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"Of those who say nothing, few are silent." - Thomas Neill

The IBM Cash Balance Disaster

Employee Advocate - - May 11, 2009

This message was posted on IBM Pension by ibmmike2006 on 5/1/09:

Message 67427

Re: Read what can happen to GM's Pensioners

When our new President came into office, I think he set a goal to establish a Universal Health Care system for everyone similar to what Congress has. I looked into that and Congress has it pretty good. I also looked at what my US Senator will receive when he retires. He presently makes $200,000 a year. He has been a US Senator for 32 years, about the same as I had at IBM, and when he retires, he will receive 80% of his $200,000 or $160,000 a year for life with Cost of Living and health Care.

It is very common for Federal employees, IRS employees, Police, Teachers, to receive the same, after 30 years, 75 to 80%. Compared with my 23% from IBM, no Cost of Living, and Health options that eat up most of the piddly pension payment. Now compare with Palmisano, Sam will get somewhere between $10,000 and $20,000 a DAY.

I am not sure why anyone would think that it is unreasonable to work for a company, who always emphasized how good the long term benefits like the pension of IBM was even though the wages were less than other companies, to not expect the pension emphasizing "I don't want you to go to work for the competition as IBM's long term benefits are outstanding" to have the Company keep their word. I could justify my lower wages in those days knowing that those monies I was not getting was being deposited in the Pension fund for my benefit. At that time, the pension was calculated as 1.5 times your salary times your years of service with no cap on years of service. When Lou came in, changed the pension calculation to 1.35 times your salary with a cap of 30 years. Shortly after that, he awarded himself 20 million shares of IBM stock and averaged over $20 million a year for nine years. A year later, in 1999 Cash Balance conversion was announced, that released about $10 Billion from the defined benefit pension fund for vapor profits to boost the bottom line and employees lost 50% of the anticipated pension. Well thought out, well executed and the courts supported the pension theft along with Congress. Money well spent by the Corporate PAC's. If my US Senator feels he needs 80% of his final salary, why should I be happy with 23% and if you add in SS, it rises to 40% with the purchasing power with no cost of living adjustment cutting the purchasing power of the pension in half, in 15 years especially since the CEO of IBM gets $10K to $20K a day?

Everyone on this board, well almost everyone, knows IBM stole the long term employee pensions in the 90's. The money IBM stole went to boost profits and to grease the pockets of the IBM former and current executives. This has nothing to do with entitlement. I earned every bit of what I expected and never got, on call for IBM for three decades 24/7 keeping customers satisfied in the field face to face in the customers office.

If I had known, a guy like Gerstner could alter the commitment, I would have demanded higher pay when I was 20 something so I could invest into something like the 401K. Unfortunately, the 401K was not available and when these pension rule changes took place after 30 years, I could not make up the lost pension especially since they were forcing 30 years employees and sometimes less, out the door in their late 40's or early 50's before their pension maximized.

Good luck, you have taken note not to trust IBM, but with the market losses in most 401K's, all the gain of your 401K over 10 years was lost in 12 months in 2008, you might have to ramp up your savings, a lot. In fact, you might have to work for life or die in poverty.

As a side note, you might be lucky and not have a disability that prevents you from working full time. Where today, there are 49 million Americans who are disabled according to the US Census and there are 50 million who are going to receive a $250 check from the Government as SS, SSDI, and Veterans DI. Only 201 million are left that are not receiving Federal checks and not disabled and includes kids and 20 million illegal aliens who cost the taxpayer $300 Billion a year and $1,000 each year from every American's health insurance policy. I suppose some of the 50 million might be disabled but SSDI is granted in only 40% of the requests for SSDI payments.

Unless these kinds of problems are addressed, most will have a Lifetime of Work, instead of a Lifetime of Retirement after 65. If the defined benefit pension of public employees and others protected by Unions of school teachers and police enjoy a lifetime of retirement, then it should have been possible for IBM to keep its commitment to its employees. The money had been set aside over three decades or more. Unfortunately, Gerstner had no obstacles in his way to stop him from "stealing the pension fund". No Union, no organization, weak employee rights laws thanks to the courts and congress, along with a passive work force. Human Resources declared war on its employees.

Thanks for sharing what your expectations are in the future. It appears, the last two decades of convincing employees they are entirely responsible for their future is working, even though, the executives are being taken care of quite nicely with deferred Corporate funded non-qualified defined pension plans like Sam. By the way, if IBM had "done the right thing" with the defined benefit pension and chose not to steal the pension plan for the benefit of a few, then this board and others would not exist. But I firmly believe, "what goes around, comes around".

Chief of Staff Rahm Emanuel Fought Cash Balance Plans

Employee Advocate - – November 10, 2008

This message was posted on IBM Pension by justa_bean_counter on 11/9/08:

Message 66909

Politicians - those whom we can be grateful for

I just wanted to remind everyone that when the pension suit was being fought, there were certain politicians that came to our aid and whom I have fond gratitude for. The list is long. Some of those generous politicians have passed away, others continue to work hard for us, and others have moved on to bigger and better things. One of those politicians is Rahm Emanuael, who will be the nation's Chief of Staff beginning on January 20th.

In April 2003, the US Treasury held a public hearing on Cash Balance Plans. Rahm Emanuel, who helped us out behind the scenes many times, came forward that day and provided the following testimony on our behalf. Emanuel was also the lead sponsor of H.R. 1677, the Pension Benefits Protection Act of 2003. As you know, his bill never passed. Below is Rahm's testimony.

WASHINGTON, DC—Congressman Rahm Emanuel (D-IL) today delivered testimony at the Internal Revenue Service (IRS) hearing on proposed regulations regarding companies converting to cash balance pension plans. Emanuel spoke against the regulations as proposed, which would allow companies to exempt the plans from age discrimination rules that apply to pension plans.

"I hope that after these hearings this panel will come up with new regulations that make sense and strike a balance between business innovation and the rights of long-standing employees," Emanuel testified before the panel of nine attorneys from the IRS and the Treasury Department.

"It's wrong for companies to promise retirement benefits to long-standing workers, and then to pull the rug out from under them by making changes midstream. Pension agreements are no different than any other contracts into which companies have entered. Employees agree to supply their labor and work hard every day to help improve the company's bottom line. In return, employers offer them wages and in many cases, retirement benefits in the form of defined benefit pensions. Working Americans should be able to take comfort in the fact that the pensions they've earned will be there when they retire."

"I hope Congress doesn't have to legislate this issue" he continued. "I worked in an Administration that put a moratorium in place on cash balance pension plans. This administration should do the right thing and issue new regulations that are sensitive to the rights of long-serving employees. But if these proposed regulations are implemented, Congress will act on legislation that strikes a necessary balance."

