out by the mob."

* * *

Andy, I find this is your strongest post up to now.

The whole discussion about bankruptcy for IBM essentially boils down to, "Yes, they broke the law, but forcing them to make amends would destroy the company, which would hurt many more people." The garbage disposal example is a perfect analogy - imagine if GE had KNOWN that the PCBs it dropped into the Hudson were dangerous to health (and if there were laws against it at the time) ... this is essentially the case with IBM and the pension plan change.

What do you (IBM) do in a case like that?

The FIRST thing you do is apologize. Admit error, and then talk about remedy.

IBM senior management hasn't taken one step towards first base yet on this account.

Calvin Arnason

Fixing the broken defined benefits pension system and creating laws that are rigorously enforced and the guilty punished if broken, will create a huge comeback in these plans because some companies will want to attract the best and brightest employees--and others will have to follow or get the worst and the dumbest employees.

This is just the opposite of what lobbying organizations like ERIC and their friends the pension actuaries have long claimed.

It is when you have flawed laws that are easily gotten around and taken advantage of that there is always trouble and which force even good companies and people to do bad things.

Saw it a million times when I was consulting--a good person--a top executive--wants to do the right thing--but if "everyone else is getting away with it, then you have to compete, or die..."

When the Mafia control say the hazardous materials disposal industry or even something as prosaic as the garbage industry, by dumping the stuff more cheaply where they shouldn’t be, it lowers the cost so much it drives others out of business and before you know it, they are either doing the same thing or simply get bought out by the mob.

The same thing has happened here in an industry that is hugely important to do the right way, and hugely detrimental when allowed to do the wrong thing.

The claim made that defined contribution plans are pensions is also patently false.

DEFINED BENEFITS pension plans were invented precisely to overcome all of the flaws in defined contribution plans when used as pension plans, but they still haven’t evolved in private industry far enough to protect early leavers--an easy fix for an experienced pension actuary.

And sadly, Social Security and Medicare and retiree medical do not have even actuarial advance funding--invented in the 1920s by an actuary named George Buck--that can stabilize these systems and not so coincidentally make them affordable by lowering costs by 2/3rds of the time, so long as common stocks form a basic component of the assets--something also that was proven by an actuary back in the late 1950s, Meyer Melnikoff.

So these important systems are now in grave danger of disappearing and being replaced by 'privatized' ones--meaning you are on your own, and the dough that will be taken from your pocket will further corrupt government, making our democracy even shakier than it has already become. Ask John McCain about what that last thing means.

Actuaries have failed to make the case for these marvelous systems, despite the fact that they invented them and have a lot to lose from their disappearance.

Lotta reasons for that...after a while they become excuses.

Enron and Lay, huge financial supporters of Bush, were alleged to have been the masterminds of the phony energy crisis in CA not too long ago, ripping off the whole state, and setting up the pretext for Alaskan oil drilling and more nuclear power plants. (Think of what could have happened had those WTC planes targeted a nuclear power plant! I am personally in the evacuation zone for Three-Mile Island --and almost was during the near-disaster a while back--that is if you have enough time to evacuate.)

Anyway, I think it was Lay that was all set to pick up a golden parachute of some 60 million bucks, if a takeover of his firm occurred.

I understand that he was FORCED to reject it--by irate shareholders.

It was not too long ago that Enron was being touted as a major dot.com firm that was the middleman in huge energy swaps--a new kind of energy company.

The more things look 'new', the more they resemble the old.

Age discrimination complaints filed with the EEOC would have a greater probability of helping than a class action lawsuit. In fact, you cannot file an age discrimination-based lawsuit without first filing a charge with the EEOC.

This administration has backtracked a lot lately - so much that Fortune Magazine just called him The U-Turn President.

However this has only happened when there has been huge public disclosure of what has been going on in certain issue areas, and/or, he has lost ground with some of his constituency or the 'undecides.'

