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"A good heart is better than all the heads in the world" - Edward Bulwer Lytton

Andy Lang - IBM Pension Club - 9/28/2000

Many, not all, of CB conversions disguise a fundamental change in the nature of the plan from one that bases the benefits on final average pay to career average earnings.

They do this by crediting an absurdly low rate of interest on the CB account balance--something around 5% per year or so, while the system's assets are geared to earn anywhere from 9-10% per year. And, it is important to also note that most DB plans have been earning well above those 9-10% per year figures--and doing so for a very long time too.

Over the long time period involved, this makes a huge reduction in benefits. (payable as an annuity).

Not only do you not get the benefit of inflation adjustments to your benefits while an active employee, but you also do not get the higher amounts attributable to pay increases that are above this--such as promotional increases.

These kinds of CB conversions can reduce a person's benefits by as much as 40% over what they were previously.

The use of such an old trick has a name: it's called taking advantage of the public's lack of understanding the time value of money (ie, compound interest, or the inverse, the discount rate, what we actuaries call the 'present value') and how important it can be over the long term in any long term financial transaction. (Check out how much interest you pay on your home mortgage company over the life of the loan when you pay off your mortgage and then realize that the same thing is being disguised here).

The reason they do this by using the CB conversion route is simple: it disguises this massive and fundamental change, which, if they did it openly and with proper individualized employee statements and proper communications, would give away the scam and they would have an employee revolt and exodus--especially in combination with the ER (early retirement) subsidy removal.

It is important to note that companies have been receiving major tax deductions for actuarially determined funding in advance for annual contributions that INCLUDE both the former plan's formula, including both past and future benefit accruals, AND the ER subsidy.

Likewise all the investment returns on the assets are completely tax exempt.

The average DB plan is now 130% funded for accrued benefits AND in addition, let's note that the benefit that accrues each year under ERISA itself is understated at every point in your career, due to a serious flaw in ERISA.

This means that some of that 30% should really belong to participants in the form of higher accrued benefits, had that error been corrected.

Never have so many been scammed by so much by so few.

The H R 1102 Conspiracy
catharis99 - IBM Pension Club - 9/1/2000

*What you are seeing played out before your eyes, is an attempt to legalize the takeaway of BILLIONS from defined benefit plans...listen to what Andy has been saying... he KNOWS! as do others, such as Norm Stein, who quickly "blew the whistle."

*It has been very craftily hidden in a "pork" bill, with totally unrelated (and perhaps reasonable) Defined Contribution plan types of changes.

*The techniques used have been a PR delight - Push the sound bite types of 401k/ira changes - push the small business relief aspect (so as to hide) - the broader regulatory and participant protection weakening of large DB plans!

*Set the stage (probably for just a few large plan sponsors) to come in and exploit the DB plan loopholes - hidden behind many others - with no intent or financial NEED to exploit.

*Even the "pundits" press releases have been very craftily worded: Only a few exploiters, so ok, or various "con job white papers" termed phased retirements, etc.

*Yes -- Norm Stein is RIGHT ON... If this legislation is allowed to be enacted without modification - it will go down in history AS THE DB PENSION REDUCTION ACT of 2000!

Sooner or later the public will demand an answer to the following:

*Why were a few "ringleaders" allowed to dictate - through various puppet groups - the entire Public Pension Policy for an entire Generation of Private U.S. workers ???

*Who were/are these "ringleaders" hiding in the shadows ?

*What are/were the relationships between these puppet groups, ringleaders, congressional staffs, and lobbyist ?

*How could so few, manipulate so many, and set DB Pension Policy for an ENTIRE Private sector U.S. Workforce ?


Two (Shill Groups Screaming)
olderfemale - IBM Pension Club - 8/27/2000

-The various shills and shill groups, "scream" that any anti-wearaway legislation NOT BE RETROACTIVE-

-On the OTHER HAND THEY WOULD HAVE NO QUALMS OF retroactively Taking away already earned retirement subsidies - This is why they "campaign so hard", for 1102, and more specifically, THE BIG SCAM CLAUSE, WHICH ATTEMPTS TO ALLOW TAKEAWAY of retirement subsidies! I call it the 411(d) 6(b) Buster; Basically repeal of the anti-cutback!