Emanuel is a lead sponsor of H.R. 1677, the Pension Benefits Protection Act of 2003, requiring companies converting to cash balance plans to allow workers to remain in their traditional defined benefit plans, in short, "grandfathering" in workers who are 40 years old, or who have 10 years of service. The bill also requires the withdrawal of the proposed regulations.

"If the regulations are revised to strike a balance, it's a win-win for all parties concerned."

Excerpts from Emanuel's testimony:

"It's not hard to imagine the sense of betrayal and anger the workers at companies like AT&T and IBM must have felt when they found out their pension benefits had been cut in half overnight. These working Americans have families to support and bills to pay, like mortgages and college tuition.

"One of the hardworking individuals who traveled here to tell her story is Kathi Cooper, a resident of Bethalto in my home state of Illinois. Ms. Cooper has worked for IBM almost 25 years and faces a 64% pension cut resulting from a cash balance conversion. She stands to lose hundreds of thousands of dollars due to IBM's actions. Ms. Cooper is the lead plaintiff in a federal class action lawsuit against IBM currently pending in the Southern District of Illinois. There are hundreds of thousands of stories just like hers all over the U.S.

This country faces difficult economic times, with devastating retirement account losses, ongoing layoffs and spiraling health care costs. Here are some of the facts since 2001:

Two and one-half million more Americans are without work; Four million more Americans are without health care; $1 trillion worth of corporate assets have foreclosed; and 2 million more Americans have moved from the middle class into poverty. As we meet today, more than 500 U.S. companies have converted to cash balance plans. There've been more than 1,000 age discrimination claims filed with the EEOC over these plans. Hundreds of thousands of employees, most notably from AT&T and IBM (140,000 from IBM alone), have joined class action lawsuits challenging these plans. An additional 350 companies are lining up to make conversions the day these regulations take effect.

The Clinton Administration placed a moratorium on cash balance conversions in 1999 because of the radical effect these conversions were having on the lifetime savings of long-serving workers. Sure, cash balance plans may be better for younger workers. But there is a way to offer these plans to younger workers while also maintaining the pension benefits that long-standing workers have earned through years of hard work. If changes are going to be made, companies need to find a point of delineation that doesn't radically alter the financial fortunes of their longest tenured employees.

In 1995, President Clinton signed into law the first piece of legislation enacted by the 104th Congress, the Congressional Accountability Act. This Act applied 11 existing employment, civil rights, health, and safety-related statutes and regulations to the legislative branch. Perhaps the Administration and some Members of Congress would have a different view if the proposed regulations were added to the Congressional Accountability Act and applied to them. If cash balance conversions are such great medicine for older workers, then let's convert Congressional pensions to cash balance plans.

Perhaps some are familiar with the recent Congressional Research Service study reporting that nearly every Member of Congress would lose out—in many cases by hundreds of thousands of dollars, if this were to happen. In that case, Members who had worked hard for years expecting to receive their full pensions would be understandably outraged. We all know that Congress would never accept such an unjust result—and neither should rank-and-file, hardworking Americans.

I strongly urge the Treasury Department to withdraw its proposed regulations and to re-issue revised proposed regulations that protect pension promises made to long-serving employees. Thank you for the opportunity to participate in this hearing."


Kathi Cooper
Bethalto, Illinois

IBM 401K (TDSP) Rollover

Employee Advocate - - December 5, 2007

This message was posted on IBM Pension by Jack Lee on Dec. 4, 2007

Message 65821


I don't make my comments easily or with malice. I based my comments on general observations and facts.

It is clear to me that IBM is no longer the same company founded by the Watson's. The things that have gone on since the 1999 pension "reform" is a wake up call to me and to others. I would never have thought a company on the caliber of IBM will knowingly steal from their employees or their retirees. That is exactly what they did and unfortunately, some IBMers refuse to believe what is staring them in the face. Just because it was perceived as legal by the executives does not mean they were morally sound. There decisions affected hundred of thousands of IBMers.

This business with the 401K rollover is just the tip of the iceberg. You can defend IBM's actions on legal grounds but you cannot honestly believe they have done a good job. As a technology company that prides itself on providing Business innovations to their customers, they cannot get a simple rollover done with electronic transfer. It is either by design or due to incompetence - either way, it does not show the current IBM in a good light.

The bottom line is this:

1. IBM's employee 401K and pension fund assets are in the billions.
2. They should be able to negotiate a great package with any of the large investment firms.
3. The returns on investments minus fees should be equal or better than the overall market (index funds).
4. The fact that they are not, means only two things. They are not getting their money's worth in investing management or they are getting paybacks from these "sweetheart" deals.

It pains me to see this happening to a once great institution.
By the way, the same applies to the medical costs for retirees.
Another way IBM chose to squeeze the people least likely to afford it and with little recourse.
Do you think Thomas Watson would have chosen the same course of action?

Crooks Go Where the Money Is

Crooks Go Where the Money Is

Employee Advocate - – November 4, 2007

This message was posted on IBM Pension by ibmaccountant on Nov. 2, 2007

Message 65699

Don't forget that crooks and all sorts of unsavory, unethical folks and organizations with big titles and fancy education will tend to go to where the money is, and in today's economy, the largest pockets of money are now in the hands of defined benefit pension fund administrators.

This time, however, the green eye shade John Dillinger types are protected by the Congresspeople that voted for the Pension Protection Act of 2006. The mortgage crisis has drained the banks of cash, so the John Dillinger legal wannabes are searching for the new places where loose money that can be stolen legally is located.

Keeping our country's upper crust in control requires them to take the money, keep Wall Street and CEOs well paid; then give some crumbs to those lower life forms called honest small investors and leave whatever's left to the employees.

All the while these efforts are supported via proxy by a crippled and intentionally ineffective SEC and other executive branch departments.

The mob and Hoffa were right and prescient. They found the right targets to steal in the 60's with the union pension funds. The problem is they never had the White House, Congress and the Supreme Court to clear the way for them to steal with legal impunity.

I'll hypothesize that if this credit crisis doesn't get real bad real quickly Wall Street and your smiling caste of large multinational corporate CEO's will be able to steal these pensions with impunity. If the crisis does get bad and we get a investment banking generated major recession or depression, then all bets are off.

The Republic is at a crossroads. We may be rapidly going back to the times when Upton Sinclair was a writer, except we now have modern technology and the legal system working against the common working American in a setting that Orwell correctly predicted.

Maybe, just maybe, if we call Osama Bin Laden the new Hitler and aberrant Islamic fundamentalism the new fascism like the neo-conservative Hooverites claim, then the President of Iran is like Mussolini and history is repeating itself.

A repetition of history means the dust bowl for the East and the West this time and a US depression caused by Wall Street because greed was able to find a way around regulations and curbs with legal instruments like the SEC Letter 23A exemptions which will recover only when we are mobilized and punished by a World War conflagration that we almost lost the last time. Then and only then will true leaders, not MBA managers with fancy education and titles will emerge to save the Republic.