The absolutely disgraceful behavior of this administration regarding the Big Four - Social Security, Medicare, defined benefit pension plans, and private retiree medical plans - hasn’t yet gotten the national attention they deserve - I mean headline stories - but I am confident they will, for three reasons:

1. You guys and many other groups.

2. They are fighting a very powerful and very rapidly growing constituency - older people. They vote a lot - far more than any other group and they are worried about their financial security in old age - as they should be.

3. Some actuaries and very famous people like Franco Modigliani, Nobel Prize winner in economics, are speaking out - at long last. (To tell you a little secret, I had something to do with both.)

Check the rate of interest that Watson-Wyatt thinks is appropriate for crediting on the hypothetical accounts established under it's cash balance plan accounts.

Then compare that rate with the one it assumes for the long-term will be actually earned on the plan assets (and in fact has been earned for the past two decades--but not last year).

For the latter, there are two of these rates--one for the IRS Minimum Funding requirements--found in Schedule B of Form 5500, and the second in the FAS 87 accounting requirements which determine the accounting pension expense, found in the footnotes to the corporate financial statement. They should be the same--and much higher than the ones you all get on your IBM cash balance plan.

That is the rip-off that screws the younger folks in IBM's plan in the long run, and the reason why some actuaries were talking about controlling cost for the employer. It actually lowers cost by cutting benefits and leaves the updating of future benefits to the good graces of the plan sponsor, which is what is meant by 'controlling costs'.

That is, BTW, over and above the taking away of the early retirement subsidies for the older folks, which many feel, including me, is obvious age discrimination.

All major outside management consulting firms, who do human resource consulting for the Fortune 1000 firms, have, for many years, been advising clients to separate retirees from active workers and to also keep retirees from staying and keeping in touch with each other.

The reason should be obvious.

They do the same, big time, with their own retirees.

They did not foresee, however, the rise of the Net and it's enormous communication capabilities.

Some major firms are just now beginning to see the light and are starting to consider that maybe, just maybe, they ought to bag the screwing of employees.

It has little to do with altruism; everything to do with getting caught and having workers shun them--right when the worker demographics are running against them for the long term.

The feature story for the October issue of Plan Sponsor Magazine is all about pension activists.

It has Janet Krueger on the cover and the story mentions many folks who are helping lead this revolution: Helen Quirini (retiree from GE), Don Shuper (Boeing), Paul Edwards (Coalition for Retirement Security), Karen Friedman (pension Rights Center) and many others.

The bad guys are also mentioned: The American Benefits Council and James Deleplane (who once worked for a Congressman who was supposed to be a supporter of pension rights of employees).

Just like international terrorists, those who have done cash balance pension plans, some pension actuaries and some major actuarial firms, along with corporate officers and their allies in Congress and government, must be held accountable and legally punished.

And just like those terrorists, you have to be in for the long haul.

These guys had a long head start--some two decades now--and have put out tons of propaganda with many political operatives…the very same folks who want so much to privatize both Social Security and Medicare.

In the end, when all the bad news comes out as to what and how they have done all this, they are going to lose in every way, including and maybe especially politically.

Nothing in this world is as fierce as the American people, the world's greatest and most important democracy, when they have been aroused to action.

Americans differ on many things, but one thing they all agree on - is fairness.

When the full extent of the pension and retiree medical scandals become known by those American people, there is going to be hell to pay for those on the wrong side of these issues.

Fully one of every four dollars in defined benefit pension assets has been taken back by various strategies - more than one trillion dollars - and counting.

Some 50 million American workers who have been downsized since the early 80s have received less than they should have. Many of those who were let go, were let go because in so doing it creates 'actuarial gains' to the plan, which in turn prevents minimum required contributions to be made, thus saving cash for the employer, while at the same time it increases the bottom line by lowering pension expense, which in turn often enhances executive compensation like stock options and the like.

Basically anyone who terminated from ANY defined benefit pension plan before retirement eligibility since 1974, when ERISA was passed, got less then they should have, regardless if the plan were a traditional defined benefit pension plan, or the new and 'improved' cash balance plans.