Even more of a joke - is that they try various press spins to deny the loophole exists. Either through their own definition of what's "material", or even more of a joke ; putting out press releases that db pension plan abuse is only isolated - and therefore (by implication) that since only a few big plans would milk the loophole- statistically, this makes it ok.

Make no mistake - if this "cutback scam" is enacted - the shills will waste no time in removing extended distribution options and thereby forcing participants into only HUGELY REDUCED LUMP SUMS. Then they will tout how benevolent they are to allow the roll into 401k's. Mean-while the Big Shills will be laughing all the way to the bank with the MASSIVE ACTUARIAL GAINS resulting from being able to declare all of what was participant retirement subsidy liability - SURPLUS. Imagine the Hugh Spikes in Vapor Profit the Shill Captains of industry can claim! Or What a bonanza they will reap - when they terminate for the 1102 Fattened DB Plan surplus Asset!

Contracts improve pensions
unionjack1999 - IBM Pension Club - 8/25/2000

We just found out in our last IBEW meeting that when Verizon was on strike, the company tried to talk about "Cash Balance plans". The IBEW immediately got up to walk out! The IBEW told Verizon that " Cash Balance Plans are a strikeable issue".

Verizon quickly dropped that issue.

Memo to Andy: Reno, RICO, Right-wing Rep
andylang_19380 - Andy Lang Club - 8/24/2000

Ugliest thing I ever saw.

Part of a strategy to save money and hold employees hostage by using a set of flawed ERISA laws, or get rid of them.

Flawed laws in effect since 1974, but strategy implemented in the early 80s, with great help from major human resource and actuarial firms, and first with traditional DB plans then with their 'improved version,' the CB plan.

Communications designed to deceive.

The latest scheme is a takeoff of the 'screw-em by lump summing them out and taking away the early retirement subsidy (since the dumb rules say it is an deferred annuity payable at age 65, not any early retirement age), a choice of extremely unequal 'choices that few people can detect, and/or get rid of the DB plan entirely and substitute a 401(k).

Either way, they win, you lose.

Some senior level actuaries in major consulting firms up to their eyeballs in this awful stuff.

Violation of SOA professional ethics rules, Enrolled Actuaries rules, and, in many cases, age discrimination laws and possibly other laws too.

Some major help from key Congressmen, influenced by corporate lobbyists.

Memo to Andy: Continue to work to make sure public aware of this.

Memo to Andy: Request that Janet Reno investigate this whole sordid affair, using RICO, the anti-racketeering law.

A trillion dollars or more ripped out of DB plans out to be enough of a scandal to get anyone's attention.

Pension Scams
andylang_19380 - Andy Lang Club - 8/16/2000

What can I say except what I have said so many times.

It's the biggest financial scandal in US history and we need a massive revision and re-examination of ERISA, to eliminate this stuff.

Gore and Lieberman will do it. Bush and Cheney will not.

Lou_Shadow - IBM Pension Club - 8/16/2000

Why thank you AloisSchattenistderschluessel, It's been years but I had enough German to buy my boys beer in Graffenwoehr. That's where, more importantly, I learnt that in any decent and effective Army the Men eat before the Officers. Clearly a revolutionary concept in today's IBM! It didn't used to be.

Quite apart from any other reason I find it very difficult, no I mean I find it impossible to respect Lou because of his blatant contempt for his own employees. He wouldn't last five seconds in combat because nobody would watch out for him. Business isn't that much different. It just takes longer to find yourself exposed. How he thought he could survive without the support of his employees I do not know.

S2853 Phased retirement
andylang_19380 - IBM Pension Club - 8/15/2000

Also, from a financial and tax standpoint, you are allowing 'wages'--the DB pension benefit, to be paid with assets that were built-up with tax deductible corporate contributions, and with tax free investment returns on those assets.

Corporate welfare to the max. Everybody pays higher taxes, while corporations escape them, and keep workers who get hosed by the lost ER subsidy loophole, lower pension accruals at precisely the time they are a high % of pay (At older ages, they can easily be 20% of pay each year--the old PVABP tontine-like rip-off)once again increasing corporate operating earnings by lowering pension expense.

It's one more version of pension rip-offs that exploit this ERISA PVABP.