I'm not a socialist or a revolutionary, but I'm looking to make sure I know where for my pitchfork is in the barn. If Wall Street collapses and there's more thefts in the name of capitalism and the good of the Republic, there might just be whiff of sedition in the air. Can we do a tea party for Armonk throwing servers into the Hudson from the cliffs of West Point? That might be a fitting re-enactment of history. The future Eisenhowers and MacArthurs at West Point might just this time back the Bonus Army instead of fighting it.

West Point and the Army just lost 58% of its graduates from active service via resignation for the first time since the 1920's. IMHO, I see all the makings of another trial for the Republic and the time of reckoning for many its alleged "leaders" who really are out for themselves and not the country.

State Street Sued Over Bond Losses

State Street Sued Over Bond Losses

Employee Advocate - November 3, 2007

This message was posted on IBM Pension by justa_bean_counter on Nov. 1, 2007

Message 65698

State Street needs money infusion. So does Citi, Countrywide, Bank of America, GE, and a host of others in the financial sector. They will get the money. They will take it from our pension trusts. They need it and they will get it. When we lose it, the politicians will feel sorry over it but do nothing else. In fact, politicians will rewrite the law to make the maneuvers legal.

Sound freaky? Well, the U.S. had trillions in surplus before Bush took office. All that is gone, and now we are trillions in debt. The same method will be used to get to our pension trusts, worth trillions now.

…NRLN warned us this was coming our way…

It's time to call your politicians and tell them to stop this nonsense. Tell your friends and family to do the same.

(no, I'm not paranoid, it's already unfolding)

Sen. Harkin Protects Pensions

Employee Advocate - - April 29, 2006

Janet Krueger posted this comment April 27, on IBM Pension. She is urging everyone to contact their senators and congressman about the pending pension legislation:

Message 62763

Correspondence From Senator Tom Harkin

Below is a response one of my Iowa relatives got back from Senator Harkin; we have at least one senator in our corner!!! Have all of you taken the time to remind your senators and representative this month that we do NOT want cash balance plans retroactively legalized??? Please write or call; talking points are listed on the front page of this board...



April 4, 2006

Dear xxxxxx:

Thank you for contacting me regarding your views on pension reform.

As you may know, S.1783, the Pension Security and Transparency Act of 2005, passed the Senate in November 2005 by a vote of 97-2. A very different version of the bill, the Pension Protection Act of 2005, passed the House of Representatives on December 15, 2005, and the two versions of the bill are now in a House-Senate conference committee to negotiate the differences.

I supported the Senate version of the bill because it requires companies to more fully fund their pension plans, ensuring that pensions are sufficiently funded. At the same time, by making the increase in required sums reasonable, this legislation would lower the chance that companies will drop or reduce their pension plans. The Senate bill also offers protections to current employees, particularly older workers, when companies convert to less generous "cash balance" plans.

Unfortunately, the House bill has many provisions that would negatively affect existing pension plans. The House bill weakens protections for vulnerable older, long-term workers when companies convert to less generous plans. The House bill also eliminates essential conflict-of-interest protections, permitting plans to provide advice that is subject to inherent financial conflicts. In addition, the House legislation includes transition rules that allow discriminatory age-based "wearaway." Wearaway occurs when companies add nothing to the pensions of older, long-term workers until the value of the pension is equal to the lower benefit of the new, less generous plan. I have worked hard for six years to prevent wearaway from occurring. At my urging, the U.S. Department of Treasury has not been approving wearaway plans while Congress considers this issue.

As a member of the conference committee that is trying to resolve the differences between the two versions of the bill, I intend to work to eliminate the negative provisions currently included in the House bill, and to ensure that any final legislation strengthen the existing pension system. We must do everything we can to ensure that workers are treated fairly and receive the pensions they are due. That will be my guiding principle on the conference committee.

Again, thanks for sharing your views with me. Please don't hesitate to let me know how you feel on any issue that concerns you.


Tom Harkin
United States Senator


Elizabeth Dole and Richard Burr Against Pensions

Employee Advocate - - April 13, 2006

Excerpts of comments posted by "Skip B" (Skip Bogard) April 12, on IBM Pension:

Message 62633

I am so angry with Elizabeth Dole I can't see straight

It is outrageous that NC Junior Senator Richard Burr(R and Senior Senator Elizabeth Dole (R) have sided with the EMPLOYMENT LAW BREAKING IBM CORPORATION by NAMING IBM in this March 31 letter they authored & signed…

North Carolina is home to thousands of IBM employees in Charlotte & RTP. So it is DISGUSTING to me that our NC State Senators would side with an entity that doesn't cast a single vote for them!

And they cite the Cooper v. IBM case TWICE (in paragraphs 4 & 5) of the Dole/Burr letter and tarnish Kathi Cooper's good family name! AND SO IT MAKES ME OUTRAGED AS A NORTH CAROLINIAN CITIZEN & IBM RALEIGH EMPLOYEE OF 20 YEARS.

Richard Burr and Elizabeth Dole are both 1st term Senators that need to be taken out--now! Unfortunately, they come up for NC Senate races per this schedule:

Senior Senator: Elizabeth Dole (R) up for re-election in 2008
Junior Senator: Richard Burr (R) up for re-election in 2010

As promised, I PayPaled $300 about two weeks ago towards the Boehner ad that ran in Ohio. If there are now several additional supporters for running an ad against Elizabeth Dole in NC NOW, I will put up $500 right now to run ads against Elizabeth Dole so we can memorably terminate her 2008 re-election in April 2006! I wish to run ads targeting only Elizabeth Dole in a SUNDAY ~ALL STATE & CITY~ EDITION for both the Charlotte Observer & The Raleigh News & Observer.



Skip Bogard

Janet Krueger Sets the Record Straight

Employee Advocate – – April 2, 2006

Janet Krueger posted this comment April 1, on IBM Pension. It was in response to the comment below:

"Cash balance plans aren't illegal. Are you seriously suggesting that 401K's ought to be illegal? I though the purpose of pressuring congress was to insure the rights of those who are depending on defined benefit plans, not do something as wacky as making 401K's or annuity plans illegal."

Message 62505

Kiss Your Old Style Pension Goodbye

Did you just crawl out from underneath a rock???

Cash balance plans are NOT 401K plans.

Cash balance plans are a form of hybrid defined benefit plan invented by consultants about 15 years ago to help employers cut worker benefits without the workers understanding what was happening to them.

IBM converted to a cash balance plan in 1999 and in the process cut the benefits of many older workers by as much as 50%. This board was created in the wake of the outcry that ensued. Kathi Cooper filed a lawsuit against IBM because of the pension changes -- that suit is known as Cooper v IBM, and in it, a federal district judge ruled IBM's cash balance plan to be illegally age discriminatory. More information about the lawsuit is available at:

It should be noted that the IBM board of directors was fully informed, before the conversion, that cash balance plans were illegal. They gambled that employees being hurt would not file a lawsuit and that, if they did, Congress would rescue them with 'reform' legislation.