Many older ones have simply dropped off the rolls of the unemployed, while younger ones are also upset over what they see as a complete lack of loyalty on the part of their employers, by playing games with their retirement benefits.

Pension actuaries have known for decades that there was a major technical flaw in ERISA…

The actions by some of these people is unethical, immoral, unconscionable, and in my opinion and many legal experts, illegal.

The cover-ups continue, unabated.

Do they have no shame?

Actuaries invented the defined benefit pension plan,…and now, ironically and tragically, some other actuaries are deliberately destroying them.

They will not succeed!

After the 1993 World Trade Center bombing, which killed 6 & injured 1,000, Bill Clinton promised that those responsible would be hunted down & punished.

After the 1995 bombing in Saudi Arabia, which killed 5 U.S. military personnel, Clinton promised that those responsible would be hunted down & punished.

After the 1996 Khobar Towers bombing in Saudi Arabia, which killed 19 & injured 200 U.S. military personnel, Clinton promised that those responsible would be hunted down & punished.

After the 1998 bombing of U.S. embassies in Africa, which killed 224 & injured 5,000, Clinton promised that those responsible would be hunted down & punished.

After the 2000 bombing of the USS Cole, which killed 17 & injured 3 U.S. sailors, Clinton promised that those responsible would be hunted down & punished.

Maybe if Clinton had kept his word, an estimated 7,000 people would be alive today.

The following question was raised on a Philly radio call-in show. Without casting stones, it is a legitimate question:

There are 2 men, both extremely wealthy. One develops relatively cheap software & gives hundreds of millions to charity. The other sponsors terrorism. That being the case, why is it that the US government has spent more money chasing down Bill Gates over the past 10 years than Osama bin Laden?

Another strange turn of events: Hillary gets $8 million for her forthcoming memoir. Bill gets about $12 million for his memoir. This from 2 people who have spent the past 8 years being unable to recall anything about past events! Incredible!

I have worked for over 30 years for this company.

Most of the people that I work with are like family. We have shared each other's sorrows, deaths of children, spouses, divorces and illnesses. We have also shared many, many happy times.

Over the years, there have been a number of situations when I felt that the company was not treating us right. But, I didn't do a thing. This time around again I did not do a thing. Then, I realized that not doing anything was eating away at me. I saw letters that others wrote to Ivan and decided that I needed to join in and stand up for myself. So, I started writing letters. In fact thousands of us did.

So far, WE have succeeded in ensuring that anyone who needs to retire this year and is eligible will receive their benefits without any changes. In addition, anyone who retires after this year and has 30 years and is under 55 will not have to pay for their benefits until they are 55. According to the AYCO representative at my seminar, the only reason we got this was because the company was trying to put off a law suit. In addition, they are offering a dental plan at group rates for us. I also learned at the AYCO seminar that our $6,000 "supposedly free" dental benefit runs concurrently with the group rates they are getting us. If you want the group rates, you have to pay for them from day 1 of retirement Therefore you now have two plans running simultaneously. You do not have the option of using your $6,000 first and then paying for the group plan they have negotiated. The company has told us they are doing us a favor by giving us the highest 5 years for our pension. For some of us, this does improve our pensions. However, according to the latest Business Week article Verizon is a leader in using their pension funds to create "false profits" to make the company look good for the stock holders. Therefore, Ivan, Chuck, Larry, Lea and Ezra can reap in astronomical bonuses and stock options. Rather than giving us the 1.6 multiplier that we have always had, they have decided to use OUR money for their own purposes.

In my opinion, we have just begun to fight. To do nothing is to lose. To fight and win is what we want. However, even if we fight and lose, we are all still winners for coming together and standing up for ourselves…

This is our chance to make Ivan and Chuck look bad in front of the stock holders. How does it look to the financial industry when Ivan and Chuck are embroiled in disputes with both the union and all of management up to fourth level. How can a company profit when there is such turmoil.

This is our chance. Let's use it.

