Court Deals Pensions Blow To Older IBM Workers

[Omaha Steve]

http://www.laborradio.org/node/3909



Court Deals Pensions Blow To Older IBM Workers - 08/09/06

By Doug Cunningham

Older workers at IBM trying to defend their full earned pensions have been dealt a blow by an Illinois federal district court. The court has sided with IBM, finding that the company did not break age discrimination laws when it changed its pensions to cash balance plans in the ‘90’s, slashing benefits for older workers. Linda Guyer, president of the CWA affiliated Alliance At IBM says this case demonstrates why workers need pension benefits spelled out in union contracts. Kathi Cooper, the 55 year old IBM worker who started the class-action lawsuit says she’s already being encouraged by IBM workers to keep fighting all the way to the Supreme Court.

[sgxnk]

1. i've said it before... i'll say it again

pensions in general are poorly conceived and belong on the dustbin of history

defined contribution plans are the way to go

[mcscajun]

2. Fine. But this is how we got here.

We all had Defined Benefit Plans. When Defined Contribution plans came along, the Benefits already accrued through years of service had to be defined somehow, so we got "Cash Balance" calculations.

My bank (where I worked for 32 years until 2003) changed in the late 80s, and I did the math on my new Cash Balance; after 15+ years of "vested benefit" participation, my lump sum moving to the Defined Contribution Plan amounted to nothing more than five years of Future Value monthly payments. It looked like a pretty paltry sum to me, and I cannot even imagine how the folks 10-15 years older than me felt when they did the math.

The formulas these corporations used to calculate the balances to be moved screwed their employees, plain and simple. What would have been right? We'll never know, the courts says so.

[sinkingfeeling]

3. Really? Then I can only hope that your defined contribution plan goes

belly up about five years before you plan to 'retire'. I have a closet full of IBM memos and booklets describing to me that my 'guaranteed pension' was 'secure' and 'deferred compensation' for my thirty years of labor.

Interesting, that the day after the US Senate passed that pension 'reform' bill, declaring that conversions to cash balance plans are legal, the 7th. District Court overturns Cooper vs. IBM. But we're not done. We will continue this law suit to the end.

[sgxnk]

5. you are making my point

defined contribution plans cannot go belly up

they work totally different

unless yer dumb enuf (not you, particularly) to put yer entire nest egg in one issue (see: ENE) or are forced to(which would be a poorly conceived defined contribution plan), this cannot happen

pension suck, especially cause all these companies underfunded their pension program

you can't underfund defined benefit plan, because it's YOUR money that you put it, then you get back

[sinkingfeeling]

7. And if the stock market were to crash completely when China et al

calls in their T-bonds? What if that $300,000 ends up being worth $1500?

[sgxnk]

8. you don't put

ALL your eggs in one basket. the stock market is a basket

fwiw, i am a trader . that's what i do to make a living

and if the stock market crashes "completely" there will be a lot worse things to worry about than one's retirement

of course, our stock market has never crashed completely.

for a 300k account to be worth 1500 you would either have to be margined 20+X (which is illegal in retirement accounts) or you would have to be dumbest investor on the face of the earth

[sinkingfeeling]

9. 'A trader'. That explains why you don't believe corporations should

have to honor their promises (yes, no contracts) to their employees. That having a corporation insist for 30 years that employees' pensions were deferred compensation
(stupid plans by your definition) and then being legally able to walk away from those commitments is super if that helps the corporate bottom line?

Since you are wise in the ways of finance, how would you have responded to being 62 years old and being told your pre-planned retirement of $3400 a month was going to be scraped and your 'cash balance' would be $130,000? What annuity would you recommend? How would you invest to achieve $3400 a month for the next 30 years? How would you react to having a defined benefit pension cut by 33%? 140,000 of us ex-IBMers filed an age discrimination lawsuit and won. Now the Appeals Court (not the full court) writes a 37 page reversal where it is evident that they ignored ERISA.

I would guess that I'm considerably older than you and I will tell you that I long for the USA that existed when I grew up. People and business' had 'honor' back then. My dad was a farmer and every year negotiated his bank loan with the local banker (a friend and neighbor) and 'signed' it with a handshake. If a place had bad customer service, you just went to another. Now everything in the country is the same. We're going to the point that we'll have the choice of buying from one or two mega stores, financing everything through 3 or 4 banks, and going to the same chain restaurants to eat all over. The massive mergers and consolidation of businesses into mega corporations that control every aspect of our lives is something I don't care for. Homogenization is ugly. There is no way I would 'invest' my money in any of them.

