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Fran Asbeck worked for IBM for thirty-two years. He retired at age fifty-six in 1994, secure in the knowledge that IBM would cover health care for himself and his wife. "The thing is, we were promised all this would be free," he says. "They said we had all the deferred money coming on down the line--a fat pension with yearly COLAs [Cost-of-Living Allowances], free lifetime health care. Those were the verbal promises made."

Two years ago, says Asbeck, IBM went back on its promises. "They just sent a letter saying, 'You've got to start paying for it' " or get less coverage, he recalls.

Asbeck, a former computer programmer who lives in Boyds, Maryland, relied on the excellent health care insurance that IBM offered. But now it's not as attractive. "Since I retired, in order to keep it at zero cost, I have had to take lower and lower levels of health insurance," he says. So Asbeck moved out of what to him was an ideal plan into IBM's preferred provider organization. He no longer gets to choose his doctors freely.

Earlier this year, Asbeck discovered that accepting a lower level of health coverage for himself and his wife wasn't going to work anymore. Worried about the risks of emergency hospitalization, he decided to start paying $80 each month.

It sounds relatively cheap as far as health insurance goes. But Asbeck says he can't afford the cost, in part because his pension has not kept up with the cost of living. That's why he's had to get another job. "I'm just going to have to work until I'm in the box and hear the dirt hit the lid," he says.

Many IBM employees share Asbeck's plight.

The retirees were told "in department meetings, by their managers, in handbooks, that they would have free health insurance for life," says Lee Conrad, an IBM retiree who is now an organizer with Alliance@IBM, which is connected to the Communications Workers of America and based in Endicott, New York. "Now they've got to pay. This has been a real culture shock for people."

"They're covered legally," says Asbeck. But he feels betrayed. And he and other IBM retirees say they're suffering while IBM's Chairman and CEO Louis V. Gerstner Jr. is raking it in. Gerstner made $2 million in salary in 1999 and $5.25 million in bonuses, according to the company's 1999 proxy statement. The bonuses are based partly on cash flow and stock market gains. Companies can boost both by cutting retiree health benefits.

"Lou Gerstner has only been at IBM for seven years," says Conrad. "He's affecting the lives of retirees who put thirty, forty years in. They're the ones who built the company and created the wealth that Lou Gerstner is now pillaging. When you have people who are ill, on fixed income, the increased costs are going to create serious problems. That's unconscionable. How can you do this to people? IBM has their own personal piggy bank right now. And it's not their money. It's the employees' and the retirees' money."

Asbeck puts it another way: "He's getting fat on our blood."

It's not just IBM. Many other companies renege on health insurance promises made to retirees.

Telephone company retirees make up probably the largest single group that has seen cuts in coverage or faced increases in monthly insurance costs, says C. William Jones, president of the Association of BellTel Retirees. The former Bell system retirees number more than one million, he says. The BellTel retirees' insurance costs have risen up to 500 percent.

"Many of the large corporations are involved," says Paul Edwards, chairman of the Coalition for Retirement Security, a grassroots organization that works on pension and retiree health insurance issues and is based in Springfield, Massachusetts. "It has become an acceptable practice. These aren't just isolated events. Just name your top corporations: IBM, GE's had some benefit reductions. We're talking millions of employees."

Michael Gordon is a D.C.-based lawyer who is working with the BellTel Retirees. In the last decade, says Gordon, five million retirees or their spouses nationwide have lost or had substantially reduced health benefits."This is a national problem," he says. "It affects just about every retiree who has had some type of health coverage under their employers."

"We think it's a great concern," says Gerry Smolka, senior policy adviser for the Public Policy Institute of the American Association of Retired Persons. "People plan based on what they know. Health benefits are one of the things that give you financial security in retirement. It can completely erode your savings if you're not adequately covered."

Some retirees are more vulnerable than others. After age sixty-five, Medicare pays about 80 percent of medical bills, usually excluding pharmaceuticals. It can be extremely difficult for older retirees, who sometimes live on a pension that inflation has sharply reduced, to pay the remaining 20 percent.