In August 2005, Judge Murphy finalized a settlement of that lawsuit. As stipulated in the settlement, IBM is appealing two points of law that were raised in the lawsuit:

  1. Cash balance plans are illegally age discriminatory

  2. The starting balances were illegally age discriminatory, because younger employees received higher opening balances under a formula called "always cash balance"

If IBM wins the appeal, IBM employees and retirees will split $318 million. If IBM loses, IBM employees and retirees will split $1.7 billion.

IBM, of course, is not satisfied with playing by the current rules. That is why they have spent over $33 million lobbying in Congress to get cash balance plans legalized. And of course it is the lobbying dollars that have convinced people like Rep Boehner to introduce the Pension Reform Act of 2005 -- one of the express purposes of that act is to RETROACTIVELY legalize cash balance plans so that IBM can keep $1.4 billion that rightly belongs to their employees and retirees. The only way we can counteract IBM's lobbying dollars is to let our senators and representatives know that we VOTE and that we will scream loud enough and persistantly enough to influence other voters.

There is a document at:

which does a great job of poking holes in the cash balance myths being spread on capital hill, one of which being that there is no difference between a cash balance plan and a 401K plan. PLEASE READ IT!!!

Let me echo the plea to the rest of you. PLEASE write to each of the members of the conference committee that have been assigned to merge the house and senate bills and let them know you will be outraged if they retroactively legalize cash balance plans, thereby reducing your settlement money and encouraging other companies to also cut promised pensions.


Janet Krueger
Rochester, MN

Letter to Senators re Senate Bill 1783

justa_bean_counter - IBM Pension October 4, 2005

Message 59681

The following letter was sent to Grassley, Enzi, Baucus, Kennedy, Bayh, Chafee, Coleman, Collins, Hatch, Johnson, Landrieu, Lieberman, Lincoln, McCain, Shelby, Snowe, Specter, and Ben Nelson today. This was Enzi's copy.

October 4, 2005
The Honorable Mike Enzi
Committee on Health, Education, Labor and Pensions
219 Dirksen Senate Office Building
Washington, DC 20510

Dear Mr. Chairman:

RE: Senate Bill 1783

I am Kathi Cooper and I am representing approximately 275,000 current and former IBM workers in the case of Cooper v. IBM Personal Pension Plan. The case is almost 6 years old and is currently before the United States Court of Appeals for the Seventh Circuit in Chicago. The case will likely be argued in the first quarter of next year and decided a few months later. As you probably know, IBM has agreed to a remedial model that will provide increased pension benefits of more than a billion dollars if the Court of Appeals affirms the District Court's ruling that IBM's cash balance formulas violate ERISA section 204(b)(1)(H), the so-called age discrimination provision of ERISA. While this would be a very meaningful recovery for the workers, keep in mind that it represents about 3% of the total assets in the IBM Plan.

I am writing to you to respond to several misstatements contained in the September 30, 2005 letter sent to you by Mr. Bruce Josten of the Chamber of Commerce. In that letter, Mr. Josten claims that "employers have, in good faith, believed that hybrid plans are a valid and legal plan design." I assume Mr. Josten was not properly briefed on this issue before he wrote his letter, because this statement is simply untrue.

In the course of the Cooper litigation, we learned that the companies, their actuaries and their lawyers have known since the late 1980's that the cash balance plan design violates section 204(b)(1)(H), but believed they could lobby either the Treasury Department or Congress to bend the law in their favor. A 1991 memorandum submitted to the IRS by the Cash Balance Practitioners Group1 candidly admitted that "a number of practitioners quite strongly believe that [a cash balance plan that guarantees interest credits to the date of distribution as does the IBM plan] does not comply with a literal reading of" the age discrimination prohibition in ERISA section 204(b)(1)(H). As a result, the group concluded that unless they could dissuade the Internal Revenue Service from a literal application of the statute or a "legislative fix" could be obtained from Congress such plans faced significant risks.

The memo further explained that "many practitioners believe that there is a very significant risk that the Service will ultimately take the view that it cannot avoid a literal interpretation of" ERISA 204(b)(1)(H). Moreover, many members of the Cash Balance Practitioners Group were not optimistic about a "legislative fix," particularly if "it is generally conceded that these plans literally violate Code section 411(b)(1)(H)." That pessimism caused the Cash Balance Practitioners Group to conduct "an analysis of the exposure under Code section 204(b)(1)(H)," which concluded that "most practitioners are of the view that the exposure is measured by the cost of bringing every participant in the plan up to the benefit accrual rate of the youngest participant. In given cases, actuaries have estimated a 4 to 5 times increase in plan liabilities."

As early as 1992, industry began lobbying the Treasury Department to exempt cash balance plans from ERISA section 204(b)(1)(H). In a June 24, 1992, letter to the IRS, Kwasha Lipton's Theresa Struchiner (a member of the Cash Balance Practitioners Group) argued that cash balance plans should be deemed to comply with Section 411 (b)(1)(H) because it satisfies a rule applicable to defined contribution plans. Kwasha Lipton made numerous other submissions to the IRS requesting exemptions for cash balance plans from the requirements of Sections 411 and 417(e). See 95 TNT 87-37 (May 4, 1995); 95 TNT 146-37 (July 27, 1995).

Our attorneys deposed an actuary named Larry Sher in another pension matter, Berger v. Xerox Ret. Income Guarantee Plan (where the Seventh Circuit found that the company had illegally underpaid lump sum distributions to over 10,000 retirees). Under oath, Mr. Sher admitted that he and his firm at the time, Kwasha Lipton,2 had been developing a comprehensive analysis of various compliance issues, including age discrimination under Code Section 411(b)(1)(H) relating to cash balance plans prior to 1991. In fact, Mr. Sher made a February 1991 submission to Richard Shea (one of IBM's attorneys and then a political appointee to Treasury) stating that Kwasha Lipton had already "devoted a good deal of time and thought in addressing compliance issues." Later, in the letter's list of compliance issues upon which Mr. Sher wanted to make a formal presentation, the first Code Section listed is Section 411(b)(1)(H).

Similar warnings of the design's illegality were expressed in a wide variety of publications in the employee benefits community before IBM adopted either the 1995 or the 1999 plan amendments that are at issue in this case. For example, in 1993 Paul Strella, an attorney at William M. Mercer & Company, addressed a session of the Enrolled Actuaries Meeting. In his discussion of IRC section 411(b)(1)(H)'s and ERISA section 204(b)(1)(H)'s prohibitions against decreases in the rate of benefit accrual, Mr. Strella stated "that's exactly, arguably, what a cash balance plan does if you take the position that the future interest is the part of the current accrued benefit.3 A serious issue." Later, he pointed out that if he structured a defined benefit final pay plan to provide decreasing benefit accruals exactly the same way a cash balance plan does, "I think everyone would agree that violates 411(b)(1)(H)." We know Mr. Strella advised IBM in connection with the adoption of the plan amendments found illegal, but we do not know the substance of the advice given because IBM refused to produce documents sent to or from Mr. Strella under claims of privilege.

