Magazine

Cover | Published in October 2001

Mad as hell

Janet Krueger still spends part of every day thinking about how she can put right what she feels IBM set wrong back in 1999. That is the year the company converted its defined benefit plan to a cash balance formula. Krueger was part of a crusade that accomplished what many would have viewed as an impossibility; she helped lead a movement that convinced Big Blue to alter its pension strategy, broadening by 35,000 the number of individuals it would allow to opt out of the cash balance plan and stick with the old-style annuity plan. Ultimately, the traditional plan was offered to anyone who was older than 40 years of age and had more than 10 years of service at the time the plan was switched. However, three years after quitting a 23-year career as an IBM software consultant, Krueger is not satisfied.

By Randy Myers | October 2001
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Janet Krueger still spends part of every day thinking about how she can put right what she feels IBM set wrong back in 1999. That is the year the company converted its defined benefit plan to a cash balance formula. Krueger was part of a crusade that accomplished what many would have viewed as an impossibility; she helped lead a movement that convinced Big Blue to alter its pension strategy, broadening by 35,000 the number of individuals it would allow to opt out of the cash balance plan and stick with the old-style annuity plan. Ultimately, the traditional plan was offered to anyone who was older than 40 years of age and had more than 10 years of service at the time the plan was switched. However, three years after quitting a 23-year career as an IBM software consultant, Krueger is not satisfied.

"We believe all IBM employees have a right to be covered by a nondiscriminatory plan," says Krueger. "In addition, we would like to see IBM honor long-term commitments relative to retiree medical insurance."

Also displeased is 81-year-old Helen Quirini, who is leading fellow retirees from General Electric Company in a tooth-and-nail battle to convince the company that it should use at least some of the billions of dollars of surplus assets in its pension plan to voluntarily give retired GE workers annual, across-the-board cost-of-living increases.

At Qwest Communications and Verizon, retired telephone workers are pushing shareholder resolutions that would prohibit those companies from including income from pension surpluses in the calculations used to set executive compensation. Their goal: to remove any incentive that top managers might have to pump up pension surpluses at the expense of improvements to retiree income.

Elsewhere, retired workers from the now-defunct Pan American World Airways Inc. have kept attorneys for the Pension Benefit Guaranty Corporation occupied for the past five years with a lawsuit alleging that the PBGC, as trustee of the Pan Am pension plans, has not fairly awarded their pension benefits.

At companies across the country, activist groups comprised of retirees and current workers are battling perceived benefit slights, from the termination of retiree health care benefits to the absence of cost-of-living increases in pension benefits. In addition to class-action lawsuits and shareholder resolutions, their anger has translated into street demonstrations, unionization movements and, in the case of some cash balance plan conversions, complaints of age discrimination filed with the Equal Opportunity Employment Commission.

Plan sponsors may feel they are between a rock and a hard place. At a time when employers are trying to cut costs to deal with a slumping economy, the employee activism movement is only becoming stronger. In September, a federal judge in Tulsa ruled, in a class-action lawsuit filed by former McDonnell-Douglas workers, that the company had closed a plant in Tulsa in 1993 to deprive about 1,000 workers of benefits there were due under ERISA. That same month, a federal judge in Illinois certified as a class action a 1999 lawsuit alleging that changes IBM made to its pension plan in 1995 violated ERISA by causing the rate of benefit accrual to diminish as workers age. An attorney for the plaintiffs says that the class could cover as many as 140,000 current and former IBM employees. IBM says the suit is without merit and it is appealing the judge's ruling. McDonnell-Douglas has since merged with Boeing, which has said that it disagrees with the judge's conclusion and is evaluating its legal options.

"I have been involved in retiree activism since the mid-1970s, and I have never seen the current workforce so enraged and alerted to what is happening with retirement benefits," says Paul Edwards, chairman of the Coalition for Retirement Security, a national grassroots organization whose members include retiree groups from some of the largest companies in the nation.

"This is no longer activism with one face," agrees Karen Friedman, director of the Pension Fairness Project of the Pension Rights Center, a nonprofit group in Washington. "It's becoming a multi-face form of activism. It's the whole American work force. We're seeing the start of a revolution."

How did it come to this?

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