Here's food for thought in these downsizing times: A new book finds that Corporate America doesn't grasp the relevance of employee loyalty to success. And its actions have alienated employees, who in turn alienate customers--and that hurts profits and growth. Frederick Reichheld, author of "Royalty Rules! How Today's Leaders Build Lasting Relationships", due out in September from Harvard University Press, finds that "revolving-door defections" have a clearly defined impact on profits. He studied nearly 100 companies in a dozen industries. One of his studies in 1996, finds 5% swings in retention rates resulted in 25% to 100% swings in earnings - in both directions.

Today, the typical company is lucky if 50% of its employees believe it deserves their loyalty, according to a study of 2,000 employees that Bain & Co. did this year. As a result, Reichheld says, U.S. Corporations lose half their customers in five years, half their employees in four, and half their investors in less than one. By fostering loyalty, companies can boost productivity, customer retention and referrals, and attract talented staff. "It's more important in a down market," he says.

A long time ago now, when I was still in school, I read a book of short poems by Japanese writer. One of the verses read: “Kites dip and soar. I open my hand and let loose the string I cannot bear to hold.”

Well, that’s about where I am with all this benefit stuff. I’ve been hanging on to the pension “kite-string” since the inception of the cash balance plan. I’ve been, at times, both a frequent and infrequent contributor to this message board. And I’m uncomfortable with what I’ve become.

I was at church last Sunday. During the liturgy, there’s a point where the congregation prays the Lord’s Prayer together. I always reach out and take my wife’s hand. When I came to the line about forgiving trespasses, I thought about how long I have been filled with anger and contempt for the leaders of first, Bell Atlantic, and now Verizon. I have become consumed with a fury for what the company has done to the unsuspecting, defenseless folks who’ve worked for them the better part of their lives and trusted their company to honor its commitment to them. I don’t know if I really want to go through life like that.

I always said that when the day came to leave the company, I didn’t particularly want to be remembered for what I did as much as for whom I was. I wanted to leave with my (and my father’s and grandfathers’) good name intact. If I can, it will be more than the officers of this company will be able to do. What they have accomplished can never be repaired. They have befouled both their family’s good names and the good name of the company.

Yet, life didn’t have to be that unforgiving. Early on I was taught to “do your best”. Above all maintain your integrity, honor your commitments and speak truthfully. This advice came from many people. My parents, for sure. My teachers. My Church. And it came from an elephant, sitting high in a tree, who stoically acclaimed, “I meant what I said and I said what I meant, an elephant’s faithful 100%.”

Ironically, all were student of, or at least took guidance from, Socrates, who once said, “Regard your good name as the richest jewel you can possibly be possessed of, for credit is like fire. When once you have kindled it, you may easily preserve it. But once you have extinguished it, you will find it an arduous task to rekindle it again. The way to gain a good reputation is to endeavor to be what you desire to appear.”

My name is Arthur Huse. You’ve known me as Sparhawk.

(Question:) So this makes it very clear as to why Portman/Cardin, Sweetnam, et al have continued the pursuit to try to get laws changed doesn't it?

(Reply:) Yes. Pension reform is very high on THEIR agenda. They must be aware there is a high probability that many, if not most, CB plans are age discriminatory based on current statute and as such must be working very hard to remedy it.

When the tax reform package was passed, Congress would not allow Portman/Cardin to include any pension reform statutes that was not related to taxes. Therefore, they are still focused on future pension reform bills to enact any and all legislation to correct a situation they must see as very threatening.

The ABC (not our friend) is already lobbying for more changes. There is a document housed on their web site that is locked. Seems the general public cannot access it. The title of the document is 'Council Compilation of Suggestions for Next Generation of Pension Reform'

I received a call yesterday at work from Ayco, the company Verizon has hired to conduct additional seminars to explain the new plan.

Lisa, the woman who called stated she had seen my e-mails and wanted to "help" me. She said she could sit with me and explain the new plan in great detail vs the old plan. When I asked her if she can give me specific figures for the new plan based on my numbers, she said they only use the "estimater."

The entire call was somewhat demeaning and I explained that I was fully capable of reading the literature provided by the Company and did not need a tutor.