In a 1995 memorandum to the Treasury Department, Judy Mazo, a prominent actuary and Washington-based senior vice president for actuarial consulting firm Segal Company, echoed the employers' theme. Ms. Mazo told Treasury cash balance plans were "too big to fail," that business did not feel obliged to comply with "statutory constraints" it believed made no sense, and that cash balance plans "evolved outside the penumbra" of the statutory constraints Congress saw fit to impose on defined benefit plans. As she put it, imposing defined benefit rules on cash balance plans, "is a bit like dropping a herd of kangaroos into the Amazon rain forest."

Ms. Mazo repeated this mantra in 1999 when The Wall Street Journal quoted Ms. Mazo as confidently stating that the giant corporations were no longer worried about their cash balance plans being exposed as illegal. "Companies who now have these plans are sufficiently powerful, sufficiently big and have enough clout that they could get Congress to bend the law ... to protect their plans," she said.

Mr. Josten also claims that the Treasury Department somehow misled employers into believing that cash balance plans were legal by issuing "approval letters" and by establishing "rules and regulations that specifically contemplate and, thus affirm, the hybrid plan design." These statements are also highly misleading. By "approval letters," I assume Mr. Josten is referring to IRS (not the Treasury) determination letters relating to the income tax qualification of retirement plans. Some plans did receive these letters prior to the 1999 IRS freeze placed on the issuance of such letters involving cash balance plans. Missing from Mr. Josten's letter, however, is any acknowledgment that all IRS determination letters specifically state that "[t]his letter relates only to the status of your plan under the Internal Revenue Code. It is not a determination regarding the effect of other federal or local statutes." In fact, the federal courts repeatedly and continuously deny employers' attempts to rely on IRS letters to defeat claims by plan participant that the plan violates the law.4 It is inconceivable that the employer community relied on the issuance of a limited number of determination letters when the law so clearly holds that the letters provide virtually no protection or guidance whatsoever and that an employer is not entitled to rely on them at all.

By "rules and regulations," I assume Mr. Josten is referring to a proposed 1991 non-discrimination (with respect to highly paid employees, not age) regulation whose preamble mysteriously contained a sentence suggesting that cash balance plans did not violate section Code section 411(b)(1)(H). The General Accounting Office reviewed the preamble sentence and found "Treasury should not have opined on whether cash balance plans were age discriminatory in a public manner without having coordinated that position with DOL and EEOC." GAO letter to Senator Tom Harkin (March 21, 2001) []. The IRS regulation was subsequently withdrawn and re-issued in 1993 without the preamble sentence, obviously affirming that it was improper and incorrect. Again, it is inconceivable that the employer community relied on a sentence in a preamble to an unrelated regulation that was never finalized, withdrawn, and then re-issued without the sentence.

He may also be referring to Treasury's regulations on cash balance plans, which were not proposed until December 2002, and then withdrawn after Congress enacted legislation prohibiting their finalization. Ironically, the proposed regulation was prospective only and very similar to the bi-partisan Senate bill that you have worked to craft.

The only other "rule" to which Mr. Josten could conceivably be referring is IRS Notice 96-8, which ruled that many employers with cash balance plans were systematically undervaluing lump sum payments in violation of Code section 411, a position later adopted by three federal circuit courts. Hardly a ringing endorsement of the cash balance design. The Notice also underscores why the design is illegal under section 204(b)(1)(H), namely, that interest credits are considered a part of the accrued benefit and must be taken into account when determining a participant's retirement annuity and applying the Code. Thus, far from emboldening employers, Notice 96-8 further advised them of the inherent illegality of the cash balance design.

I appreciate the hard work you and other members of the Finance and HELP Committees have put into this complicated issue. While I cannot say, from a policy perspective, that I believe cash balance plans and their age discriminatory design should be prospectively blessed, I recognize that the safeguards you have included in the Senate bill are designed to ameliorate the horror stories of the past, where career employees with no place to turn had their pension gutted, typically by employers whose plans were over-funded by hundreds of millions (and often billions) of dollars. In the end, I trust you will maintain a bipartisan compromise that protects employees from the most egregious practices of the past while allowing the employer community flexibility to offer cash balance plans. I also trust that you will not be misled by misstatements and threats from special interest groups or employer lobbying concerns, like those of the Chamber set forth in Mr. Josten's letter.


Kathi Cooper

1 The group was a virtual who's who of benefit consultants and attorneys who developed and implemented cash balance plans.

2 Kwasha Lipton developed the first cash balance plan.

3 Treasury and the federal courts have unanimously held that the interest credits are a part of the accrued benefit.

4 "The law permits plan participants whose rights are violated by the terms of a plan (or a plan amendment) to recover benefits-even if the plan has received a favorable ruling from the service." Hearings on Hybrid Pension Plans Before the Senate Comm. on Health, Education, Labor and Pensions, 106 Cong. (1999) (prepared testimony of Stuart Brown, Chief Counsel, IRS).

Should IBM Pay You What They Owe You?

Janet Krueger - IBM Pension September 22, 2005

Message 59546

Observe as Janet Krueger shreds a corporate troll:

(Troll) So... given the fact that corporations can no longer afford to fully sponsor traditional pension plans...

(Janet) WHY is that a given fact? Because the corporate lobbyists say so? It is a proven fact that it is more economical for companies to sponsor [and fund] traditional pension plans than 401K plans!!!

The problem is that during the 90s, companies got used to contributing nothing to their pension plans, while continuing to promise pension benefits. When it became clear they could no longer continue those promises without contributing to the plans, they decided it was more economical to convert promised benefits downwards, through hybrids like cash balance plans, than resuming plan contributions.

The next time you hear someone say a company 'can no longer afford' a traditional pension plan, ask why the executives of that same company are receiving higher executive pension promises than ever before, in addition to huge raises and even higher bonuses.

This is NOT a question of affordability!!!

Nor is it a question of whether traditional plans can be created and maintained with relatively low, and economical, contribution plans.

It is purely a question of executive and corporate greed, paired with a question of whether Congress should force companies to honor their promises.

(Troll) And please don't tell me some cockamamie story that corporations should restore old-fashioned pensions and fully fund them.

(Janet) WHY is this a cockamamie story? Because the corporate lobbyists repeated the mantra so often that you believe them? That is a silly reason.

(Troll) The business model has changed. If you owned the company or if you were a major stockholder, you wouldn't feel any differently?

(Janet) Again, I don't buy your hypothesis. As a stockholder, I find it offensive that such a high share of profits is being siphoned into executive pockets. In most corporations, the contributions being made to the 'special' executive pension funds could easily support and fund traditional pension plans for the full base of employees!

