Posted by Roger Burtenshaw on 18 October 2000 at 19:39:10:
IBM's own Pension material makes interesting reading.
Pension Increases
1. IBM Pension Handbook. Introduction page 11 (1993)
'In the past it has been the company's practice, periodically to increase pensions in payment on an ad hoc basis. The company intends as far as possible to maintain its ability to award such increases and therefore makes specific allowance for this within its annual contribution to the pension fund. However, ... The company cannot guarantee these increases because it is impossible to predict the economic environment that will affect their provision.'
A) Infers to a reasonable person, that IBM intends to continue awarding increases in a similar pattern to its past performance. i.e. approx. 70% of RPI.
B) That the Company is prepared to make contributions that along with the member contribution, Retiree AVC reinvestment, joining employee transfers, DSS payments and fund performance will be sufficient to maintain this award pattern.
C) Although 'the economic environment' may affect the awards. Company non contribution will not be a factor.
2. IBM Pension Matters Two - Jan 1991
'Why can some pension funds pay for inflation increases?
Some pension funds have surplus assets enabling them to make pension increases in line with inflation. Such funds are in surplus for two reason. Firstly, they were at a level of maturity in the late 1970s when their asset base was firmly established to meet future liabilities.... Secondly, companies with high attrition, or redundancies, would reduce their liabilities as a result of employee turnover...
Why can't the IBM pension fund do the same?
The IBM pension fund does not share the above characteristics. It is a relatively immature fund and does not have high attrition... The fund is not, therefore, in surplus...
IBM's record (on awards) is impressive and while it would be unwise to assume increases at these levels indefinitely, the company will continue to review the need for future increases subject to inflation rates and affordability.'
D) IBM is stating that funds with good surpluses can be expected to make awards at the level of inflation.
E) As IBM pension funds were not then in surplus, sorry it can only 70% awards.
F) If IBM can afford to take a four year contribution holiday, then the funds must be considerably in surplus. The pension regulations require that an occupational scheme increase its benefits before the contributing company takes contribution holidays. There is no evidence of increased award rates prior to or during the contribution holiday.
Use of Fund Assets.
1. IBM Pension Handbook. Introduction page 15 (1993)
'..... The plans (note plural) are administered by IBM UK Pensions Trust Limited, which are the only Trustee of the Funds. (note plural) The funds can only be used for paying pension and other benefits to members in accordance with the Trust Deed and Rules. The funds are entirely separate from the normal business and assets of IBM UK Ltd.'
2. IBM Pension Handbook. Introduction page 16 (1993)
'Contributions are paid to the Trustee by the participating companies, B and C Plan members, together with certain outside organisations e.g. The DSS....... These contributions are used to build up funds from which the promised benefits are paid. These funds may not be used for any other purpose.'
'A, B and T Plan contributions are invested separately from the main fund.....'
A) IBM recognises that there are a number of funds, each of which is individually administered. Refutes IBM's claim there is only one fund.
B) Each fund is separately managed and invested.
C) The funds can only be used to pay pension benefits to members. They cannot be used to provide contribution to another fund that members are not entitled to join.
D) Funds may only be used in accordance with Trust Deed and Rules. The Trustees changed the deed/rues after starting to make transfers to the M Plan. Therefore the transfers cannot have been in accordance with the then current Trust Deed and Rules.
E) IBM recognises that the company is not the only contributor to the funds, therefore IBM must also recognise that it is not entitled to take assets (or cease contributing?) without the concurrence of the other principal contributors (the members).
F) Funds are entirely separate from normal business and assets of IBM - By deliberately taking C Plan Funds and transferring them to M Plan Funds, just so that the company can take an M Plan contribution holiday. IBM has clearly mixed the Pension Funds with its 'normal business and assets'.
G) As in the US. These actions have had a positive effect upon the results of IBM UK, upon which the IBM executives are incented and upon which they have received improved bonuses. These same executives are also Trustees of IBM Pension Trust Ltd. The executives are therefore personally benefiting from the various pension plan activities. It would seem that a serious conflict of interest exists, and that they may be being abused to favour the executives and harm the current and future retirees.
H) As in the US, 'vapour profits' are appearing in IBM's Corporate Accounts. Therefore shareholders may be being deceived as to the actual profitability of IBM.
Summary
According to its own documentation, in 1993, IBM clearly agreed with all of our positions. When did IBM officially change its position, actions and the Deeds & Rules?
It is possible that IBM's Pension Handbook & Pensions Matter may not have been an accurate reflection of the then Trust Deed and Rules. If so, this infers either negligence or dishonesty.
Some abuse of IBM Executives' conflict of interest and legal responsibilities could be construed to have occurred.