But people who retire early, often as the result of pressure from their employers, can be in even more serious trouble. Those who are not yet eligible for Medicare may have to rely solely on their promised benefits. When their companies snip the strings, these retirees come down hard.

Some early retirees "have lost their benefits and can't get replacement insurance because they have a pre-existing condition now that is so severe no one will insure them, or because the costs are so high that they'll just eat up their pension," says Gordon. "If you're not Medicare-eligible, you're in a black hole if you've got a medical condition that requires expensive treatment and the employer pulls out the rug."

Companies have an incentive to take back retiree health benefits: They can get richer that way.

On October 25, 2000, The Wall Street Journal published an article entitled "Companies Transform Retiree-Medical Plans into Source of Profits." The reporter, Ellen E. Schultz, revealed that a little-known accounting rule, called the Financial Accounting Standard (FAS) 106, forced companies in the early 1990s to report the lifetime benefits they owed to future retirees as a liability. Few companies want large liabilities on their balance sheets. So, by decreasing the amounts they owe on health insurance, they appear better off. Some companies overestimated their retiree health benefits at first. By downscaling their estimates and by cutting coverage, they improved their balance sheets.

"The kicker is that at numerous companies . . . the paper gains not only erased the retiree benefit expenses, but exceeded them," wrote Schultz. "And that is how benefit plans came to boost the bottom line."

"Companies that have boosted their bottom lines by this method," wrote Schultz, include R. R. Donnelly and Sons, Sears, Sunbeam, Tektronix, and Walt Disney.

One of the most egregious cases involves BWX Technologies, Inc., based in Lynchburg, Virginia. The company is a subsidiary of McDermott International, which describes itself as "a leading worldwide Energy Services Company." In the mid-1990s, say employees, the company's naval nuclear fuel division began to push people into early retirement. "They said, 'If you retire early, you can keep your insurance,' " recalls William McKenna, a retiree from the company. But if you don't retire early, they said you'll have no insurance when you do. "About 400 people jumped on that bandwagon."

Richard Mull, a former chief electrician, says that management told him, "The most your health insurance will be for the rest of your life will be $16" per month. From 1996 through 1998, he says, "they really pressed this point. They got rid of a lot of older employees that way."

Mull left in 1997, at age sixty-two, having worked for BWX Technologies for thirty years. "I was anxious to get out of the plant," he says, mentioning a supervisor who he says died of a brain tumor thirty days after diagnosis. "They wanted to know if he'd been exposed to radiation or asbestos. Uranium 235, enriched uranium, we worked with every day. You had all these poisons around you."

When he heard about his supervisor's death, Mull decided to leave. "I said, 'I'm getting out of this place.' "

Mull got out. Then his insurance costs started to soar. In April 1998, the company segregated the retirees out from the insurance policies of the active workers. In a document entitled "Employee Information 1376" (released only to active employees, but leaked to the retirees), the company warned, "Beginning April 1, 1998, retirees enrolled in the Health Care and Life Insurance Plans will be responsible for most of the cost of those coverages."

In that document, the company explains the new charges: "The current cost of providing Health Care and Life Insurance Plans for retirees is very high and continues to increase. Changing the structure of the plans lowers the cost to the company, which helps improve the company's cash flow and its profitability."

In August 1998, Mull says he received a letter that stated the retirees would be charged between $250 and $750 per month, according to age and state of health. At that point, he says, because his health was good, his insurance costs rose to only $285 per month. By October, he says, the company had gotten rid of coverage for prescriptions and doubled the deductible for hospital visits. "They dropped about 50 percent of your coverage," says Mull.

From then on, every six months, the retirees were reassessed. "I eventually went up to $795 a month for me and my wife," says Mull. "No general, no doctor's visits, just for 70 percent hospitalization after we paid a $1,500 deductible." By April 1999, Mull says the company informed him that, at the rate he was paying, his insurance would not cover prior illnesses.