(Troll) The bottom line fact is things ain't what they used to be.

(Janet) Again, who made you swallow this particular bottom line??? You've been fed a story, hook, line, and sinker, and you don't even seem to know it.

(Troll) Companies can't afford traditional pensions any more.

(Janet) Repeating it again still doesn't make it so.

(Troll) And I agree that the US taxpayer shouldn't have to shoulder the burden either.

(Janet) Congress has the ability to force corporations to live up to their obligations without handing a bill over to the US taxpayers. There is no one on this board advocating that our pensions be paid by US taxpayers. So WHY are you using this question to repeat the song and dance corporate lobbyists are feeding us???

(Troll) So what's the answer?

1) Strengthen and enforce ERISA without taking the age discrimination rules out or watering them down.

2) Strengthen the plan funding rules in ERISA.

3) Add some teeth to the ERISA enforcement clauses allowing courts to charge corporate offenders with both damages and plaintiffs' legal fees.

4) When companies like NWA declare bankruptcy, allow the employees, the retirees, and even the PBGC a place at the front of the line in the creditors' queue.

Not one of those 4 options would cost the American tax payer a dime. But they sure would increase retirement security a lot more than legalizing cash balance plans! And in the process, it would lesson the number of corporate retirees who end up living on public assistance at the end of their lives.

Janet Krueger

Rochester, MN

Rick Priory Gets $337,100.00 (executive cash balance plan credit)

Pension Response from Senator Richard Burr

ibmaccountant - IBM Pension September 9, 2005

Message 59447

I talked to a Republican party official here in NC and our opposition is beginning to worry them big time. It has already affected Dole's plans to consider the ticket in 2008. You will notice he voted against it, but never stands on the floor to voice his opposition to what is essentially the Republican party's agenda.

They came to me for my usual annual 1-2K donation and I stunned them by telling them that because of HR2830 it was now going to the Democrats and I was going to be available to speak as a "poor, misled average hard working Joe screwed by the Republicans." The RNC rep put me through straight to an old pal and I'm sure Rove or one of his aides was listening in on the call. When they started on the case of "we gotta save corporations" and the United case, and I just let them have it. At the end, I told them I'd stand with the Dems this next election and tell people I'd wasted my 100K donations over the years because I'd been misled. (IBM = I've Been Misled). It was not a pretty call. Someone chimed in and said the reason ERIC and ABC were being listened to was because only 8% of employees now have defined benefits pensions.

I responded by saying that meant that maybe up to 70% had already been robbed and a great pool of future democrats within the demographic that has the most votes!

This is an old political trick. Those Senators and Congress people in districts that are endangered because of this bill (read districts with large numbers of Boeing, IBM, retirees etc.)will vote against the bill to protect themselves, but will numerically be insignificant. The result is the bill still passes and Richard Burr can claim he voted for his constituency when election time comes.

I hear from the same source Virginia Foxx (D-Banner Elk) is going to be stunned by the amount of negative publicity surrounding her vote and the money that's starting to pour in against her re-election. She will regret her vote on the committee as well. I already have 3 surprise appearances there scheduled, so you folks will learn my name shortly.

This is dirty politics, folks, the only way to hurt them is to vote against them and give the Dems every dime you can spare. They are ideologically driven by MBAs in big business. That's why IBM, historically a democrat enclave (the Watsons were big Democrats), is now full of Republican pension money grabbers. They are trying to save a dinosaur, the big American multi-national corporation. What they don't realize is that this and some other issues is going to take down the party with it.

Don't forget that if we can elect a Democratic Congress, they can always go back and re-write the law back, given enough votes!

Don't bother with the press. Gannett's been bought off, as well as Fox and Hearst.

Another worry....the Supreme Court nominee Roberts is totally against defined benefits plans and will definitely vote against us if he gets on the Supreme Court.

What Happened at the HR2830 Mark Up?

What Happened at the HR2830 Mark Up?

justa_bean_counter - IBM Pension September 9, 2005

Message 59440

There were about 100 people in the audience. Harkin gave a fantastic speech about the IBM employees, there was applause. Harkin voted against the bill as written because there were no protections for early retirees. (that means you can kiss your early retirement subsidies good-by) Burr also voted against the bill, but I have not been able to find out why. Everyone else voted for it. Several amendments were offered but none accepted. If there is to be a fight with the amendments, it will be on the Senate floor.

What does the bill contain? An odd carve-out for one. The carve-out states something like 'all cb plans currently in the judicial branch can stay there if filed prior to August 1, 2005, while after August 1, 2005, no one can file any more law suits.' There is an odd caveat that if IBM loses their suit, all the safeguards that are written in the bill will be removed and if IBM wins their suit, all the safeguards that are written in the bill will stand. Yes, there are safeguards in the bill that employers must follow if their CB plan is to be dubbed 'legal.'

That's about all I understand right now and I'm sure after I examine it better, I'm probably half wrong with what I've already written. It is a hodge-podge of piss-poor legislation that is trying to satisfy everyone, in my opinion. It's trying to protect retroactivity, but only if IBM wins. It's trying to put safeguards in there for employees over 40. It's trying to give corporations the legal ability to reduce promised pensions, wear-away, grab subsidies, etc...

That's about it in a nutshell. I have the right to change what I've said further down the road as I study the thing.

Oh, one last thing, ERIC and ABC (nor our friends) doesn't like the bill as marked. They wanted it all. They didn't get all. But then again, I'm not sure how much we got, if anything. Later.

Kathi Cooper

Stop Legalization of Cash Balance Plans

Stop Legalization of Cash Balance Plans

kathicooper - IBM Pension July 22, 2005

Message 58972

This is Kathi Cooper of Cooper v. IBM. I need your help immediately or Congress may RETROACTIVELY legalize Cash Balance Plans.

The Senate Finance Committee is working on their version of the Boehner bill (HR2830). Next week Senators Orrin Hatch (R-Utah) and Blanche Lincoln (D-Arkansas) will offer an amendment to make the bill RETROACTIVE. THIS MUST STOP NOW!!! They have the support of Finance Committee Chairman Senator Chuck Grassley (R-Iowa) and Ranking Democratic Member Senator Max Baucus (D-Montana).

If passed RETROACTIVELY, this legislation would legalize IBM's actions. We would lose most everything. It would allow IBM to convert everyone from the old plan to Cash Balance and, potentially, IBM could even cash out retirees that are currently collecting pension checks.


Forward the petition to your friends and ask them to sign, with their city and state included on the comment line:

3) If they want more background, refer them to Marie Cocco's editorial at:


This is critical, very critical.

Pass this note to your family, friends, and co-workers.