The message: Fix the PVABP, including the ER subsidy loophole, and you eliminate this nonsense.

Do all the other stuff and you wont.

Tell Harkin about this. It's the same deal all over again that he tried to stop and called attention to before.

Send a letter to Janet Reno asking the Justice Department to look into this, along with the CB scams and have her invoke RICO. This is a racket if ever there was one.

Any actuaries that are pushing this should be thrown out of the profession, made Ex-Enrolled Actuaries, and thrown into jail.

Any consulting firms that are pushing this should pay a heavy price too.

Election Year Considerations
angryspouse - IBM Pension Club - 8/11/2000

What I would like to throw out for consideration:

1) Go get a copy of Ellen Schultz's WSJ article dated July 27:

Companies Find Host Of Subtle Ways to Pare Retirement Payouts

If you've already read it, read it again. Ask yourself, if left unchecked, do you think this kind of stuff will continue?

2) Decide how important THIS ISSUE is to you. (The fact that this board has been active for over a year now, indicates that this issue must be of some consequence.)

3) How badly do you want THIS ISSUE fixed?

4) Given your answers on items 1 - 3 above, and given the events over the past year, ask yourself where are we most likely to get the most support on this issue?

5) Weigh the above with other issues that may be of consequence to you.

Ellen Exposes Phased Retirement
andylang_19380 - IBM Pension Club - 8/6/2000

If consultants and their clients want to keep those older employees so much, they should try doing it the old-fashioned way: Like pay them more money.

Since when do you cut a person's 'total compensation', e.g. their pension benefit, in order to keep them?

And they don't need high priced consultants to do that either.

They should also use the savings from not having to pay those consultants and increase the health care benefits.

To say that they cut out the early retirement subsidies in order to keep the older workers from retiring is the height of hypocrisy and absurdity. It turns reason on its head.

IMO, the reason they did it without firing older workers instead is simple: They were afraid of age discrimination lawsuits.

AND they could also simultaneously convert the traditional DB plans from final pay related ones to career pay ones and save tons of money from younger folks too.

They thought they could get by with doing this and few would notice and even fewer complain by obscuring it all in gobble-de-gook--just like numerous actuaries say in those Enrolled Actuaries meetings.

Those transcripts are sort of like bank robbers discussing exactly how they are going to rob the banks---and then leaving behind the plans.

Well, it seems they miscalculated a little.

The law of unintended consequences, I think I heard ERIC and APPWP say a few times.

Election (SS Plan)
bluemajor - IBM Pension Club - 8/5/2000

I also agree that our choice of candidates is pretty dismal this year. A third party that would represent the interests of working Americans is a great idea, but for the short term we're stuck with a two-party system. The stakes are too high this year for protest 3rd-party votes, so I'll be holding my nose and voting for Gore as the lesser of two evils and hope the Democrats can hold off the wholesale looting of pension trust funds for a few more years. Then we have 4 years to work on getting a third party going, or reforming one or both existing parties to start working for the American people.

Management Impact
Lou_Shadow - IBM Pension Club - 8/4/2000


You said "With the net most everything gets out now."

Lady, you ain't seen nothing yet! Did you notice the OTC newswire account of Lou's visit to Rochester? Now where did one read that first?

Corporations have a simple choice. Clean up their act and keep it clean or be outed for exactly what they are. They will not like, they'll threaten, they'll harass but it will come out all the same.

Once the Hanger on Execs of today depart a new wiser smarter type of exec will emerge who is far more tuned in to exactly what you are saying. The boys of today are products of a world of secrecy that is just evaporating for the reasons you give.

It must be a big shock to find oneself naked in a stadium filled to the brim with the public, when one has been used to being treated as a demi God. That's Lou's challenge and I might say the same challenge faces all with responsibility to others.
How's he coping with his personal change? He's clearly trying God Bless him.

Workers get fair day courtesy of IBM - Two
donshuper - IBM Pension Club - 8/3/2000

Sure sounds like IBM uses the same play book the Boeing anti-union firm uses.

In the Boeing case last month, the company gave1/2 a day off to the Wichita employees who were going to vote in a few days on union representation. Bring the wife and kiddies to the local Disneyland and enjoy the rides and barbecue. - after a few hours of "meet the managers" meetings and rallies at said fairgrounds.

perhaps the Rochester people are thinking about a union / is Lou nervous ?

