UAW expected to squander retiree trust funds

A historic new trust intended to pay the health costs of UAW retirees from Detroit's automakers could run out of money much sooner than the 80 years union President Ron Gettelfinger has said it would last.

Industry experts say the scant public information about the trust -- known as a voluntary employees' beneficiary association, or VEBA -- provides little comfort that current benefits will remain as promised for hundreds of thousands of UAW retirees.

The UAW's plan has two key problems:

• Automakers are paying an estimated $52 billion to shift $88 billion in retiree health care liabilities to the union-run trust -- leaving about $36 billion unfunded.

• The plan assumes health care inflation falls to 5 percent by 2013 and stays at that level, even though it has averaged almost double that rate in recent decades.

"They've got ridiculous assumptions on health care costs," said Lance Wallach, a VEBA consultant in the New York City area. "It's not even close to being realistic, it's preposterous. ... Unless they make drastic changes to the way they treat health care, I'd be surprised if the money lasts 20 years."

If the money runs out, many of the 750,000 retired workers, surviving spouses and dependents who are to receive benefits under the trust would have to rely on Medicare and need supplemental health insurance, even though they were told those costs would be covered.

"I can't say I have any hopes that this VEBA will last," said Gary Walkowicz, 57, of Ford's Dearborn, Mich., truck plant.

Union members and outside experts said the UAW will have difficulty keeping its commitments unless the federal government has a national health care system within five to 15 years.

People familiar with the VEBA planning dispute those assessments, saying their analysis of life expectancies, investment returns and health care cost inflation shows otherwise.

The UAW would not comment and hasn't publicly shared a detailed analysis that supports the promise.

Gettelfinger first committed the VEBA to an eight-decade run on Sept. 26, when he announced that the UAW had called off its nationwide strike of General Motors Corp. because the parties had agreed on a new four-year labor contract.

In the following weeks, the union made the same promise to members at Chrysler LLC and Ford Motor Co.

The UAW won't divulge details about ages of members and other factors that are crucial to determining the plan's soundness. Gettelfinger says to trust him.

"It's a very simple thing, based on cash flow and solvency," he said in September. "I can assure you that based on the trend and the discount rates and other projections, that VEBA will be solvent for 80 years."

Defenders of the promise say the VEBA will save costs by implementing healthy living programs and taking advantage of the size of its population to negotiate lower costs. They say that help from a national health care system seems more likely than ever, and if put into effect would essentially transform the VEBA to a supplemental Medicare plan.


1 comment:

Anonymous said...

As a union member for 40 years, with some work in California, when it came time to apply for my pension, I was told because of the thousands of hours worked that employers paid funds into the pension trust where my name is on the account,I will not get a pension for this reason:
None of the hours, with over $7,000in my account, count because the 'plan year'[July 1 -June 30] requires you must work at least 1000 of them in the plan year.
I and many others in construction travel to CA from the northern states in winter to lengthen out our work season, and this Local[with their own plan separate from the IUOE one I am vested in] of my Union has it set up to keep our monies, and not pay the pension we expected.
I will appreciate any input on a class action to test if this is beatable.

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