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IBM's (Eroding) Total Compensation

If you think the Cash Balance Plan (CBP) conversion and
Future Health Account (FHA) changes
were the first time IBM has reduced benefits,
this will make you Think Twice.

This is a growing list of Reductions in IBM's Total Compensation, accompanied by excerpts from, and links to, postings on the IBM related clubs on Yahoo!. Many of the items on the list were pointed out by members of the Yahoo! ibmunion club. If you know of specific dates for any of these events, please contact Jim Mangi.

An IBM Time Line is also available that shows other important dates in IBM history.

Reductions in IBM's Total Compensation:

  • 1991/01/31 - IBM announces 10% reduction in pension benefits.
  • 1991 (or 1992?) - Elimination of medical plan's "coordination of benefits".
  • 1992, April - Elimination of Pre-Retirement Education for IBMers within 5 years of retirement. Plan reimbursed up to $2,500 per employee and another $2,500 for a spouse.
  • 1992 - Rolex removed from 25 year catalog.
  • 1992 - Elimination of $1000 that came with Quarter Century club.
  • 1993/04/01 - Louis V. Gerstner Jr. becomes IBM Chairman and CEO. Coincidentally, this is April Fool's day... we're not quite sure of the relationship here... but many people who thought Lou would look out for IBM's long term well being sure feel fooled now.
  • 1994/02/17 - 320 employees laid of at IBM Endicott.
  • 1994/07/27 - IBM announces Kingston, NY plant closing.
  • 1999/05/03 - IBM mails notice of new "cash-balance" plan to employees.
  • 1999/07/01 - Pension reductions for employees under 40 due to Cash Balance Plan conversion.
  • 1999/07/01 - Reduction of retirement medical benefit due to conversion to Future Health Account (FHA) for employees with more than 5 years to go before retirement.
  • 2000 (first quarter) - Reduced 2000 variable pay (70% of previous years payout for some employees) due to poor management. Since variable pay is about 10% of yearly salary, this amounts to a 3% pay cut for many employees.
  • 2000/04/25 - Sponsored by IEBAC, IBM shareholders' resolution to restore "pension choice" for employees receives 28 percent support at stockholder's meeting.
  • 2000/09/14 - IBM Endicott announces Alternate Work Schedule (AWS), with mandatory 12 hour work days and weekend days. Workers must work every other Saturday. Overtime (and overtime pay) is reduced. 20% premium for AWS called just a "tip" and not worth the extra effort. Endicott management tells employees that day care should not be a problem, but Alliance@IBM research shows just two licensed day care providers in the area with 24x7 coverage.
  • 2000/10/09 - IBM announces that new retirees will have to pay for medical benefits.
  • 2001/03/20 - IBM Endicott holds "all hands" meeting to announce that it was sending, eventually, "all" HyperGBA, Blue Devil manufacturing to China. Reduction: job security.
  • Other reductions. We need exact dates for these. If you have any information, please forward it to us.
  • Unused vacation no longer carried over to next calendar year. IBM can legally do this because they do not take away EARNED vacation. Instead, they reduce the number of vacation days in the current year by the number of unused vacation days for the previous year.
  • Elimination of standby pay.
  • Elimination of mission pay.
  • Elimination of meal reimbursement when working 4 or more hours overtime.
  • Employees began paying for medical benefits.
  • Employees began having to pay for first day's room and board of a hospital stay.
  • Elimination of pension growth after 30 years.
  • Reduction of pension growth percentage.
  • Mandatory 10% overtime (effectively reduces employee's hourly wage).
  • Loss of one hour minimum pay for interruptions when not working (now get actual time).
  • Loss of four hour minimum pay for callouts (now pays actual time).

Yahoo! Club Postings:

On June 29th, 2000, a post was placed in the Yahoo! ibmunion club that discussed how IBM's Total Compensation has been reduced in recent years. Several members added to the list with follow-up posts of their own. The posts in the thread have been included below.

Original post by southbury_alliance (Jim Mangi) on 2000/06/29:

I was reading some old company information. One of the booklets played up IBM's "total compensation" as being leading edge. That made me start thinking of all the things that have happened as far as benefits in the last ten years.

When I first joined IBM over 10 years ago, the salary was among the highest offered, and we also had some of the best benefits.

The first 'hit' I remember was when the medical plan was changed and 'coordination of benefits' was taken away. Who remembers that? I was single at the time, but I think this coordination of benefits worked so that if a husband and wife were both IBMers, the 20% not covered by one insurance would be picked up by the other, so that, effectively, medical was covered 100%. Since IBM likes to look at total compensation, then the elimination of this benefit (which is part of your compensation) means that you had a compensation reduction. If they didn't increase your pay accordingly, then, by IBM's definition, you've had the equivalent of a pay cut. So, that's one pay cut I can remember.