BTW, the vote was close, and Boeing appealed since Boeing lost. Outcome is still in doubt, now in hands of judge to determine if re-election is needed.

Estimates are that company spent 1/2 million on that day, for about 1200 employees who were eligible- to say nothing of the highway billboards, etc.

That IBM is doing this is -from my knothole - generally an indication that you've got those varmints on the run

Don Shuper

Workers get fair day courtesy of IBM
puppy_play - IBM Pension Club - 8/3/2000

Workers get fair day courtesy of IBM
By Bob Freund
The Post-Bulletin August 2, 2000

IBM Rochester workers today are strolling on the midway instead of laboring in their cubicles or on production lines.

IBM is giving its employees a half-day off to attend the Olmsted County Fair. The local site's 6,000 workers and their families also will be able to gather in IBM's big tent at the fairgrounds in Rochester.

The company is springing for a party featuring a live band, activities for children and discount tickets, among other attractions, spokesman Tim Dallman said.

But at least one reminder of a work-related issue will hang over the fair this afternoon.

The IBM Employee Benefits Action Coalition is sponsoring two flyovers this afternoon by a banner-towing plane to highlight its ongoing protest over IBM Corp.'s handling of workers' pensions. The company's pension plan was changed drastically last summer.

The plane is scheduled to be in the sky over the fairgrounds from 2 p.m. to 3 p.m. and from 5 p.m. to 6 p.m.

The IEBAC also is staffing an information booth at the fair this week.

AT&T Lawsuit Status
puppy_play - IBM Pension Club - 8/1/2000

Federal Judge Tosses Two Age Discrimination Claims But Gives Plaintiffs Go Ahead to Pursue Other Age Discrimination and ERISA Claims in Lawsuit

On June 29, 2000, Federal Judge Nicholas Politan dismissed two of the AT&T management employees' claims of age discrimination in the design of the cash balance pension plan lawsuit. In the same opinion, he rebuffed AT&T's efforts to dismiss a key age discrimination claim and five claims of ERISA violations resulting from AT&T's adoption of the cash balance pension plan-thus giving the employees the go ahead to pursue those claims.

The plaintiffs intend to vigorously pursue the age discrimination and ERISA claims still in the lawsuit and to appeal the dismissal of two of the age claims.

To help us proceed: If you have information about the design by AT&T's Human Resources department or by ASA of the cash balance pension plan transition feature so that older workers receive no pension benefit increases for many years to come, please send an e-mail to our lead attorney, Stephen Bruce, at, or send a letter to Stephen Bruce Law Offices, 805 15th St., NW, Suite 210, Washington, DC 20005.

Employee Empowerment (Austin's Helene Armitage-Attrition)
twener_too - IBM Pension Club - 7/31/2000

This company took away something that was PROMISED to me more than 20 years ago and wants to replace it with beer bashes, ping-pong tables and volleyball courts. They still just don't get it.

Do you think our Managers are that clueless or just highly trained in the skill of distracting the masses of robot employees while avoiding addressing the real cause?

Don't they realize that their most intelligent, productive employees are the ones who are leaving? Do they care? Can they do anything about it even if they do care?

Poor powerless Managers, afraid for their jobs, afraid to rebel; forced to say what they're "supposed to say" and do what they're "supposed to do".

Just like all the rest of the poor powerless employees; trained that they MUST be employees; that the corporation is the only way to survive.

Believing that there are no choices in life, they continue to play victim. Only when the oppression is overwhelming will they ever risk security.

Think about this: non-Americans give up all their worldly possessions and risk their very lives to get to America for a chance at freedom.

Americans are afraid to take any risk at all. Corporations are making this decision easier by reducing what you have to lose.

While once you risked full benefits, early retirement, salary and security, what do you have to risk now? What will you have to risk if this continues?

If ever there was a time to learn to live, now is the time. Here is an excerpt from that speaks to this:

"Every one of us has 100 reasons why we "can't" test the limits or push the boundaries. And, every single one of those reasons is a lie! If you had never pushed the limits of your ability, you would not be able to walk, or to run. You would not be able to ride a bike or drive a car. You would not be able to read, get on the Internet, or make love. It is only by going "too far" that we discover our strengths and expand our power."