"Now, you work at a chemical or a nuclear plant for thirty years, you've got priors," he says. "I myself have mild asbestosis." Three months ago, Mull learned that he also has basal skin cancers. "The doctor said there could be a link, or there might not," he says. "I got a lot of high density radiation burns from welding."

Last July came another note from BWX Technologies' parent corporation. The premium had risen to $1,113 per month for Mull and his wife. Further, the letter said, coverage was guaranteed only if at least 85 percent of the retirees agreed to participate in the plan. "If this level of participation is not attained, it is highly likely that no alternative plan can be identified, and the company will no longer be able to provide you access to any medical coverage plan," says the document.

"People dropped their health coverage. They withdrew money from their 401(k)s, they went and got home equity loans," says McKenna, who worked for the company as a darkroom technician developing X-ray film, as a welder, and as an accountability technician. Then, after local press attention from reporter Chris Flores of the Lynchburg, Virginia, News and Advance, "all of a sudden, [the company] found a nice policy" for just over $600, says McKenna. Even so, he says, "After twenty, thirty years of work, it's taking your whole retirement check to pay for your health insurance."

McKenna has pulmonary illness. He says he was exposed to many hazardous chemicals and asbestos, as well as raw, unprocessed uranium. "I can no longer breathe on my own without daily doses of Prednisone and asthma medications and aerosol breathing treatments every four to six hours," he wrote to former Energy Secretary Bill Richardson on April 13, 2000, in response to Richardson's proposal to compensate sick nuclear workers.

In separate interviews, Mull and McKenna mention a recent asbestos screening organized by the retirees. "Sixty percent tested positive for lung scarring," says McKenna. "194 took the test. 150 were retirees. Our lawyer made sure the doctor read these real strict." Those that tested positive, says McKenna, "were real bad. You should have heard all the stories that retirees told about all the stuff they were exposed to."

McKenna claims that he is also in the beginning stages of asbestosis. "I went and had my test back in July. I was positive," he says. "The lady that did the lung screening said, 'They exposed you to asbestos, and now they're going to dump you in the street and take away your insurance.'"

Both Mull and McKenna now get their insurance from other sources: Mull from the Veteran's Administration, McKenna from his wife's employer.

"These are loyal, twenty-five- to thirty-year employees," says Gary Kendall, general counsel to the Virginia AFL-CIO. "The amount of insurance in some cases is equal to, or maybe even more than, their monthly pensions. Nobody can afford to carry it. Had they known that, they never would have retired."

McKenna can't get over the company's duplicity. "The bottom line is, 'We don't care about the retirees no more. We need cash flow,' " he says.

Corporations are not the only ones reneging. Unions are doing it, too. Robert Devlin was vice president of the Transportation Communications International Union for sixteen years before he retired. He is a fifty-six-year member of the union. Now he's involved with the Retired Employees Protective Association, based in River Edge, New Jersey.

"We are all retired officers or employees of a railroad union that has cut our benefits," says Devlin. "For thirty-three years, we've had health insurance, just as the railroad employees had, including cost-free insurance into retirement--not only for the rest of our lives, but to our surviving spouse. A new group of officers came in, and they decided that these old retirees are getting treated too well."

The union decided to charge retirees $100 per month, or else they would have to forfeit their insurance. Devlin feels double-crossed. "If the railroads had done this to their employees, they would have had a strike on their hands," he says.

The union did not respond to several requests for comment.

Many retirees are outraged to learn that companies are acting legally when they do away with health benefits. "It's a particularly nasty problem because courts have held that employers are free to end or reduce retiree health coverage almost regardless of the circumstances--whether they need to or not," says Gordon. "Even if there was an understanding when the retirees retired that these are lifetime benefits, courts have held that retirees are helpless to protect them. Every federal court in the country has had this issue litigated. It's the same problem over and over again."

