“Staying Off the Cover of Time” ( JofA, Feb.00, page 31) discussed the recent turmoil surrounding pension plan conversions, with particular emphasis on IBM’s recent difficulties.
As a multi-degreed IBMer for more than eighteen years, I’d like to offer an employee’s perspective on what happened and what enraged employees to the point of public action.
First, IBM’s pension conversion was particularly heinous. Employees comparing the present-day values of the prior and new plans were shocked to see hundred-thousand-dollar losses as the norm. In my case, the opening account balance was less than half the correct amount, and, more amazingly, it was even less than the pension my wife earned in her eight years as a minister. We, like many other IBM families, were suddenly thrown into a state of shock.
Second, IBM simultaneously introduced a devastating reduction in retirement health-care benefits. Not only is the new plan much more restrictive in terms of qualification, but it also discontinues the practice of providing retirees with ongoing yearly coverage. IBM retirees and their families can look forward to approximately three to five years of coverage—a coverage, by the way, which can be purchased only from IBM. For employees with serious medical concerns, this change dealt a significant blow—one perhaps more crucial than the pension plan changes.
Employees viewed these changes in terms of IBM’s historic commitments. For decades, IBM presented the retirement benefits as part of each individual employee’s total compensation. By reducing those already earned benefits, IBM effectively implemented a retroactive pay cut. Equally noteworthy, IBM has, and purports to continue to have, an unqualified commitment not to discriminate on the basis of age. This written promise is contradicted by the terms and conditions associated with these plan reductions.
Further, the transition itself was conducted in a highly questionable manner. In a dramatic departure from previous benefit plan changes, employees were directed not to contact their managers for further information, but to call a toll-free number and speak to human resource vendors who appeared to be working from prepared scripts. Vital information—official plan documents, statements of vested legal minimums—was not provided. Time and again, employees complained that false and misleading statements were made not just to IBMers, but to the public and even to Congress.
Customers, stockholders and employees alike look to senior executive management to set an example for credibility and trustworthiness. A major disservice has been done in this regard. It is not surprising IBMers have acted with such speed and fury, nor is it surprising to see this effort continue. To date, their actions have resulted in a congressional hearing, the introduction of several bills and scrutiny by several federal agencies, including the Equal Employment Opportunity Commission, the Department of Labor and the IRS.
Whether the nature and severity of these actions merit a story in Time is a decision only the owners and editors can make.