You can read the rest of the newsletter at the above url, item 3 on the page.

You are the director of your own life. You really do have choices. Believe in yourselves!

Press briefing next Tuesday
puppy_play - IBM Pension Club - 7/21/2000

4pm July 25, 2000
Front Steps of the Department of Labor
200 Constitution Avenue

Immediately Following Meeting Between Employees from Major Corporations and Senior Officials from the U.S. Department of the Treasury and U.S. Department of Labor

Current and former employees from IBM, Bell Atlantic, Duke Energy, SBC and AT&T will meet with senior officials from the U.S. Departments of Labor and Treasury on Tuesday, July 25, 2000 in an unprecedented meeting to discuss critical pension issues triggered largely by the recent trend of major corporations converting traditional defined benefit plans to so-called cash balance plans. The meeting comes on the heels of the passage last Thursday (July 20) by the U.S. House of Representatives of an amendment prohibiting the Internal Revenue Service from using any funding for activities that violate current pension age discrimination laws. In proposing his amendment, Rep. Sanders (I-Vermont) charged that "with regard to cash balance plans, the Federal Government has been asleep at the wheel and it is time to give them a wake-up call."

The scheduled meeting is a historic break through in employee efforts to bring pension plan abuses to the attention of high government regulators and will highlight many of the most severe abuses arising out of the recent wave of pension conversions. Each of the employees attending the meeting has been subjected to major reductions in their promised pensions, at the same time their employers have accumulated multi-billion dollar pension fund surpluses. In many cases, the employers failed to disclose the true impact of the changes on employees; the need for meaningful disclosure is a key demand of the employees. It is also expected that the meeting will focus on current and future activities by the agencies to enforce long-standing laws prohibiting age discrimination.

Members of the press are invited to a press briefing on the front steps of the U.S. Department of Labor at 4pm to hear employees review the results of their meeting with government officials. All of the employees have been focusing attention during the past year on the state of American pension funds. These plans currently contain billions of dollars of surplus money, yet corporations are cutting the pensions of their current employees and denying COLA's (Cost of Living Adjustments) to their retirees, apparently to gain virtual earnings increases for their share holders. Employees are leveraging all legal means available to restore and protect their pensions, including seeking new legislation from Congress, working with government agencies, and filing lawsuits against their employers. Employees will answer questions from the press on any of these areas. For more information, reference

Letter to Weatherbee (Hanoi Jane)
andylang_19380 - IBM Pension Club - 7/18/2000

And do you do that, Hanoi Jane, by lobbying and using massive loopholes that allow the company to escape their responsibilities for paying a pro-rata part of promises made and communications made over generations to your employees?

Defined benefit pension plans are marvelously cheap and good for shareholders as well as employees--when the proper laws are in place.

I've got some bad new for you, Ms Jane. We are on to what your are doing and before this is over many people are going to pay one helluva lot in money and some people may well wind up in jail.

Tell your bosses that.

Will you?

We know every loophole you have used and we know how they got there too. And we are going to bite you where it hurts the most---politically and in the pocketbook.

You can also give your superiors my name and tell them that I will personally never gives up and will chase you down everywhere--and defeat you politically. And if you know anything about the Lang family, know this.

We are never intimidated, nor do we ever give up. And we are smarter than you will ever be.

And I also am a pension actuary who knows everything about what has been happening to pensions for nearly 40 years.

So do yourself a favor and deliver that message--and you might want to get out while you can--before the roof falls in on your head.

Beware All Optional Forms of Benefit
andylang_19380 - Andy Lang Club - 7/15/2000

If I were a lawyer, I would make sure I got a copy of all actuarial correspondence on these changes from consultants to the company, a copy of the full annual actuarial report, and any other reports produced by the consultants, as well as internal documents on these plan changes.

A good actuary could then review them and look for what is happening in both of these areas. Sometimes this is difficult to tell, and other times it is easy.

And of course questioning the actuary in a deposition or on the witness stand would clear it up right away.

BTW, just because ERISA permits this—ie, has a major loophole, does not mean that other laws have not been broken.