The next 'ding' was when employees were forced to start paying for a portion of their medical coverage. Medical coverage being part of your compensation, this again was a reduction in compensation. That's pay cut number two.

Paycut #3 was (for IGS) the Billable/Productive hours quotas and mandatory 10% OT. Forget compensation, this was a true pay cut. Don't even think about the 10% OT, because for most people to meet their Billable/Productive targets, take their vacation and holidays, and attend classes to stay technically vital (another PBC requirement) you actually have to put in 15 to 20% OT. What does that mean? If you have a worker who makes $50,000/year, gets 3 weeks vacation and 12 holidays, that translates to about $26.82/hour (52 weeks * 5 days/week = 260 weekdays/year. 260 days - 15 vacation days - 12 holidays = 233 work days. 233 work days * 8 hours/day = 1864 hours/year. $50,000/1864hours = $26.82/hr). Now, add %15 overtime, and you get %50,000/2143.6hours for a new hourly wage of $23.32/hour. BAM! Another pay cut!

Paycuts #4 and #5 came in one shot in June of 1999.

#4 was when many of us had our pensions cut. In my case, my projected annual pension was cut 42% (using IBM's OWN calculators). To make up for the shortfall, I would have to put aside extra savings on my own. Not being an actuary, I cannot acurately figure that out, but whatever that amount is, it would be essentially a cut in my compensation, and therefore my pay.

The last paycut was the new Future Health Account (FHA). The actuaries predict, in my case, that my FHA will last between 1 and 2 years after I retire after 30 years. Based on the projected cost of medical insurance 20 years from now, I don't even want to think how much I need to save on my own now to be able to pay for it. Whatever that amount might be, it would be subtracted from my total compensation, resulting in the fifth pay cut.

So if someone tells you IBM has never actually cut salaries, just remind them that IBM focuses on compensation, not salaries. Then remind them that compensation most surely HAS been cut!

-- Jim Mangi, IGS, Southbury. 10+ year employee.

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Additional 'dings' added by others (some are excerpts):

lawn_mower_man1 (posted 2000/06/30):

Somewhere in between the first hit and the next 'ding', they made us responsible for paying the first day's room and board for a hospital stay. Although this was also another pay cut, they claimed that it was entirely educational - we needed to become more aware of the high cost of medical expenses.

Another 'ding' came for many employees this year when they received only 70% of their variable pay for last year. Since base pay is supposed to be about 90% of one's total pay, with variable pay making up the other 10%, that translates to a 3% pay cut for last year.

Puppy_play (posted 2000/06/30):

The "use it or lose it" methodology handling of unused vacation was another pay cut for many of us, especially when paired with critical project deadlines in November and December and the elimination in almost all cases of mission overtime...

bits_bytes_and_bugs (posted 2000/06/30):

Jim - I think you have the biggies for most people, but there are many more smaller takeaways - in fact, one could probably not list them all in one post. Here are a few more:

- elimination of standby pay,
- meal reimbursement when work more than 4 hours OT,
- mileage reimbursement for working unscheduled work days.
- elimination of mission pay.

skipd45 (posted 2000/06/30):

I remember when I was working in mfg. if we came in on a Sunday night, and worked until Monday morning, we would get double time for the entire night. That was taken away and we were paid the double time only for the time up until midnight.

bettyshaef (posted 2000/06/30):

Let us not forget what Lou did to the older people (the ones who are able to take the defined benefit pension plan). The number of years you have with the company stops at 30. This means that once you pass 30 years our pension stops growing.

mrs_adm (posted 2000/06/30):

>>" This means that once you pass 30 years our pension stops growing."

Yes, that's exactly what it means. And in addition, the percentage per year was also lowered..

The old calculation was:
5_yr_avg_pay * actual_yrs * 1.5%

The new calculation is:
5_yr_avg_pay * Years_up_to_30 * 1.35%

So yes, with the 1995 change, even those who can take the original service and earnings formula lost.

And the folks who ended up with the (then) new PCF plan got screwed because the rate of future accruals was decreased by this first introduction to wear-away.

tweener_too (posted 2000/07/03):

Loss of one hour minimum pay for interruptions when not working (now get actual time). That doesn't seem too bad until you get paged three times in one day far from a phone or awakened two or three times in the middle of the night (or even in one night!) for several days in a row.

Loss of four hour minimum pay for callouts (actually going onsite to a customer account). Now pays actual time.

Other (Eroding) Total Compensation related excerpts and links:

The GOP Case Against Pension Theft by Jamshyd Taylor (2001/01/27) - Excellent points regarding IBM's ethical obligations

Why the GOP should fear Pension Heists by Jamshyd Taylor (2001/01/27) - More of IBM's broken promises


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Jim Mangi (jim.mangi at
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