The crux of the problem is that, even when companies make promises to retirees, they shield themselves with written statements claiming the right to modify or terminate the benefits at any time.

Gordon calls GM vs. Sprague "the most shocking case of all." About 50,000 GM employees were offered an early retirement package in the mid-1990s. The company assured them they would get the same benefits they had as employees as retirees. This, the retirees later claimed, was part of what induced them to take early retirement. Then GM backed out. The retirees went to court and eventually lost. The U.S. Supreme Court denied the case a review. "These guys are out of luck--some 50,000 of them," says Gordon.

The appellate court took a generous view of GM's side of the story. "GM's failure, if it may properly be called such, amounted to this: The company did not tell the early retirees at every possible opportunity that which it had told them many times before--namely, that the terms of the plans were subject to change," said Judge David A. Nelson in his 1998 ruling for the United States Court of Appeals for the Sixth Circuit. "There is, in our view, a world of difference between the employer's deliberate misleading of employees . . . and GM's failure to begin every communication to plan participants with a caveat."

But the dissent to this decision, from Chief Judge Boyce F. Martin Jr., is scathing in its evaluation of GM's behavior. "This is a classic case of corporate shortsightedness," Martin wrote. "When General Motors was flush with cash and health care costs were low, it was easy to promise employees and retirees lifetime health care. Later, when General Motors was trying to sweeten the pot for early retirees, health care was another incentive to get employees off General Motors's groaning payroll. Of course, many of the executives who promised lifetime health care to early and general retirees are probably long since gone themselves. Rather than pay off those perhaps ill-considered promises, it is easier for the current regime to say those promises never were made. . . . Seemingly, any reservation of rights, no matter how weakly worded or unconnected to the grant of rights, will inure a company from having to live up to its obligations in the future."

Representative John Tierney, Democrat of Massachusetts, believes retirees won't be adequately protected unless the law is changed. That's why he introduced the Emergency Retiree Health Benefits Protection Act of 2001.

"Obviously, if you don't have to show an obligation to pay out retiree health benefits, there's more cash on hand" and the company is more financially attractive, Tierney says. "Many of these companies are extraordinarily healthy financially. It has not been a hardship thing." Tierney lists several companies: "General Electric, you don't get much stronger than that. The telephone companies are surviving and doing well, for the most part. General Motors is a strong company. Sears Roebuck."

The bill, which Tierney submitted along with three other Democrats (Robert E. Andrews of New Jersey, Dale E. Kildee of Michigan, and Carolyn McCarthy of New York), would require employers to restore any post-retirement reductions or cancellations of health benefits, unless to do so would cause financial hardship. And it sets up an emergency loan guarantee of $5 billion for those employers who need financial help to give their retirees benefits.

Retirees of many corporations--including the former Bell Telephone companies, General Electric, U.S. West, SNET, Prudential, Johns Manville, the New York Transit Police, Greyhound, and Grumman Aircraft--have signed on to the legislation. Other supporters are the Institute of Electrical and Electronics Engineers and the Pension Rights Center. But in a Republican Administration, the bill's chance of passage appears bleak, despite President Bush's pledge that health care for seniors is a top priority.

Mike Kucklinca, executive vice president of the BellTel Retirees, was a loyal employee: "I went into the company because I thought I would have job and benefit security both during my tenure and into retirement," he says. His father, a power company employee, drilled that ethic into his head, he says.

"Who would disbelieve a company that you've worked for for thirty and more years? It was like Mother Bell would take care of us. Well, she didn't. I never thought I'd be spending all this time and energy organizing to get what I and the other retirees feel we worked for all our lives. I'm going to fight until I leave this world."

William M. Mercer Knows Something About Benefit Rip-offs

The Montreal Gazette published a retiree article based on a report by the firm William M. Mercer. You should know all about William M. Mercer by now. They devised Duke Energy's cash balance plan. They also helped design the cash balance plan for IBM.