Look, you have your knowledge and profession to rely on, but there are tens of thousands, maybe millions, of older people in this country that just got screwed. I'm lucky, because I'm working full time at a good salary and stashing about 11% into a 403(b) with my employer adding another 10%. We're all, of course, also facing the demise of Social Security as well.

All I'm saying, is 35 years ago, if someone had said, "IBM will never honor their pension commitment to you", I'd have argued that the Watson family would never default on their promises. No one can see 35 or 40 years into the future. So your defined contribution plans may be in good shape or they may be called 'stupid plans' in 2045.

[sgxnk]

11. you are lying or mistaken

please retract your lie

i stated that corporations SHOULD be forced to pay their committments (ie pensions)

i said that as a matter of policy, pensions are inferior to defined contribution

but GIVEN that a company has a pension program... they are morally and legally (imo) contracted to pay off their pension obligations

hth

i NEVER said they should not be responsible for paying off their pensions. i said the EXACT opposite

hth

[sinkingfeeling]

21. I asked a question about if you believed they should be able to

break their 'contract' pension obligations to their employees if it benefited their bottom line. I'm sorry that I implied that you automatically endorsed that behavior. The point of the OP is that a federal appeals court ruled it was not age discrimination to change from a defined benefit program that people had been in for 25 to 40 years to a defined contribution plan that cut those planned pensions by up to 50%. You stated that pensions belong in the 'dustbin of history' and that defined contribution plans are the way to go.

You also keep saying that defined contributions are 'YOUR' money, but fail to realize that for 30 years my ex-company, IBM, told me that what was put into my pension fund was MY money as well. And I have several documents that state here is your current salary: $xxxxxxx and here is your deferred compensation: $xxxxxx. What is different in that and getting a pay statement that says here is your current salary: $xxxxxx and here is your contribution to your 401K: $xxxxxx?

The complaint is that the US government just said it's OK to change plans that harm the older workers and as I said before, there could be something (at this time, not thought of), in 35 to 40 years that will cause defined contributions plans to be just as vulnerable as our 'old pensions'.

[sgxnk]

22. and i agree with you

and disagree with the US govt. in their decision

that is a seperate issue to the fact that i also think that defined contribution plans are superior

[LincolnMcGrath]

10. Translation: "Screw having the company save for you, save your own

money!"

Well ain't that a bargain? Instead of asking the corporation I dedicate 40 years of my life to kick in a few bucks to ensure a decent retirement, I can save my own money? :eyes:

[sgxnk]

12. well, yes

tax deferred, and with matching payments from the company if so contracted

defined contributions are much more portable, flexible and empower the individual

they also are better for the companies

win-win

[LincolnMcGrath]

13. Lose lose

I watched 75% of my coworkers lose their 401K overnight. Guess who is paying for their golden years now?

[sgxnk]

14. i would not accept ANY 401k plan

that had more than 5% of funds in ANY individual issue. I would accept that 401k holders could hold up to 10% of the stock of their *own* company but that's it

the fact that some 401k plans are poorly managed is not an indictment of 401k's overall. it is an indictment of poorly designed 401k's

[LincolnMcGrath]

15. It's still lose lose.

And a pay cut as well.

Nothing prevented working folks from enjoying the benefits offered in most 401Ks prior to their introduction a few decades ago. You'll also recall that they were sold to workers not as a replacement to pensions, but a supplement. So much for that nonsense.

[sgxnk]

16. imo..

they should be a replacement to pensions

UNLIKE pensions, they do not have the same sort of risks of failure to fully fund a pension system.Companies can never know how much to jkeep in a pension system since too many factors are uncontrollable variable. in 401k's the money is the employees OWN money and is much more portable and flexible and does not have these same potential problems in many respects

pensions were designed at a time when it was very common for a person to stay with one company their entire careers. that is far less common now

[LincolnMcGrath]

17. Spare me the sorrow for corporate america.

My company spends Billions on Executive Excess before they ever spend a nickel on hourly folks.

[sgxnk]

18. this has nothing to do with

sorrow for corporate america

corporate america is doing just fine thank you

this has to do with two competing concepts of how employees should plan for retirement and which concept is better for both employee and company

imo, defined contribution plans are clearly superior

[LincolnMcGrath]

19. Well, you are simply wrong.

Issue 1: They are a pay cut.

Issue 2: The risks outweigh any benefit.

[sgxnk]

20. i disagree

that much is clear

[MaineDem]

4. That's fine...but don't change the rules in the middle of the game

These older workers have been depending on the plan the way it was. Now it's being changed.

I think it's more fair to change "from this point on"; anyone joining the company comes in under the new plan, whatever it happens to be.

I empathize with the almost-ready-to-retire folks. I truly do.

[sgxnk]

6. i agree 100%

these companies owe their employees

pensions (should be) like contracts