Investing September 23, 2004

August Mass Layoffs See Major Improvement

September 23, 2004 (PLANSPONSOR.com) - Roses were blooming all over when it came to the August mass layoffs picture with sizable drops in both the number of layoffs and the amount of involved workers, the government announced Thursday.
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According to the US Department of Labor’s Bureau of Labor Statistics (BLS), there were 809 mass layoffs (down 61.3% from July’s 2,094) involving 69,037 workers (down 73% from July’s 253,829).   From January through August 2004, the total number of events, at 11,017, and of initial claims, at 1,118,574, were lower than in January-August 2003 (13,205 and 1,316,863, respectively). Each action involved at least 50 persons from a single establishment.

The 10 industries reporting the highest number of mass-layoff initial claims accounted for 23,342 initial claims in August, 34% of the total. Temporary help services, with 4,978 initial claims, and school and employee bus transportation, with 4,718 initial claims, together accounted for 14% of all initial claims in August.

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Meanwhile, the manufacturing sector had 24% of all mass layoffs and 26% of all initial claims filed in August – the smallest shares for any August since 1995, when the monthly series began.   A year ago, manufacturing reported 32% of layoffs and 39% of initial claims.   Within manufacturing, the number of involved workers was highest in transportation equipment (2,846, mainly automotive-related), followed by food processing (2,797) and fabricated metal products (2,031).

  

The administrative and waste services sector accounted for 15% of layoffs and initial claims filed in August, with layoffs mainly in temporary help services.   Temporary help services, at 4,978 initial claims, accounted for more than 7% of all mass layoff initial claims in August.   Twelve percent of all layoff events and 13% of initial claims filed during the month were in retail trade, primarily in general merchandise stores.

Construction accounted for 9% of layoffs and 8% of initial claims during the month, mainly among specialty trade contractors.   Transportation and warehousing accounted for 6%  of events and 7% of initial claims, mostly in school and employee bus transportation.   An additional 5% of events and 7% of initial claims were from the information sector, largely in motion picture and sound recording.

                        

Government establishments accounted for 5% of events and initial claims filed during the month, mostly in elementary and secondary schools.

Compliance September 22, 2004

House Approves Measure Blocking Treasury Cash Balance Intervention

September 22, 2004 (PLANSPONSOR.com) - The US House of Representatives has approved an amendment to the Treasury Department's funding bill for the third time that would prevent it from helping to overturn a court case that found that cash balance pension plans violate federal age discrimination laws.
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>The amendment, backed by Representative Bernie Sanders (I-Vermont), would prevent the Treasury from spending money to intervene in the case against International Business Machines Corp. (IBM) in US District Court  in Illinois.

“By voting for this amendment, we will be protecting the retirement benefits of some 8 millions of American workers who have seen their pensions slashed by as much as 50% through age discriminatory cash balance pension schemes,” Sanders told Dow Jones.

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Some outsiders, however, disagree with Sanders regarding the motives for the amendment. “Sanders is very focused on this one court case and not the retirement system as a whole,” asserted Kyle Brown, a consultant for Watson Wyatt in Washington, DC. “As far as I know, the Treasury was not planning on intervening. The IRS had proposed regulations, but they have now dropped them. Thus, I am skeptical of about the true motives here, whether this is more about policy or politics.”

>In July 2003, US District Judge G. Patrick Murphy  ruled that the computer giant violated age discrimination laws by amending its pension plan to make older employees accrue retirement benefits at a lower rate than younger workers. By switching to a cash balance plan – where workers are credited annually for a percentage of their income and interest and use the money at retirement to purchase an annuity – IBM discriminated against older workers who would not have as much time to accrue interest, Murphy ruled (See  Murphy’s Law: IBM Loses Cash Balance Ruling ).

>Last week, IBM settled part of the cash-balance pension lawsuit. The settlement, however, did not deal with age discrimination, and instead dealt with termination claims of employees who did not become 100% vested upon plan termination, which is required by federal pension law. Although the amount settled upon was not disclosed, court documents filed by IBM suggested that the price tag could be as high at $6 billion. (See  IBM Reaches Partial Cash Balance Lawsuit Settlement ).

The case is being watched intently because of its potential implications for other major corporations where employees have complained that pension and health care benefits were reduced in corporate cost-cutting moves (See   One Bad Apple). Companies in addition to IBM that moved to cash balance pension plans in the 1990s include Eastman Kodak Co. and Electronic Data Systems Corp.

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