The story of one class action lawsuit.
IBM Pension Class Action lawsuit - Cooper v. IBM settled 5/2007. A summary report and personal commentary.
Note: It is my intention to provide information for the average person. If there are any errors on this lens, please notify me. I will gladly correct it. Also, I welcome comments and suggestions for additions to this lens.
Jack Lee
email: jackclee@optonline.netMay 2007
My personal view
As a former IBMer of 28 years, let me summarize the crux of this case.
1. IBM traditionally had a "defined benefit" pension plan for all regular employees.
2. In 1995, IBM decided to modify their plan to
a hybrid plan called a pension equity plan. Then in 1999, IBM introduce a "cash balanced" pension plan.
This plan would allow employees to take their accumulated benefits with them when they move from job to job. It would also create a "cap" to the amount the company is required to pay.
3. There would have been no controversy if the conversion formula was done in a "proper" way and not discriminate against older employees.
4. IBM and its accountants, decided to use this change of benefits to draw off some of the pension funds and help their troubling bottom line.
5. In the process, they have cheated hundreds of thousands of employees of their earned pension benefits.
6. A class action lawsuit was launched by Cooper to address this problem in 2002.
7. 5 years later, after numerous litigation, and appeals, the Supreme Court of the US decided not to hear this case.
8. A summmary penalty of $320,000,000 was imposed on IBM Corp.
9. The funds will be distributed to all party concerned based on some "formula". With a large portion (29%) of first 250 Million and 25% of above that amount going to the attorneys.
10. Approx. 140,000 employees were affected by this case.
1. IBM traditionally had a "defined benefit" pension plan for all regular employees.
2. In 1995, IBM decided to modify their plan to
a hybrid plan called a pension equity plan. Then in 1999, IBM introduce a "cash balanced" pension plan.
This plan would allow employees to take their accumulated benefits with them when they move from job to job. It would also create a "cap" to the amount the company is required to pay.
3. There would have been no controversy if the conversion formula was done in a "proper" way and not discriminate against older employees.
4. IBM and its accountants, decided to use this change of benefits to draw off some of the pension funds and help their troubling bottom line.
5. In the process, they have cheated hundreds of thousands of employees of their earned pension benefits.
6. A class action lawsuit was launched by Cooper to address this problem in 2002.
7. 5 years later, after numerous litigation, and appeals, the Supreme Court of the US decided not to hear this case.
8. A summmary penalty of $320,000,000 was imposed on IBM Corp.
9. The funds will be distributed to all party concerned based on some "formula". With a large portion (29%) of first 250 Million and 25% of above that amount going to the attorneys.
10. Approx. 140,000 employees were affected by this case.
Recent developments
Even though I did not initiated or participated in this lawsuit, I received a settlement on April 27, 2007 as part of this class-action.
I am grateful to Cooper for bringing this case to the forefront.
By my estimates, assuming $320 Million payout, the average amount per employee would be $1622 or $15 per month.
This is much less than what they were owed by IBM assuming the previous pension plan were kept in place.
I think IBM did a great dis-service to its employees and to the company reputation when it proceeded with this pension reform. They would have been much better if they just discontinued the previous pension and converted them fairly to the 401K plan (TDSP). That is my humble opinion.
I am grateful to Cooper for bringing this case to the forefront.
By my estimates, assuming $320 Million payout, the average amount per employee would be $1622 or $15 per month.
This is much less than what they were owed by IBM assuming the previous pension plan were kept in place.
I think IBM did a great dis-service to its employees and to the company reputation when it proceeded with this pension reform. They would have been much better if they just discontinued the previous pension and converted them fairly to the 401K plan (TDSP). That is my humble opinion.
Detail calculation for subClass 1
I requested a detail explanation of the Base Annuity calculation from the Cooper Settlement Admininstration. I received a one page summary.
Here is the detail of how they compute the final number. They don't explain how the various factors are generated. (perhaps someone can explain them to us...)
Here it is:
Base Annuity = Average Annual Compensation(Your salary average) x Base Annuity multiplier (0.00017034) x Years of Service (20 is maximum cap) x Base Annuity Group factor (1.0 for subClass 1, 0.5 for subClass 2) x Age factor (1.0) x Adjustment Factor (1.001251) /12
In addition, depending on your age, there is a final Age reduction factor in my case (0.5195): I was retired at age 50.
That is how your Annuity is computed.
Here is the detail of how they compute the final number. They don't explain how the various factors are generated. (perhaps someone can explain them to us...)
Here it is:
Base Annuity = Average Annual Compensation(Your salary average) x Base Annuity multiplier (0.00017034) x Years of Service (20 is maximum cap) x Base Annuity Group factor (1.0 for subClass 1, 0.5 for subClass 2) x Age factor (1.0) x Adjustment Factor (1.001251) /12
In addition, depending on your age, there is a final Age reduction factor in my case (0.5195): I was retired at age 50.
