Wall Street Journal Article Exposes IBM's "Pension Cuts 101"  

A front-page article in today's Wall Street Journal (Thursday, 7/27) exposes many of the changes which IBM and other corporations have been gradually making over the last decade to reduce employees' pensions.  

Much of the IBMers'  pension woes in the article, entitled "Pension Cuts 101: Companies Find Host of Subtle Ways to Pare Retirement Payouts," are told by early supporters of the Alliance@IBM supporters, David Finlay and Ken Buckingham. In fact, the front page section of the article is illustrated by a drawing of Finlay.  

The article goes far further than any other written to date on delving into the intricate changes that IBM has made over the years to reduce its employees' pensions. The newspaper is very pro-business, but this does not prevent the WSJ article from going easy on IBM (here are some excerpts):  

Sometimes companies cut pensions when business is bad, but that isn't what's happening here. Employers are imposing the pension cuts at a time when profits are lush and when most pension funds are fully funded or overfunded, thanks to the long-running bull market......  

.....for some [corporations, pension funds] are a new profit center. That's because accounting rules allow excess pension income to flow to the bottom line, where it can boost operating income and smooth earnings.....

"When [Finlay] started studying IBM's pension moves in 1999, the engineer would bicycle home from work........and stare at his computer till nearly midnight....By his calculation, the 1995 changes reduced his prospective pension to about $57,700 annually from the previously estimated $69,500.  

I'm a Goldwater conservative, a Vietnam vet and a Republican, but I'd support a union coming in here if it would force the company to open up its books on what its doing.....  

Employers rarely say that the reason they are changing their retirement play is to save money.  Instead, no matter what kind of change they are making, companies generally tell employees roughly the same things. "The changes keep us competitive with others in our industry."

"I did not realize the significance," says software engineer Ken Buckingham, 44, a 20-year, second-generation IBM employee in Charlotte, NC. "I had not a clue that this wasn't a traditional pension plan. They have the right to make changes, but I resent the surrepticious nature in which they made them."  

...when IBM converted to the pension-equity plan in 1995, it sent a memo to managers saying the goal was "to attract and retain the people we need for the future".....When IBM switched to a cash-balance plan four years later, its brochure for the staff said the change was to help "attract, retain, and motivate" employees.

...the shareholders have fared well...IBM had reported pension expenses of $11 million [in 1994]. In 1995, the year it converted, it reported pension income of $252 million....Over the next four years, pension income boosted the company's operating income by $1.8 billion.....  

For employees, bad news can continue even after a conversion to a cash balance plan. What has happened at some big companies illustrates the variety of ways managements continue to pare pension benefits.....Six years after Interpublic Group of Cos. converted to a cash balance pension plan, the ad agency went further and froze the plan. CBS Inc., adopted a cash balance plan but closed it to new employees.  

Unfortunately, you cannot read the article on-line from the Journal's website because it is one of the few newspapers which requires you to sign up for a paid subscription first. Go to (www.wsj.com).