For example, age discrimination can exist completely apart from whether or not ERISA permits something or not.

And of course, there are all manner of laws and professional ethics rules that might also be broken, if, for example the intent can be proven that the company and/or the actuary intended to deceive and have the plan participants make poor decisions.

It is well-known that many people will choose lump-sums over a deferred annuity, even when that 'choice' is not in their own best interests.

And I suppose it might be inferred that many people might also choose an immediate annuity, over a deferred annuity, since often they are under financial pressure and might well have been downsized.

It smells, to put it bluntly.

H-1B Visas - Transcending Companies
duke_did_it_too - Duke Pension Club - 7/7/2000

American (global?) workers must transcend what only applies to them and their companies. It is time to transcend companies and even unions. We can support each others objectives by asking if each new bill will help or hurt the workforce in general. It is immaterial if the bill applies to your company or your union. We can make a meaningful impact by supporting all workers on each issue. Employers have been winning this game because they are united against the employees. We have the numbers; we need to use them! We certainly should use them on election day. The H-1B Visa program is another con game to exploit American workers; every worker should fight it.

Must Read! Pension Scandal
retired_in_89 - IBM Pension Club - 7/4/2000

Real Life Suit is Fodder for Fiction

One could only (hope) that this suit will lead either directly or indirectly to the indictment under the RICO Act, or any other law, of any who receives any compensation or gain, other than employees and retirees of any pension plan, from the manipulation and/or use of such pension fund monies, INCLUDING any gains from the sale of stock shares whose price can be shown to have risen as a result of the vapor profits generated by increasing the surplus for that purpose.

The time has come for not only fighting back, but also for BITING back.

Further, it would be nice if all the unions in America would get together and put full page ads in every major mewspaper in the country that would explain to ALL non-unionized workers just how they have been taken for a ride with these C/B conversions by the very people whom they have worked their butts off for and foolishly trusted.

If enough voters are finally awakened to what HAS been going on for too many years perhaps the politicians of ALL parties will FINALLY realize that they gotta be re-elected by these VERY SAME VOTERS. If they aren't re-elected then they can kiss all that corporate moolah goodbye once and for all.

Recruiting via Defined Benefit Plan
bits_bytes_and_bugs - IBM Pension Club - 7/3/2000

Just read a employment/help wanted ad - here's an excerpt (caps are mine).

"We offer a broad range of benefits. including DEFINED BENEFIT PENSION PLAN and 401K with match, medical plan with choice, Section 125 plan, life insurance, STD, LTD, tuition reimbursement, paid vacation and holidays."

Notice the specific statement of a defined benefit plan. Also note that the DB plan is mentioned FIRST!

Now, why to you suppose this is? Perhaps because the two major companies that this company competes against for such talent have both converted to cash-balance plans.

The company's ad is touting its DB plan as a competitive edge for talent.

This pretty well debunks everything Bouchard claims about these CB conversions being for competitive reasons such as to keep/retain the best.

If cash-balance plans are so wonderful, how come companies advertise they have pension plans, but never say it's a cash balance plan?

Everything You Ever Wanted To Know About Cash Balance Plans!
by Andy Lang - Andy Lang Club - 6/20 - 6/24/2000

Below is a composite sampling of posts 214 through 232. Andy Lang is back from vacation and is taking no prisoners. Click the link below to start at message 214. Keeping hitting "Next" to learn as much as you want. This is not "Joe Blow." The man is an expert and he is spilling the beans!

The problem with traditional defined benefit (DB)pension plans and with the new cash balance (CB) plans, which are DB plans with some of the attributes of defined contribution (DC) plans, is NOT the age 65 thing, but the failure of Congress to define and protect the right accrued benefit.

Money today compounding at an interest rate and present values of money payable in the future are one of the essential building block tools of modern day finance.

I'll return at some point to give an analysis of both Bush's proposal to fix SS and also Gore's. But for now let me simply say that Bushes is absurd and will create the need to cut benefits enormously, while helping primarily those who don't need help!

The actuarial report for a large plan sponsor can often be 40-80 pages long, and contains a wealth of information that any good pension actuary can tell the financial status of that plan, how reasonable the assumptions are, how well the assumptions are holding up to actual results, what the plan changes in the prior year cost or saved in the prior year, whether the plan has any cash flow needs in the next 10 years, etc., etc.