She then asked my age and years of service. I recommended she go back to whoever gave her my e-mails, name and number and get it from them.

I resent that my info has been provided by the company to an outside firm who are only interested in getting me to use them as a financial planning company!

Beware!

The following observations are hardly objective. One would think that the officers of this company would be taken aback by the overwhelmingly negative response to the latest benefit changes. Rather, they’ve enveloped themselves in a veil of righteousness and fiscal savvy. After all, these folks are the CEOs and vice-presidents of a monolithic telecommunication company. “Trust us,” they say. “We know what’s best.”

Unfortunately for us, it’s a mistake to think an officer is any smarter than the rest of us. People make decisions the same way regardless of how big and smart they are. It comes down to how best they can serve their own needs and preserve their own personal well-being. Remember, we’re not dealing with ethical folks here. They don’t have much in the way of consciences. A notion of right and wrong doesn’t play in that sort of mind. They translate what’s good for the company into what’s good for themselves, just like a king in the twelfth century, but in this case there isn’t any bishop around to remind them that there may be a God looking down on them keeping His own account.

I’m not a psychologist, just a telephone employee. When you deal with people like this you have to play their game without entirely understanding them. These people do things none of us would ever do. And they run a major company complete with thousands of employees who’ve depended, depend and will depend on the company for their well-being.

Twenty-six years ago I enter into a marriage, making certain promises to my wife. I never qualified those promises. I gave her nothing more than my word. Yet, she’s stuck by me through both the good times and the bad for no other reason than she took me at my word. She’s given me her best years. Now, as we move on in years and her hair is a little grayer, can I modify or cancel a single promise I made her just because it would be less expensive to maintain her? After thirty-one years with the phone company, my employer feels it can do whatever it wants with the promises it made me. And, for no other reason than because everyone else is doing it. What kind of rational is that? Certainly not the rational of people the least bit concerned with anyone other than themselves.

Normally, my eyes would glaze over when reviewing an article such as this one. However, this article has my blood boiling!

Their Spin:
The Pension Practice Council of the American Academy of Actuaries asserts that the inordinately low 30-year Treasury rates distort the contribution requirements for the proper funding of defined benefit pension plans, create added liabilities when lump sum distributions are provided to participants, and unnecessarily increase the PBGC premiums for plans that are adequately funded.

Their Threat:
The dramatic decreases in these rates are causing many employers to contemplate terminating their plans due to increased funding requirements and these added liabilities.

Their Solution:
Replace 30-year Treasuries with something higher.

The Truth:
When your pension is actuarially calculated, the Plan Administrator will use a Discount Rate to determine your lump sum payment or annuity (your choice). Due to the mathematical nature of discount rate calculations, the lower the Discount Rate, the more your lump sum or annuity will be. For every 1% drop in discount rates, your pension increases by 12% (on the average). Plans with mostly young employees will have much larger increases, around 25%. Conversely, plans with mostly retirees will have smaller increases, around 8%.

The rule is: The lower the Discount Rate... The more your pension benefit becomes.

The American Academy of Actuaries is making an argument that because the 30-year Treasury rate is low, it will cost the Plan Administrator more in liabilities. Remember, their increased liability is your increased pension benefit. When you deserve more in your pension benefit because the rates are low, their liability increases because they have to tuck that extra money away in our pension trust fund to cover you.

As stated in the article, it is not surprising that employees elect lump sums instead of annuities, and demand that their defined benefit plans provide lump sums. Why? Because we effectively get 30% more money! Why? Because the 30-year Treasuries are low.

They argue that if the Plan Administrator can stop using 30-year Treasury Rates, and use something like the PBCG annuity rate, our pension trust would be well funded. It could buy annuities for everyone's vested benefit and have money left over! They argue that they can leverage OUR assets, like cash balance plans do, and profit from the excess returns!

Money left over for the Plan Administrator?

Excess Returns for Surplus?

I'm sick and tired of how we are used, abused, manipulated, and exploited!

Stop it! Stop it - NOW!

I just thought you would like to see the feedback I sent and the non sequitur answer I got back.

