DukeEmployees.com - Duke Energy Employee Advocate
Noon Rebuttal - 1999
Noon Rebuttal - December 1999
The December "Noon Report" was held on Dec. 15, 1999, and hosted by Rick Priory.
Employee: "I heard recently that Ed Crutchfield, CEO of First Union, along with 200+ First Union executives will not get bonuses this year due to less than stellar performance and First Union's low stock price. Are our executives considering forgoing incentives this year since Duke Energy stock isn't performing well?"
Mr. Priory: We have an incentive plan that says if we don't deliver what the Street expects, we don't get an incentive. However, we don't have a single measure in our incentive plan that ties directly to the stock price. The Policy Committee has one measure in their incentive plan ? Earnings Per Share (EPS). The reason for this is that the Board wants the Policy Committee focused on earnings growth. (Other company leaders have incentive plans based on corporate, business unit and individual performance.) Through the structure of our incentive plan, the Board is indicating that if we focus on EPS, they think the stock will head in the right direction. We positioned ourselves so that when the money turns around and begins looking at our sector again, we'll be attractive. If our team delivers the results we've outlined, they deserve the incentives.
Employee: "I would appreciate it if you would comment on the Retirement Cash Balance Plan (RCBP) with respect to the lawsuits that are going on currently."
Mr. Priory: I don't know of any lawsuits. Several employees have filed charges with the Equal Employment Opportunity Commission (EEOC) regarding the RBCP. I don't know the specifics of the charges, other than that they are age-related. The EEOC is charged with the responsibility of looking at these types of issues. They'll bring the charges to us. We will provide the necessary data to explain the plan, the IRS rulings our plans received, etc., and we'll go through the process of resolving those. There are a lot of issues floating around regarding cash balance plans. They were handled in a variety of different ways at different companies. It has caused us to re-look at our plan and the transition rules we used at Duke Energy. We're comfortable with the approach we used. We will simply go through the normal process of handling any EEOC charges we might receive.
Translation: "They'll bring the charges to us. We will provide the necessary data to explain the plan..." Mr. Priory says that Duke will provide the data, but in actuality, they are stonewalling again. Duke has yet to tell the EEOC how the conversion was made as of 1/27/00. Some view this as a bad sign for Duke. Duke does not want to give the EEOC a new rope with which to hang them with. But, Duke can only stonewall for so long. The EEOC can subpoena the data if necessary. Duke has been stonewalling for so many years that they probably just cannot help it. "There are a lot of issues floating around regarding cash balance plans." Duke did not cover themselves as well as they thought. "We're comfortable with the approach we used." One astute employee observed that this means that Duke would have liked to have taken more money from the employees, but they are comfortable with the amount that they did take!
Employee: "Reading through our benefits enrollment package, I noticed that HMO total charges increased up to 23 percent. I also noticed that my premiums for HMO coverage will increase 47 percent from 1999 to 2000. Why is my premium increase so much more than the cost increase?"
Mr. Priory: "While financial pressures have caused HMO total charges to increase up to 23 percent, the company's policy also changed to retain cost equity across all medical plan options. In other words, to keep average out-of-pocket costs including employee contributions, deductibles, copays and coinsurance about equal for employees in all plans. This resulted in some HMO participants seeing substantial contribution rate increases for the 2000 plan year. For more details about medical and dental plan costs for 2000, see page five of your 2000 Life Tracks Enrollment Decision Guide."
Translation: Just what is the purpose of more than one plan if they are constantly tinkered with to always cost the same amount? If the employee should happen to pick the best plan and save money, Duke just raises the cost of that plan. There is no way to win in this constant cat and mouse game. It proves that these plans have nothing to do with flexibility. They are just another way to add confusion to the benefits program. Amid all the smoke and mirrors and changes, the employees are consistently getting less! That is the true purpose of all pension and health benefits changes, to give the employees less and try to conceal that fact. Duke is shaking us down, but they want us to feel good about it!
Employee: "Why doesn't Duke Energy do something to enhance the value of our stock?"