Now the company is feigning concern for retirees. This is interesting, since William M. Mercer helped ensure that many future retirees will have a very meager pension. Maybe they have seen the error of their ways. It may just be a case of "jailhouse religion." When the investigations get hot and heavy, they may wish to have some "good works" to point to.

At any rate, the article is dead on the money. Retirees are rising up to challenge the pension hoodwinking by many companies. And it is high time that they did! Employees are also taking employers to task before they retire. There are avenues open for those who wish to be more than a doormat - say, a bear trap.

The article stated: "a highly educated, demanding, activist, and savvy cohort of retirees is about to be born."

But these people are already here and fighting. Their numbers will only increase. It is well worth a person's time to fight for what they have worked all their lives for and what is owed to them.

The article seemed to imply that a company could pull anything over on retirees if they just maintained a "relationship" with them. This stance is more typical of the William M. Mercer that we have experienced. They exist to teach companies how to take benefits from employees, and not get caught in the process.

Ignore retirees at your own risk

Dow Jones reports on the growing resentment of retirees because of the lack of cost of living adjustments to their pensions. The greediest of companies are bleeding employees and retirees in any way that they can – and they are finding a lot of ways to do it!

Retirees are not too happy about "pension credits" generated by overfunded pension plans being reported as income and this helping generate bonuses for the CEO’s. Meanwhile, retirees may go for a decade without a cost of living adjustment! It is an old story. Those who do not need the money have no qualms about taking it from those that do need it.

There was an old TV western that portrayed a villain with overpowering greed and absolutely no empathy for his fellow man. This villain was so corrupt that he was really unbelievable, even for a TV character. The villain came across a wagon load of blankets contaminated with typhus. He promptly proceeded to sell these blankets to the Indians. Of course, the Indian village came down with typhus fever. The townspeople responded to the plight of the Indians by obtaining typhus medication. As they attempted to deliver it to the Indians, the villain robbed them of the medication. The villain was ever mindful for any way to turn a profit and reasoned that he could sell it to the Indians.

Yes, this villain was almost too corrupt to be believable. He infected an Indian village with typhus to make a profit. He then stole their medication to make an additional profit! The villain was just unbelievable, until the modern day corporations came along. Looking at some of the pension injustices today, the villain seems very believable. In fact, many corporations would be bidding against each other to hire the villain as their CEO. He would be sure to come up with some “revenue enhancing” pension plans.

Tax incentives are reaped for money placed in the pension fund, retirees are deprived of pension funds, pension surpluses are reported as revenue, and the CEO gets bonuses added to his already bloated salary. If this scheme does not surpass the typhus infected blankets and stolen medication plot, it at least equals it!

Retirees/shareholders of many companies are fighting back via shareholder's resolutions. These resolutions are non-binding, but they do help get their point across.

A Duke Energy retiree addressed the lack of COLA’s at the shareholder’s meeting in 2000. The time is overdue for employees and retirees of all companies to band together to stop these despicable pension practices.

Dow Jones: Retirees Ready To Rumble Over Corporate Pension Plans

It seems that there is a never ending stream of retiree rip-offs occurring almost daily. "Yahoo Finance" ran a story about a firm denying retirees promised product discounts! Nothing is too petty to take from retirees, or those still employed, for that matter.

Whether it is a large chunk of your pension or product discounts, the order of the day is grab, grab, grab.

Trying to reason with greedy corporations is like a bleeding man in the ocean trying to reason with circling sharks. There is only one way to deal with a shark - a harpoon. A competent legal firm can launch such a harpoon effectively!

The retirees in this story launched their harpoon.

Click the link below to read the story:

Hewlett-Packard Reneges on Program to Provide Retirees With Lifetime Rebates

A "Boston Globe" article, about employee benefit rip-offs, was based on a survey by William M. Mercer Inc. That is a subject that William M. Mercer is certainly an expert on. They devised the cash balance plan scheme for Duke Energy! They were also involved in the plot to convert IBM employees to a cash balance pension plan.