I am a 30 year former Bell Atlantic management employee. It is difficult to find the words to express my disappointment in the new pension plan. For those of us nearing retirement, there is little or no increase in the dollar amount and, depending on T-Bill interest rates, the amount could actually be lower. Meanwhile, death benefits are reduced, medical coverage is reduced, dental coverage was reduced and managers are farther than ever from parity with associates.

We used to think of transition from associate to manager was a "promotion" but it's been a "demotion” for many years, and it just keeps getting worse. How is this company going to entice the "best and the brightest" of associates to take management jobs? Many years ago, when I was promoted, it was understood that managers made less money than associates because of the disparity of overtime pay. But at least we had the same medical benefits and the promise of a better pension when we retired. We also had respect. Now the associates laugh at us and call us fools. I'd be laughing too, in their place. Offer managers the chance to "take back their tools" and you'll loose nearly every manager out there.

Your betrayal of the promises made to us all those years ago just proves the union members right when they say, "Don't trust Verizon." Particularly galling is the knowledge that the pension fund is severely over-funded, and is being kept that way, simply so top management can count the increases in the fund as revenue; thereby pumping up their own bonuses.

Shame on them and you all for this shabby treatment we are getting. Reengagement has turned into disenfranchisement for the 1st & 2nd level managers. Many who planned to retire in a few years are seriously thinking of going before the end of this year. Of course, if it was your purpose to force older managers out - then your plan is working.

And the answer:

“At this time, the plan documents related to the new plan design have not been completed. If the information in this e-mail conflicts with such plan documents, once completed, or any existing plan documents, the terms of the plan documents shall prevail. The information provided to you is based on any facts or assumptions that you may have provided to us in your inquiry. This response is in no way a guarantee of future benefits. Your actual benefits depends on your personal faces, including compensation and service, that are applied to the terms of the applicable plan at the time of your retirement.”

The new pension plan has been approved. I don't have any details yet. All I can say for now is that we have done everything in our power to make our case for a better pension plan that takes into consideration the fact that we are managers of the business.

Sometime in the near future we will know if we were heard or ignored.

I can only hope for a good outcome. It has been two years that we have struggled for this decision.

Have a nice weekend everyone.

PS. Don't put those pens down yet. Even if the decision works to our advantage we still need to support our friends at Boeing, Duke Energy, IBM, AT&T etc. employees in their quest for pension change.

We still need to stick together for the greater good of all management employees across America.

Janice

As a matter of fact, Duke is conducting an Employee Opinion Survey this month. Duke said that they value our opinions.

One employee said that when he completed the last electronic survey, he hit “enter” without selecting any answer, just to see what would happen. He said that the survey would always default to the “politically correct” answer. So, you were right when you said that the company will tell you what your opinions are!

The survey is said to be anonymous. All I know is when I filled out the last electronic survey, the next day I had to take a “random” drug screening test. (“This guy had to be on drugs to put down those answers!”)

I have notice the following chain of events occurring on several occasions:

1. Duke asks for an opinion (OK, sometimes they don’t have to ask).
2. I graciously provide them with the opinion.
3. The next day, off I go for a “random” drug screening test.

One time, another employee and myself provided feedback to the company. The next working day, as I was on my way to take my “random” drug screening test, I passed the other employee, who was coming back from taking his random drug screening test! When working for Duke Energy, one will notice a lot of coincidences.

If you work for Duke Power, you were more than likely told to read and sign a document about BUSINESS ETHICS a few weeks ago. It was the dos and don’ts to maintain the high standard expected from all who work here. This clearly did not apply to all, given the goings on in California. But this should be no surprise to anyone; remember "THE CASH BALANCE PLAN" - what a deal.

Call To Action: We don't want a fast track for free trade agreements... If you have been watching the negotiations for FTAA (Free Trade Agreement for the Americas), NOW is the time to call Congress. President Bush is currently pushing for 'trade promotion authority' (fast-track), which would allow him to negotiate FTAA with minimal Congressional 'interference'. This would rob U.S. citizens of our vital right to weigh in on FTAA as it is hammered out. Call your Representative and Senators now, and tell them to oppose any silencing of the people's right to influence legislation... Tell them to oppose fast track!!!