Mr. Priory: "While the utility sector as a whole is currently down, we're doing many things to enhance the value of Duke Energy stock. We continue to communicate with analysts who follow our stock, as well as portfolio managers who invest in Duke Energy, to make sure they understand how dynamic and compelling the Duke Energy growth story is. Based on recent analyst reports and on our ability to execute our strategies, we believe Wall Street is getting a clearer message about the value of Duke Energy. In fact, we are receiving favorable ratings and buy recommendations from many analysts. We have told "the Street" we will grow earnings 8 to 10 percent per year, and we are demonstrating strong progress toward those growth goals. As we continue to post strong earnings, and investors and analysts get a better picture of how we have grown, they will give us additional credit for future growth."
Translation: Mr. Priory is trying to sell Wall Street analysts a bill of goods that they are not buying. They know that his saying it does not make it so. He has yet to even successfully sell the employees on the cash balance plan.
Noon Rebuttal - November 1999
Rick Priory hosted the November "Noon Report" on November 30, 1999.
Employee: "If the ...(RCBP) actually 'pays' employees at the interest rate level of Treasury securities, why are the funds themselves invested in a more risky 'hedge' fund? Assuming the hedge fund is profitable, where does this profit go?"
Mr. Priory: "The company's investment committee works with a leading pension consulting firm to determine an asset allocation that will most effectively meet the obligations of RCBP over the long-run. Currently, that allocation is 45 percent U.S. stocks, 20 percent non-U.S. stocks, and 35 percent bonds. Some years the assets in the pension trust will earn more than the 30-year Treasury yield; some years they will earn less, depending on market fluctuations. Earnings on the pension assets in excess of the cash balance crediting rate simply reduce the amount of cash the company is required to contribute to the trust."
Translation: The profits go into Duke's pocket. Duke's pension fund became "over funded" due to stocks' appreciation outpacing the pay out to retirees. There are ways to move the over funded amount to the bottom line at favorable tax rates. When Duke raided the pension fund (reduced liabilities), there was a windfall of free money. The money was originally placed in the pension fund for the express purpose of meeting the retirement promises made to the employees. The money was placed there by more honorable people than those who are running the company today. The money was never placed in the pension fund so that Duke could enjoy windfall profits at the employees expense. Only by breaking retirement promises to employees by very questionable maneuvers, was Duke able to grab our money.
Employee: "Why is it that an employee who started working at Duke Energy Jan. 1, 1999, at age 22 (my age when I started) and receiving the same raises I have (after 17 years -- my current length of service) would have about 40 percent more in his RCBP than I currently do? It seems that two employees who start at the same age, making the same salaries and working the same amount of time should have the same RCBP amounts (regardless of what year they start). What formula was used to determine the beginning balances for our RCBP?"
Mr. Priory: "It's hard to tell which program you participate in by your question. To receive an explanation of how the transition to cash balance is structured, you can submit a written request to: Director, corporate employee benefits, PB04B (street address: 526 S. Church St.; Charlotte, NC 28202-1802)."
Translation: The plan is rotten to the core. It was not designed for your benefit, or to even be understood by you. It was designed to transfer money from you to Duke Energy. Remember, one of the reasons for the conversion was because it is "easy to understand."
Employee: "How can DE&S separate itself from Duke Energy and take away Easter, Christmas Eve and birthday holidays, plus make its own sick allowance program (80 hours paid time off)?"
Mr. Priory: "All Duke Energy business units can tailor policies to meet their business needs, with business unit board approval. DE&S' personal time off (PTO) policy, which was approved by its board, enables DE&S to meet its clients? deadlines and schedules, while allowing employees flexibility in time off and other options if the time isn't used. Regarding holidays, DE&S employees will be given 80 PTO hours on Jan. 1, 2000. There will also be seven core holidays. If employees wish to observe any day (such as Christmas Eve, Easter Friday or their birthday) as a holiday, they may select to use eight hours of their 80 hours of PTO time. If you'd like more details about DE&S' paid time off policy, you should talk with a DE&S human resources representative."