Kathi Cooper
Bethalto, IL

IBM Pension Settlement

Janet Krueger - IBM Pension – June 4, 2005

Excerpts of Message 57931

Please be aware that Rep. Boehner is planning to sponsor new 'pension reform' legislation in Congress next week that will retroactively legalize everything IBM did to our pensions. If passed, other employee groups, who could otherwise benefit from the precedents being set by Cooper v IBM, will have no recourse at all. Instead of potentially getting a settlement that they would have to share with their attorneys, they would get nothing at all, and other companies would not be held accountable at all!!! The result would be massive pension reductions throughout corporate America...

If you haven't done so recently, PLEASE share your thoughts on this whole travesty with your senators and representative in Washington…

Congress has the power to either improve or damage our legal system. They will only do the right thing if enough of us make it clear to them that we are watching what they do, and that we will base our votes in the next election on their behavior.

Janet Krueger

Rochester, MN

Executives, Stop Stealing

justa_bean_counter - IBM Pension - April 29, 2005

Message 57321

Message sent by omikey2:

(4/28/05) - While I remain very upset about the way I've been treated over the course of the last 6 years (28+ years and still active employee), I WILL NOT celebrate if IBM goes bankrupt!!

I do not want the company to go bankrupt... I just want all employees to be treated like the good human beings they are and to be treated with financial equity. And I REALLY want the executives to stop stealing from the company and shorting the workers !!!

Reply by justa_bean_counter:

I agree.

And I also want the tooth fairy to visit me when I get my new crown next week.

Protest at IBM Annual Meeting

"Janet Krueger" - IBM Pension - April 28, 2005

Message 57307

(4/27/05) - Over a dozen protesters dressed as cops, as well as several dressed as prisoners, protested in front of the IBM annual meeting yesterday in Charleston with some lively juggling and keystone cop routines...

In his efforts to avoid calling on known IBM employee protestors, Sam called on a representative of Protects USA, who explained why they were running the protest, asking IBM to run a general audit and review of all the contracted services they purchase from Wackenhut. Sam replied that it sounded like there are some internal disputes going on between Wackenhut and Protects USA and that IBM, as a general policy, does not get involved in such matters...

I got the distinct impression from Sam's body language that he was wishing he had taken a question from one of us instead!

He had time for one more question from the floor after that, and actually let Linda Guyer have the mike -- she asked the question that triggered Sam's commitment to 'defer' raises for himself and 50 other top execs for an undetermined length of time...

The Social Security Cash Balance Plan

ibm_slave - IBM Pension - February 8, 2005

Message 56579

(2/7/05) The Bush plan is a cash balance plan for Social Security. If private accounts are so secure and profitable for beneficiaries, then why doesn't the government invest the social security "trust fund" into conservative investments, pay out the benefits promised under the current system, and (according to Bush) realize a profit that can be used to reduce our national debt?

Prima Facie Case of Age Discrimination

i_be_mad_as_heck - IBM Pension - September 25, 2004

Message 54769

For those interested in the details, I am posting some information that I have previously posted on this board, Message 53908. I am not too sure many people understand that their accrued monthly pension can actually go down with age if you keep working past a certain point.

Below is information showing just one of the age discriminatory aspects of the 1995/1999 pension plan changes. There are many other discriminatory aspects.

With everything else being equal, a person retiring at age 65 receives 5% less than a person retiring at age 55. That is not right, and Judge Murphy has ruled in Cooper v IBM, that it is illegal also.

Most people would think that by waiting longer to retire, you would receive a larger pension. At a minimum, you would think your retirement benefit would remain constant. Not necessarily so with IBM's PCF pension.

By delaying retirement until you are older, you would expect the monthly pension to increase, since you will be collecting for fewer months since you are closer to meeting the grim reaper. Not necessarily so with IBM's PCF pension. This is a prima facie case of age discrimination. It is clear, in black in white, that as your age increases, your pension benefits decrease.

Why did it take so long for this to get out?

Thanks to Judge Patrick G. Murphy and the class action pension lawsuit, the secret is now more widely known. Take the case where everything else is equal. Assume that you could retire at 30 years of service at age 55. Assume also that your monthly benefit is $1000 per month. Did you know that every year you wait to retire your monthly pension benefit decrease under the PCF (1995) plan?

Here are the numbers:

Retirement Age - Monthly Benefit
55 - $1000 (assumed)
60 - $975
65 - $951

How can that be? It is called the conversion factor. As your age increases, your benefits go down. How is that legal? It isn't according to Judge Murphy (see Appendix C in his July 31, 2003 ruling for the conversion factor table).

IBM says that they are going to appeal. Good luck trying to convince the appeal Judges that employee pensions should go down as their age increases and that it is not age discriminatory.


I have compiled below the "conversion factor" list for the PCF pension calculation. I don't think I would want to be the attorney for IBM trying to argue why this is not age discriminatory in front of an Appeals Court. I have added a column showing the percentage of an age 40 pension you get as you get older. Note that there is only one component to the "conversion factor", and that is age. As your age of retirement goes up, you benefit goes down.

A Prima Facie case.

Age - Factor - Normalized to age 40 benefit
40 5.498 100%
41 5.733 96%
42 6.062 91%
43 6.365 86%
44 6.683 82%
45 7.017 78%
46 7.298 75%
47 7.590 72%
48 7.893 70%
49 8.209 67%
50 8.537 64%
51 8.879 62%
52 9.234 60%
53 9.603 57%
54 9.987 55%
55 10.387 53%
56 10.439 53%
57 10.491 52%
58 10.543 52%
59 10.596 52%
60 10.649 52%
61 10.702 51%
62 10.756 51%
63 10.810 51%
64 10.864 51%
65 10.918 50%

Bush, Towers Perrin and Watson Wyatt

andylang_19380 - Andy Lang Group - March 1, 2004

Message 3088

Bush, Towers Perrin and Watson Wyatt are All National Disgraces

(2/29/04) - The Bush Medicare bill recently passed is a complete sell-out to the Drug industry and the insurance industry, and will also benefit all major corporations by allowing them to get rid of drug coverage for their retirees.

It is the Camel's nose in the tent for eventually privatizing the entire system, which is almost certain to happen if Bush is reelected. And even if he loses, it will eventually happen if the Democrats fail to reform the financial and legal parts of Medicare and Social Security by keeping them both as defined benefit plans, but this time real ones, instead of the Potemkin Village ones they are currently.

Real defined benefit plans have actuarial advance funding of the obligations--not the dumb pay-as-you-go way of financing them--and strong laws with teeth to protect the assets and the past service obligations, instead of the complete lack of any protections at all.

In this phony Medicare law, Golden Rule should be singled out especially for it's giving huge amounts to the GOP in exchange for the provision that enables them to sell their 'specially designed products' for the employee health savings accounts in this awful law.

Consulting firms like Towers Perrin and Watson Wyatt--otherwise known as 'The Facilitators' for their major roles in both destroying the Defined Benefit Industry and for rewarding CEO's and other top executives in their executive compensation practices often for ruing their company's--are already gearing up to help major firms slough off their obligations for drug coverage to their retirees. Speaking of national disgraces...

