Retiree benefits a growing casualty
By David B. Caruso
Associated Press
PHILADELPHIA — The nation's persistent economic slump and rash of corporate scandals that have drained cash from pension plans and 401(k) accounts are eating into yet another piece of retirees' livelihood: their health benefits.
Associated Press
Thousands of retired workers who were promised lifetime healthcare coverage by their former companies have lost those benefits as a growing list of firms have folded or been sold.
Richard Sterner, 60, who worked for Bethlehem Steel for 32 years, has bladder cancer and will lose healthcare benefits in March, when the company terminates its plan for retirees. The former shipping yard maintenance man says he will probably go back to work.
By far the largest single group affected has been steelworkers. Nearly 200,000 retired steelworkers nationwide have lost healthcare benefits or will lose them in coming months because of the bankruptcies of such former giants as LTV Steel and Bethlehem Steel, according to the United Steelworkers of America.
In other industries, Polaroid, the maker of instant-film cameras, and Outboard Marine Corp., which made Evinrude boat motors, slashed health insurance for thousands of retirees when they went bankrupt in 2001.
Great Northern Paper Inc., which once ran the largest paper mill, asked a Maine bankruptcy court for permission in January to stop paying healthcare benefits temporarily for 677 retirees.
Now some experts are concerned that struggling airlines could be next. US Airways already has announced plans to terminate an underfunded pension plan with about 6,000 pilots.
"There is a great deal of concern that the entire pension and benefit system of industrialized workers is in dire straits," said Marco Trbovich, spokesman for United Steelworkers.
Unlike pensions, which are guaranteed by the government, retiree health benefits can be reduced or eliminated almost at will by companies that have declared bankruptcy.
Doing so can slash billions of dollars in liabilities, with no real penalty and no effect on daily operations, said Randall Eisenberg, managing director at FTI Consulting and a specialist in company turnarounds.
"Normally, if you are not in bankruptcy, you have to sit down and negotiate with the unions, and that can be a big deal and difficult process. But if you are in bankruptcy, you can just terminate the contract and it's over," Eisenberg said. "And when you look at this from a big-picture standpoint, it is probably better to have some benefits cut and have the company survive, than have the company not survive."
That's little comfort to retiree Richard G. Sterner, who worked 32 years at Bethlehem Steel.
At age 60, Sterner is being cut off from his health benefits this spring and has another five years to go before he qualifies for Medicare.
In the meantime, he is undergoing a rigorous and expensive treatment for bladder cancer. Come March 31, when Bethlehem Steel is scheduled to cut off health insurance to retirees, Sterner likely will have to go back to work, if he can find it.
"It is not easy running a jackhammer at age 60, but I did it last summer, I could do it again," Sterner said. "I'm just going to get beat up."
Around 22 percent of American retirees — 8.8 million people — get health insurance through a former employer, according to the Department of Labor.
In a survey of 435 large employers released in December, the Kaiser Family Foundation found that 5 percent considered themselves "very" or "somewhat" likely to terminate subsidized healthcare coverage for current retirees in the future.