That is how your Annuity is computed.
Important link
This is the IBM Pension site. You can login and find out your personal earnings history and your current pension payments and options.
You will need a SS # and a pin. You can create a pin by calling the main pension number 800-796-9876.
You will need a SS # and a pin. You can create a pin by calling the main pension number 800-796-9876.
- IBM Pension Benefits site
- Make sure your personal information is accurate.
- FAQ
- Some questions answered by the Class Counsel.
Some related links...
- Cooper v. IBM settlement
- The settlement summary.
- Stossel on class action lawsuits
- An article appearing in the Heartland Institute.
- Historical information on the Cooper suit
- A long history going back to 1994-95.
- Supreme court decision
- Recent decision by the US Supreme Court
- Timeline of IBM Pension
- From IBM Alliance
- Alliance@IBM
- IBM Employee Allliance.
- Cooper vs. IBM ruling
- Earlier Court ruling.
- Compare the two pension plans
- Defined benefits (traditional) plan vs. Defined contribution (cash-balanced) plan.
- A news article on pension reform
- It appears IBM is finally doing what I suggested. Dropping the pension plan and converting to the 401K.
- 2007 Fortune Top 100 list
- Check out the top companies of 2007.
- My lens on Business conduct
- Some old ideas are still true today.
- A critique by a law professor-EDWARD A. ZELINSKY
- A different view on the Cooper v. IBM case.
- ERISA blog
- The Pension organization ERISA blog on the IBM case.
- A discussion forum on Yahoo.
- A bulletin board on IBM Pension by current and former IBMers.
- A simple guide to longevity
- One way to get back your pension.
- My personal IBM Experience
- One chapter in my Squidbook...
Winners and Losers
At the conclusion of these drawn out legal battles, there are always winners and losers.
- Winners - IBM Senior Executives - Their compensation is tied to the company's performance. Funds taken from IBM pension help improve the company's bottom line. They took a gamble and decided to proceed with the suit instead of settling. They won because the appeals help them reduce the amount of payout.
Winners - Attorneys - They received a large portion of the final payout by IBM. There share was 29%.
Losers - IBM employees/retirees - Their pension was reduced significantly and the class action case only recovered a small portion that was lost.
Losers - IBM Shareholders - The "good will" of IBM was damaged as a result of this lawsuit.
Losers - IBM Human Resource - Their work will be much harder going forward given their handling of this case.
IBM has dropped off the Fortune top 100 Best Companies list in 2007.
What would TJ Watson Do?
- In times like this, I would wonder what TJ Watson Sr. would do? He was the founder of IBM.
1. First of all, I don't think he would approve of the pension changes the way it was implemented.
2. At this juncture, I think he would have issued a public apology to all IBM employees/retirees stating that they (the senior management) miss interpretated the law and thought at the time that the changes to the pension program was legal and proper. However, having gone through the courts and received a ruling against IBM, they now apologizes for the error in judgement.
3. They will make amends by repaying all benefits due to the retirees down to the last penny. This is not rocket science. IBM and it's accountants has the skills to compute exactly how much each retiree affected by these changes and will repay them in a lump sum payment. If necessary, out of the stock options given to top executives which amounted to millions.
4. Going forward, they will convert all pension benefits to the employee's TDSP account (401K) by using a fair and equitable formula that will not discriminate due to age.
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- John Mellon John Mellon Jan 10, 2009 @ 3:37 pm
- Our Attornies in Maine are very close to getting money to all of the ex IBM employees over 40 years of age that were unfairly laid off a few years back. The minimum of monies will be at least in the 5 figures amount. Stay tuned for more updates
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Reply
- John Mellon John Mellon Aug 11, 2008 @ 7:20 pm
- IBM AGE DISCRIMINATION
www.ibmdiscriminates.com
www.ibmdiscriminates.net
IBM - BIG TIME ON AGE DISCRIMINATION!
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Reply
- JOHN MELLON - IBM AGE STORY JOHN MELLON - IBM AGE STORY May 17, 2008 @ 3:00 pm
- Some Of The Best IBM age discrimination information on any site.
"CLICK"
www.IBMDiscriminates.com
&
www.IBMDiscriminates.net
&
Author's Site
www.JohnLanaMellon.com
Enjoy
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- KD KD Jan 9, 2008 @ 11:24 pm
- My father was employed during the "ups" and "downs" of the company. It was a shame to see big blue use and abuse my father, who passed almost 10 years ago. the stories of job security were all smoke and mirrors.
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Reply
- John Mellon John Mellon Oct 9, 2007 @ 9:50 am
- Click here for story:
http://www.poughkeepsiejournal.com/today/business/stories/bu092603s2.shtml
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