It seems that the more benefits the employees lose, the more rewards that senior management gains. It is high time for all employees and retirees to fight the take away of benefits earned by long years of service.

Click on the link below to read the story:

Retirees see threat to health benefits

A recent retiree reports that in March, 1999, his medical and dental insurance cost was $88.79 per month (this included $2.51 for life insurance). Then, on January 1, 2000, the cost went to $121.65.

The pattern of this game has been established. In 2001, the premiums will increase to $163.51. This is an increase of almost 35 percent for 2001, on top of the 37 percent increase in year 2000! This amounts to an overall increase of 84 percent from 1999 to 2001! This retiree's mail order 90 day drug prescription co-pay will also increase by 50 percent!

Here are some quotes from the letter accompanying the statement from Duke:

"As you may have seen in national media discussions, next year these costs are expected to rise by an average of 12%. Prescription drug costs are increasing at a higher rate - about 20% each year."

"For 2001, Duke Energy pays a part of the cost of your retiree coverage under the Medical plan. The subsidy amount provided by Duke Energy was calculated based upon your years of service at retirement and does not change. Any increase in the cost of coverage occurring after your subsidy amount was calculated is paid by you through increases in your contributions."

"Attempting to correlate the percentage increase in contributions to the overall percentage increase in health care costs can be misleading. This is because plan participants with the greatest subsidy will generally experience the greatest percentage increase simply because they tend to pay a smaller portion of the total cost of their coverage".

"Duke Energy Corporation reserves the right to amend or terminate any of its employee benefit plans in any respect and at any time. For example, a plan may be discontinued in part or in its entirety, or what the plan covers or what benefits it provides may be changed. Cost sharing between Duke Energy and covered individuals is also subject to change, which may include initiating or increasing required contributions."

Advocate translation: "You cannot figure this out, so don't try. And, do not count on today's benefits being here tomorrow."

The retiree had this to say: "I think that it is a certainty that, should there be national legislation offering even the weakest drug plan, Duke will immediately terminate the retiree drug insurance."

Those are probably prophetic words. Duke has cut our benefits in every way imaginable. Our pension benefits and retirement insurance benefits were cut, then our retirement insurance was again cut or eliminated. Now Duke is going after the retirees. If anyone in the room has failed to see a pattern, please raise your hand.

After working for thirty or more years, the retirees thought that they had earned certain retirement health benefits. Now, we see that these are "vapor benefits." They sound good while you are working, but when you retire, the benefits float away.

For those still working, do you expect to get a better deal when you retiree? If so, there are a lot of telemarketers that would like to have your phone number.

Companies Transform Retiree-Medical Plans into Source of Profits

Duke Energy is doing everything possible to keep your pension as meager as possible. If you live in North Carolina, the taxman wants to ensure that your pension check is smaller by taking a cut before you even see it. To read the new laws, effective January 1, 2001, click the link below:

New N. C. Pension Tax Laws

Most employees have had their promised retirement health insurance taken from them. The company has cut us loose and now we will be entirely dependent on the federal government when we retire.

One would think that those who retired prior to "The Great Benefits Plunder" would have their insurance locked in and not have to be concerned with it. Not so. Duke Energy is putting the squeeze on retirees in the form of insurance premiums.

One Duke Energy retiree who retired last year writes that on January 1, 2000 his health insurance premiums escalated a staggering 37 percent! Another retiree's premiums increased 38 percent. No explanation for the increase was given to either retiree.

Even after a person retires, it seems that they are not free from Duke's "money games." This is on top of the fact that cost of living adjustments (COLA's) are far and few between from Duke Energy. There are no automatic COLA's. They only come after specific board of directors action and only out of the goodness of their hearts. You can see where the retirees just might have a problem. When those at the top can enjoy a seventy-five percent raise in one year and have over a third of a million dollars added to their executive cash balance plan, there is probably nothing left over for the retirees.

Rick Priory Gets $337,100.00 (Cash Balance Credit)

Stock grants make CEOs' day (75% Raise)