Instead we are given the Schedule B of Form 5500--two pages of technical info that tells us if the company has made its minimum funding contribution and that's it. It's a joke.

How would you like to be a potential investor in a major public firm and instead of being given a full and complete annual financial report, you are given two pages of information summarizing that report instead and then told that's all you get partner.

We haven't yet discounted for mortality--that is the possibility that you might not live till age 65. We will see that this is relatively minor, but still works to make the PVABP (Present Value of Accrued Benefit Problem)even more skewed and unfairly distributed.

Sometimes I think that is the idea that lies behind our lousy pension laws. Hold them all hostage and then avoid paying anyone anything, take away their early retirement subsidies and keep downsizing America, churning employees until they do not want any pay increases at all.

The only reason that plan sponsors do not simply take the massive surpluses and run, is that there are severe laws taxing that surplus. But these laws do nothing to fix the underlying problem--which is that ERISA defined accrued benefits badly.

In other words, if the plan provides that you can retire early at age 55 with 5 years service, and it has a full actuarial reduction the accrued benefit you have is payable at age 65, would be reduced by about 50%.

So how much can a full early retirement subsidy at age 55 be worth? Well, a decent pension plan can easily be worth several hundred thousand dollars to a middle income person.

So if the full subsidy doubles its value, then eliminating it right before reaching age 55 can cost a person several hundred thousand dollars.

The stated goal in Enrolled Actuaries meetings, held each year in Washington DC, BTW, is to eliminate early retirement subsidies when converting DB plans to cash balance plans, to as many people as possible, to save as much money as possible.

BTW, one comment made by a pension consulting firm and their marketing program to the effect that keeping these subsidies in for older employees will result in escalating costs to the employer is dead wrong.

So when you hear someone say that old people cost a plan sponsor too much because of the pension plan early retirement subsidies or simply because of the escalating present value of accrued benefits they are lying through their teeth.

What they are really doing is saving the company money that has in most cases already been set aside in assets through tax deductible actuarially determined contributions.

Would you believe that removal of the early retirement subsidies while especially awful due to the short time horizon for older people, is a small financial flea on the back of this humungous scandal--a scandal that has been going on for a quarter century?

Once upon a time in America corporate leadership meant that loyalty wasn't a one way street, and that loyalty counts a lot in the long run, especially as people and information become the new information economy and the making of things becomes a commodity and priced accordingly.

Of course as anyone in that business knows and you guys now know, those Medicare benefits leave a lot on the table for you to pick up--such as those expensive drugs you will need by the fistful should you be so fortunate to live a while.

I got out of the actuarial pension consulting business in 1990, after watching all this unfold for a decade.

I couldn't stand it any more. These plans once upon a time actually worked well for plan participants. Some still do--but too many have decided to take the low road---exposing the flaws instead of fixing these problems.

As a reminder--the PVABP (Present Value of Accrued Benefit Problem), including the early retirement subsidy problem, are fixable--using standard actuarial techniques too.

And if you fix it, you can get rid of major complex rules and regs, simplify them enormously and maybe even save the actuarial profession also.

by ken_tucker_wf6f – IBM Pension Club - 6/22/2000

Allow me to paraphrase what Bennis & Nanus say about trust in their book on leadership -"Trust is the lubrication that makes it possible for organizations to work. Trust implies accountability, predictability, and reliability. It's what sells products and keeps organizations humming. Trust is the glue that maintains organizational integrity. The truth is that we trust people who are predictable, whose positions are known and who keep at it; leaders who are trusted make themselves known, make their positions clear."

Trust is one of those elusive things that's very hard to get, yet is one of the easiest things to lose. Leadership establishes trust - and nothing serves an organization better than leadership that knows what it wants, communicates those intentions, positions itself correctly, and empowers its people.

Keep up the good work
by Andy Lang - Andy Lang Club - 6/18/2000

I want all of you to know that your voices are being heard in Washington, but thus far there seems to be little understanding of the basic issues that gave rise to this mess, much less how to fix it.

But there are a lot of friends, but a lot of people that might try to shove this under the rug too.