Translation: You do not have a contract and are at the mercy of the whims of Duke Energy Corporation. If it happened to DE&S, it can happen to any of us at any time. Which way has Duke been going, giving employees more benefits, or taking all they can?
Employee: "The answer to a lot of questions about pay, vacation and benefits seems to be that we want those in line with our competitors.' Is it written in stone somewhere that we have to be in line with them? Can we not have better benefits than others? Staying in line doesn't make us better, and that's what I thought we were striving for."
Mr. Priory: "Our total compensation strategy, which includes benefits, base pay and incentives, is designed to help both employees and the company prosper in a competitive market. And although we have a common strategy across the corporation, benefits, base pay and incentives vary between business units based on the markets in which they compete. Incentives are designed to offer each of us an opportunity to share in the companys' success and earn more than the market based on personal, business unit and company success. Regular benchmarking ensures we're doing this. It's also reinforced through external recognition such as Money magazines' recent ranking of our benefits program as 10th out of 40 Fortune 100 companies surveyed. We continue to benchmark our pay and benefits to ensure they remain competitive to help us attract and retain the high-performing employees that will help Duke Energy excel in an increasingly competitive and changing industry."
Translation: It is not written in stone that our benefits have to be in line with other companies. However, it is burned into Mr. Priorys' mind with a laser beam that our benefits must always be in line or lower than other companies' benefits. Our old retirement plan, with the enhanced early retirement benefit was placed into operation by greater people than those who destroyed it. Our present senior management felt no moral duty to honor the implied retirement contract that we have worked under all our lives. They saw our EARNED retirement security as a pile of free money for them to grab. And, just try spending the "Money Magazine" article! A Duke spokesperson drug out the "Money" article, Mr. Tuckman proudly presented the "Money" article. Now Mr. Priory is glorifying the "Money" article. If that's all they have going for them, they have to play it for all its worth.
Employee: "Last year I was disappointed with the company for cutting health and retirement benefits to save money. To make matters worse, I received, by Priority Mail, a binder outlining our benefits. How do you justify the cost? What upsets me more are discrepancies in benefits among business units. I understand that each unit is responsible for its benefits, but it seems that, as one company, benefits should be almost even."
Mr. Priory: "The Life Tracks benefits tracker notebooks were introduced in 1997 at Duke Power to fulfill legal requirements of providing employees summary plan descriptions (SPDs) for the company's benefits program. The notebooks were designed with input from focus groups, and provide a durable storage space for all benefits information. Benefits information continues to be sent to employees' homes to enable employees and their family members access to information. Mailing information to employees' homes is also often less expensive than using labor-intensive internal networks for distribution. The packaging used with this year's distribution was necessary to ensure the contents were delivered damage-free. Priority Mail ensured delivery during the 2000 enrollment window. Employees who already had benefits notebooks received updated SPD booklets for their existing notebooks. Employees who had not previously received notebooks received them as was requested by business unit human resource groups and leaders. Newly hired employees receive benefits notebooks as well. SPD booklets distributed this fall will be added to the benefits section of the Duke Energy Now! Web site. However, it's important to remember that not all employees have access to the Web, so there will continue to be a need for some paper distribution as well. While business units have some flexibility to tailor certain benefit plans to meet their individual needs based on market competitiveness, a core set of benefits means that there are many consistencies from unit to unit as well."
Translation: The real facts could have been given on a few white sheets of plain paper printed with black ink, and would have met all legal requirements. When someone is trying to sell you something that is not in your best interest, don't expect the facts to be presented clearly. The last thing that a con man wants to do is simply presents the facts! The con man is only interested in mudding the water, confusing the issue, and creating diversions. A multitude of documents will fill the bill. Especially, when the important facts are omitted from them! Textured paper, pastel colors, fancy type, thick pages, wide margins, plenty of cartoons, redundancy, and little real information should obscure the facts nicely. Sure, it cost more. But, if the con man takes millions from the deal, he can afford to spend some pocket change. Duke probably thought we deserved a nice binder, since that's about all we have left of the benefits program, a binder.
Employee: "If the company requires us to wear prescription safety glasses, why don't they share in the cost of buying them like they do with safety shoes?"
