Companies Sue Union Retirees To Cut Promised Health Benefits
Firms Claim Right to Change Coverage, Attempt to Pick Sympathetic Jurisdictions
The Process Server Pays a Call
By ELLEN E. SCHULTZ
Staff Reporter of THE WALL STREET JOURNAL
November 10, 2004; Page A1
When a deputy sheriff came to his door with a court summons, George Kneifel, a retiree in Union Mills, Ind., was mystified. His former employer was suing him.
The employer, beverage-can maker Rexam Inc., had agreed in labor contracts to provide retirees with health-care coverage. But now the company was asking a federal judge to rule that it could reduce or eliminate the benefit.
(snip)
In the past two years, employers have sued union retirees across the country. In the suits, they ask judges to rule that no matter what labor contracts say, they have a right to change the benefits. Some companies also argue that contract references to "lifetime" coverage don't mean the lifetime of the retirees, but the life of the labor contract. Since the contracts expired many years ago, the promises, they say, have expired too.
(snip)
They have little to lose by trying. Typically, as such legal cases drag on, the employers save money as some of the retirees, who have to pay growing portions of their health-care costs, forgo costly care, drop out of the plans or die. If companies lose in court, the worst that happens is they have to resume paying benefits. They don't face punitive damages or penalties. And they may not have to resume benefits for those retirees who dropped out of the health plans. What's more, their earnings get a pop. That's because at the same time as they sue, employers typically announce reductions in the retirees' benefits. Doing so entitles them to lessen the liabilities carried on their books. Lower liabilities translate to higher earnings.
The retirees, by contrast, often find themselves in a bind -- unsure of their recourse and facing, as they age, the court system's typical long waits for legal resolution. The U.S. Labor Department is of little help. Retired workers "aren't our constituents anymore," says a spokeswoman for the department.
(snip)
Write to Ellen E. Schultz at ellen.schultz@wsj.com
URL for this article:
http://online.wsj.com/article/0,,SB110003711129469246,0...
Printer-friendly format
Email this thread to a friend
Bookmark this thread
(1000+ posts)
Send PM |
Profile |
Ignore