Some background: Last Sunday night, 34 leaders from around the Western Hemisphere ended the Summit of the Americas by signing the Quebec Declaration, which seeks to extend the North American Free Trade Agreement (NAFTA) free trade zone to cover 800 million people across the Americas by 2005. The new trade agreement would be known as FTAA.

While the various ministers smiled for the photo-ops, the growing tide of discontent over the pro-corporate nature of Pan-American globalization was spilling over into the streets in the form of tens of thousands of demonstrators. In and of itself, expansion of free trade is not a bad thing; it is most likely an inevitable step. However, NAFTA-style globalization would work to benefit only the international businesses which lust after open markets. FTAA would spark an international 'race to the bottom', since countries with better wages, higher environmental standards, and stronger labor rights would be at a disadvantage in attracting business. Peaceful demonstrators in Quebec made the point that free trade should not mean a conscious ignoring of sweatshop working conditions and the steady flow of jobs out of the U.S. and into developing nations. International worker rights and the environment are being threatened. Citizens must take these sentiments to Congress before it's too late.

PVS, Proxy Voter Services, a division of ISS, supported resolution #4. Following is their analysis:

This is essentially the same proposal that was brought forth by the proponent at last year's shareholder meeting. We voted for the proposal believing that the negative public sentiment and poor employee morale surrounding the new benefit plan, outweighed any gains that the company may recognize on paper due to its implementation. We find that the rate of retirement accumulation under the cash balance scheme is substantially below that of the old plan. Moreover, the growth of the plan over time will be accredited at one percent above Treasury notes, allowing the company to enlarge its 'vapor profit" growth in the future. Management states that it did not implement this plan to reduce total compensation cost; it plans to expand the number of employees receiving option grants and increase salaries. However, in this instance, accounting rule manipulation is at work. Options and salary increases cannot come from the money in the retirement trust. In fact, option grants are not accounted for in the company's balance sheets. In essence, the company is attempting to create surpluses that are reflected on paper in the balance sheet, and claim that they are washed out by options that are carried at no accounting cost. We are most disturbed that employees were not presented with the opportunity to provide input regarding what provisions they would like to have under a new plan. Other changes in the defined benefit program, a complete cash out and move to a 401(k) plan or keeping the old plan for current employees all seem to be better options that would have not created a dramatic fall off in employee relations. The cut-offs for continued participation in the old plan were based upon age, denying employees the opportunity to choose between the old plan and the new plan. The company could be at substantial financial risk in litigation filed against the company for age discrimination. As a result of the negative sentiment, the company expanded the group of employees who could choose between the old and new plans. However, this was not well received as the expanded group was not offered eligibility to participate in the old medical plan. The questionable manner in which the company has implemented the new plan has caused such a public outcry that a Senate hearing has been scheduled in response to the growing criticism. Although the new plan is expected to boost the company's bottom line, any reported gains in net income as a result of this new plan will be due to the accounting treatment of the plan's current surplus and not from any real increase in the company's operating income. We estimate that this "vapor profit" begins at $200 million and grows over time. While increases in earnings usually help to boost shareholder returns, the market rarely responds positively to earnings increases that arise from accounting requirements. Furthermore, the Wall Street Journal has discussed this issue in detail so investors are well aware that these accounting profits are not real earnings. In one article, Business Week has identified IBM as one of the top companies in stating millions of dollars in income from its pension fund and thereby, padding its profits in 1999. The unveiling of the new plan has resulted in negative public sentiment and poor employee morale, which in our opinion could have a material adverse effect on the company. We believe these potential adverse effects outweigh any gains that the company may recognize on paper as a result of the new retirement plan. We urge IBM to reconsider and not become the "Cracker Barrel" of age discrimination in the world of corporate governance. These actions are certainly contributing to the decline of the Blue Chip reputation of IBM. We support this proposal.