Watson has put out huge amounts of propaganda on how the Big Bad “Gubm't” is the cause of the decline in DB pensions, even as senior people at Watson very work hard in Washington to privatize Social Security.

Could it be that Watson's close relationship with State Street Bank of Boston, a firm that derives most of it's revenue by selling products for the 401(k) industry and who generously provides an executive by the name of VP Bill Shipman to promote privatization through the Cato Institute has something to do with this ironic and seemingly strange stance?

The senior actuaries are crying about spilt milk as they destroy future work for junior members of my profession.

Mr. Lang mentioned the fine article written by Ellen E. Schultz and Theo Francis about this issue.

Medicare Bill Hurting Retirees

Towers Perrin

andylang_19380 - Andy Lang Group - February 8, 2004

Message 3042

Frankly, I haven't read the bill. But you can rest assured that anything Towers Perrin is for that benefits corporate America screws the plan participants.

One of the reasons I normally do not read these bills is because they contain words and phrases that typically were put in to flimflam the public and it becomes very tedious to go through the ones I am interested in - very time-consuming.

Just in the snippet you quoted below it is easy to point out that preventing no benefit accruals under a CB conversion and then giving older workers the same as is given to younger ones is a rip-off. Typically, something like a 5% of pay hypothetical "credit" is given and this is far less than older workers would get had the old plan continued; they are usually around 15-30% of pay, as a present value of accrued benefits.

The words following are ambiguous, "The proposal also requires a five-year 'hold harmless' period for each plan participant involved in a conversion from a traditional pension plan to a cash balance plan. During such period, each participant would earn the greater of the old plan and new plan benefit. Thereafter, the new plan formula could apply."

What benefit are they talking about - the accrued benefit under the old plan or the "pay credits"? Also many plans have limits on credited service for benefit purposes such as 30 or 35 years—deemed a "career," or that and then giving a peanut benefit that is a mere fraction of the one that accrued during the career, such as 1/4th of 1% of pay.

Then there is the matter of why they are limiting this to “5 years.”

But mostly everyone MUST become familiar with the essence of how they are screwing you - namely how compound interest works and its reciprocal, the present value function. It is the very low interest rate that is credited in typical CB conversions that screws plan participants - younger and older ones. A rate that is vastly below the rate earned on the assets. T-bills or some variant thereof - earn only 0.5% -1% above inflation versus say 8-9% annually, nominally, or historically 5-6% above inflation. This makes a huge difference and actuaries know this.

I will try to write a piece on how this works, hopefully including how to use the "rule of 72" and its reciprocal so that you can make these calculations yourselves.

Towers BTW, screwed their own early leaver employees on their DB pension plan for decades using something called "project and prorate," a mathematical device that exaggerated the awful backloading of the present value of accrued benefits in their traditional DB plan. Then, to top this off, they converted their plan to a CB plan on 1/1/03 - making sure they avoided any lawsuits by giving choices to all participants as to whether they wished to stay - forever - in the old plan or go into the new one and giving information to employees as to the choice. I do not know how complete that information is.

The project and prorate is illegal because it was done secretly, with no employee communication at all, and with nothing in the pension plan document either.

The Enrolled Actuary, a senior actuary at Towers, Don Fleischer, did it and should be held accountable.

It is against the law for an Enrolled Actuary to deceive plan participants and against the ethics rules of the Academy of Actuaries too. Regardless it is unethical and immoral.

Fleischer, a Fellow of The Society of Actuaries and a Member of the American Academy of Actuaries, conveniently retired the moment he converted the plan to a CB plan. But he is still culpable.

Towers is also the most important firm when it comes to the growth of these excessive Executive Compensation arrangements that assault us nearly every day - and the most important when it comes to the decline of the dB pension industry too.

It was absolutely awful to watch how they did both. During my tenure - 1975-1990 - the typical Fortune 1000 CEO's total compensation went from something like 40 times the median pay to 5-6 times that, and then kept going on to some 400 times before the bubble burst.

In DB pension plans they exploited shamelessly the backloading issues and also worked with major firms to develop the legal strategies to take back pension “surpluses,” to use plan assets for "open window programs" - basically bribes to get people to retire so as to avoid age discrimination issues, while still saving the firms tons of money (due to the avoidance of the heavily backloaded PVAB of older employees and heavy duty medical costs) and even develop pay strategies that, in effect, made most of the workforce very vulnerable to being fired and also avoiding lawsuits there.

The removal of the plan sponsor's costs for retiree medical plans was also a specialty, as was medical cost transference back to the employees and the really big one, so-called "Flex-Benefits," a device that could be easily manipulated to have incentives for employees to make the decisions that would benefit the company.

In other words, Golden Handcuffs, Golden Parachutes and just plain Gold for the top guys, irrespective of performance, and for everyone else, fear driven by "Pay-For Performance" deals, bait-and-switch DB pensions and maybe a small 401(k) deal - almost always accompanied by misleading financial communications showing how you could become a millionaire under these do-it-yourself plans.

Quite an outfit!

The above message was in reply to message 3041:

--- In, "duke_did_it_too" wrote:


Towers Perrin seems to be touting the Treasury's proposed legislation as a victory for the pension consultants. It looks more like the Treasury is saying that the consultants are going to have to stop robbing employees as much as they have been.


Towers Perrin Says Treasury Department's Proposed Legislation to Protect Defined Benefit Plans and Older Workers Reaffirms Legitimacy of Cash Balance Plans

2/2/2004 6:04:00 PM

STAMFORD, Conn., Feb 2, 2004 (BUSINESS WIRE) -- Towers Perrin reacted favorably to the proposed legislation regarding cash balance pension plans issued today by the U.S. Treasury Department stating the legislative proposal reaffirms the legitimacy of cash balance plans.

"We urge Congress to act quickly to eliminate the uncertainty associated with cash balance plans," said Steve Kerstein, Towers Perrin principal and managing director of the firm's HR Services business global retirement consulting practice.

The Treasury Department's legislative proposal clarifies that a cash balance plan satisfies age-discrimination rules if the plan provides pay credits for older participants that are not less than the pay credits for younger participants. "Virtually every cash balance plan works this way," according to Kerstein.

The proposal also requires a five-year "hold harmless" period for each plan participant involved in a conversion from a traditional pension plan to a cash balance plan. During such period, each participant would earn the greater of the old plan and new plan benefit. Thereafter, the new plan formula could apply.

"Based on our experience," added Kerstein, "many of the transition benefits offered by large companies are at least as generous as the proposed minimum transition benefits."

"This proposal, if adopted, would give plan sponsors the clarity they need to address their retirement plan design issues and would create a framework that many should be able to comfortably live with," concluded Kerstein.

Pension Watch - Page Four