Mr. Priory: "Reimbursement decisions regarding prescription safety glasses vary among business units based on jobs. However, restrictions sometimes are applied to individually assigned personal protective equipment such as safety glasses and safety shoes that may be used off-the-job. Within Duke Energy, individual business units are given the flexibility (and responsibility) of establishing the specific details of a safety and health program. However, the business unit's safety and health program must meet the framework established by the Duke Energy Environment, Health and Safety (EHS) Policy and Standards. The policy regarding prescription safety glasses is currently being evaluated in Field Services. Additional information will be communicated to Field Services personnel after the review is complete. The Duke Energy EHS Policy is available on the Intranet under the banner of Ethics and Policies."
Translation: One of the reasons given for all the benefit changes was to bring all the departments in line with each other. Almost every time the real reason for a Duke change is to spend less on the employees. With each change Duke invents a "cover story" to explain how it will help the employees. Duke evidently does not spend a lot time on the cover stories; that's why they seldom hold water. If a robber sticks a gun in your face, it is more honest for him to say "I am going to rob you." In the same situation, all we hear is: "Hi, I'm from the Duke Energy Benefits Department, and I am here to help you."
Noon Rebuttal - October 1999
Questions were asked about Duke Energy's retirement plan. Below is Rick Priory's answers:
Rick Priory: "We elected not to provide a choice between plans."
Truth: A choice was given to employees within five years of retirement on 1/1/97 (read employees age 50). IBM employees pressured IBM into rolling the choice for them from age 50 to age 40. Now, Duke does not even want to acknowledge the choice for employees age 50 on 1/1/97.
Rick Priory: "We are not considering changing that decision."
Truth: We have no doubts about that. However, Mr. Priory will do exactly as instructed by the federal court, whether it is providing a cash settlement to injured employees or "changing that decision."
Truth: We do not doubt the statement; it is the insidious implication we take issue with: " We are completely legal. We have all bases covered. It is foolish for employees to challenge us. They are too dumb to understand the complexities anyway." The IRS has given only TENTATIVE approval to cash balance plans. The right is reserved to withdraw favorable tax treatment after a complete investigation. Recently, the IRS took the position in a lawsuit that a pension plan at Onan Corp., a subsidiary of Cummins Engine, should be stripped of its tax-exempt status because of the way it converted to a type of cash balance plan. This was TEN YEARS after the IRS's tentative approval of the plan! If the IRS can go back ten years and revoke approval, that means that Duke is NOT off Scott free yet. The IRS only has the power to approve matters relating to taxes anyway. If ERISA laws or ADEA laws are violated, that is a matter for the federal courts. There is a letter from Congressman Lloyd Doggett on the "News" page that states that the actuaries who concocted these plans may be in trouble. The Department of Labor is considering investigating and disciplining guilty actuaries. Some people in Washington think that the companies who hired the actuaries will not escape unscathed. Duke has built a shaky house of cards. They are trying to hold it up with their triad of deceit: stonewalling, half truths, and innuendoes.
Rick Priory: "While recent media articles indicate that the IRS will continue to review future companies' conversions to cash balance pans, there is no indication that future plans will not be approved."
Truth: Not according to many senators, congressmen, and pension experts. Congressman Sanders stated: "... the IRS signals that they will not be issuing any new tax determination approvals for cash balance plans in the foreseeable future." In another interview, he said "The very good news is that the IRS has, essentially, placed a moratorium on the conversion of pension plans." It is difficult to believe that Mr. Priory is that ignorant of current events. Perhaps he is so arrogant that he thinks we will swallow anything that he throws out. The tentative approval was given before by the IRS field offices; now tentative approval must be give by the national office. Even one IRS field office last year raised questions about potential violation of age bias laws. And, in a memo to IRS division chiefs, Employee Plans Division Director Carol Gold says that "a number of important issues" have been raised when companies convert standard pension plans to the cash-balance arrangements. Critics claim they violate the 1967 Age Discrimination in Employment Act. Cash balance plans are under investigation by the IRS and they are requesting comments from the public.