Fat chance. The rules that once allowed such baloney to happen have changed--forever.

They might pass Trojan horse legislation.

They might pass red herring legislation.

They might even find a scapegoat or two.

But this will not make the problem--and their problem--go away.

It isn't going to go away until the people hosed get their benefits back, the guilty and their allies in Congress, are exposed and punished, and serious pension reform happens.

This cash balance stuff didn't just happen yesterday and it isn't going to be fixed easily either.

But it IS going to be fixed.

Lump Sum From Pension Surplus
by cbploser - Duke Pension Club - 6/15/2000

Your Pension

CMHC gives employees lump sum from pension surplus

OTTAWA (CP) -- In a precedent-setting move, Canada Mortgage and Housing Corp. is disposing of some of a huge pension fund surplus by handing out $44 million to 4,500 workers and retirees.

What's ahead for 2001
by kees50 - IBM Pension Club - 6/10/2000

Excerpt from Special Supplement to the Kiplinger Letter, "What's Ahead For 2001 and What You Can Do About It":

"A traditional defined-benefit pension is still a great retention tactic but too expensive for many employers. Some are shifting to cheaper defined-contribution plans such as 402(k)s. Others will transform pensions into hybrids known as cash balance plans, but such switchovers can put longtime employees at a disadvantage, so *MANY* companies will permit those workers to remain with the old plan."

Maximum Profits - Minimum Obligation
by cbploser - Duke Pension Club - 6/9/2000

"Companies also like the plans because they get to keep any interest earned on workers' money above the established rate," Alexander continues. "If they play the markets well, the plans become self-funding. For these and other reasons, cash balance plans tend to be cheaper for companies than defined benefit plans."

Senate Committee on Aging input
by pbc360 - IBM Pension Club - 6/8/2000

Why are employees so upset about the conversions? It is not just because of bad press as stated by members of your second panel. It is because 30% to 50% of their pensions have been stolen to add to the pension surplus.

State Street Bank
by abouthadit - IBM Pension Club - 6/6/2000

My main concern is about State Street's ability to borrow against the fund and invest in derivatives. We had no say in the interest rate they pay and we don't get a benefit from the profit they make but we could get hit with the loss as per a California pension fund did a year or two back.

Senate Hearings
by mad_man_47 - IBM Pension Club - 6/5/2000

I found it interesting that at 02:15 into the video, Ms Sweatt stated that it was too difficult to give individual comparisons to show benefit reductions. As if the problem wasn't the reduction, but the work it would create for then to show you how much you lose.

Congressional Action Alert
by puppy_play - IBM Pension Club - 6/4/2000

Apparently Ida Castro has provided Senator Grassley with a progress report on the EEOC charges filed that says they have received over 650 complaints...

We didn't know this was happening
by shuffnew - IBM Pension Club - 6/2/2000

When this first started up one of the feedbacks we got "We haven't received many employee complaints - duh, we didn't know this was happening"

If this fiasco hasn't taught employees to fight back and get their earned benefits, then nothing will. It took years to get in this mess and no one can expect an instant overnight fix. But, look at the progress already made in a mere year! We have to gain momentum with all US workers in mass. We are a large percentage of the population, cast a large majority of the votes in this country, etc. Don't sell ourselves short ever - or, we get what we deserve (zip).

IBM's been good to me
by riptoff - IBM Pension Club - 5/31/00

Another saying that I've heard many people mouth like a too often played TV commercial is the "IBM's been good to me" mantra. I've heard several managers say it and can only conclude it is a labor consultant sales pitch for the more trusting souls. When I hear it I think of a married couple in a fine house, nice things, etc.. but one day one spouse comes home and knocks out his wife's teeth out and takes them down to the pawn shop to cash in the gold fillings. When he returns he says, you still live in this fine house, with a fine car, pool, etc, so you should be happy, things have been good around here right? The "been good" part has been over shadowed by something very, very bad, I still wonder if the company can survive.

Stalag Lou
by Andy Lang - IBM Pension Club - 5/29/2000

The sum total of what you dealing with here is the largest financial scandal in US history--one that easily topples the next largest the S&L scandal. That one only cost a couple hundred billion. This one is a multiple of that one--and hurts people far more.

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