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UAW Fund, Underfunded By $20 Billion, To Cut Retiree Benefits

By: LaborUnionReport (Diary)  |  January 9th, 2012 at 01:30 PM  | 

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You may remember how, during the Obama-structured bankruptcies of General Motors and Chrysler, shareholders were shoved to the side by the UAW’s retiree benefit trust (called a VEBA), which assumed partial ownership of GM and majority ownership of Chrysler. That was in addition to the American taxpayers pumping in billions to the American auto companies.

Well, as it turns out, the UAW’s retiree benefit trust is, according to Crain’s, still running in the red:

A nasty combination of rising health care costs and poor stock market performance has caused a drop in available funding for the UAWs Retiree Medical Benefits Trust, according to documents filed in October with the U.S. Department of Labor.

The trust pays for health care benefit costs for 840,000 retired autoworkers and their dependents that currently amount to $4.5 billion each year.

The fund has net assets of $58.8 billion and total benefit obligations of $79 billion, resulting in a $20.2 billion shortfall, said the UAW documents.

This shortfall is leading the UAW VEBA to begin cutting retiree benefits:

“I’ve already gotten letters saying they are raising premiums for dental and eye coverage,” said Lyle Roussey, a worker who retired from GM’s Saginaw Metal Casting plant in Michigan two years ago. “I never had faith when the UAW took over medical benefits. We don’t know what they are doing with all the money.

“From the beginning, the VEBA was underfunded by billions of dollars. Now all we are going to see is more letters, saying ‘we’ve got to cut this, we’ve got to make you pay for more this.’”

In 2007, in exchange for cutting entry-level wages, the UAW achieved its long-standing goal of getting the auto companies to fund the VEBA, a union benefit trust fund that the UAW would administer to its retirees. Then UAW-president Ron Gettlefinger pitched the agreement to both the media and his members, claiming that the VEBA would take care of the UAA retirees for 80 years.

“I am pleased to say we have a VEBA,” Gettelfinger said, “and that it stretches out for the next 80 years. And that’s all I’ll say.”

Gettelfinger and UAW Vice President Cal Rapson stressed that the VEBA should help GM become more competitive by relieving the automaker of direct health care costs. Instead, the company and the union will put money into the trust, which will be administered by a third party.

We  know how that turned out, don’t we? Now, with an additional $20 billion of under funding, will American taxpayers get asked to kick in more money?

_______________

“I bring reason to your ears, and, in language as plain as ABC, hold up truth to your eyes.” Thomas Paine, December 23, 1776

Cross-posted on LaborUnionReport.com

Image source: LibertyWorks.com

COMMENTS

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  • bk

    You know the answer to that right? Surely it will happen one way or another. They’ll try to backdoor it by forgiving debt or having some sort of special deal that pumps yet another $20B of taxpayer money into union coffers. Too big to fail.

    In the meantime, cuts for active duty and retired troops is to be expected, since they are “unaffordable”, a word you NEVER hear mentioned when it comes to bailouts, medicaid, medicare, welfare, head start, etc.

    • http://www.laborunionreport.com LaborUnionReport

      ;)

      • Death_of_the_Donkey

        if they had discharged the pensions in bankruptcy the PBGC would have been on the hook. What this article demonstrates more is that right now neither pensions nor private accounts are getting anywhere near the returns needed to fund a retirement (and haven’t for about 11 years now).

        • JSobieski

          The politics of such systems (be they private or public) are such that they will almost never be funded properly in the long term. It is simply to tempting to over-promise on the front end based on overly optimistic predictions.

          This issue gets to the heart of left v. right in this country. Do you want someone to lie to you about your benefits, or do you want to assume responsibility over them yourself?

          Those are the only two options available.

          • Death_of_the_Donkey

            Have you looked at the return projections from Ryan’s Plan? The problem is that no one wants to be honest with the American people to say that returns are unlikely to mimic 1982-2000 and thus you need to either a) save more, b) work longer, or c) live less well in retirement. While most pension funds are overly optimistic on their returns, so are virtually every privatized social security plan I have ever seen and most 401k planning info.

        • http://www.laborunionreport.com LaborUnionReport

          At least for now.

          Q: What is the Pension Benefit Guaranty Corporation (PBGC)?

          A: PBGC is a federal agency created by the Employee Retirement Income Security Act of 1974 (ERISA) to protect pension benefits in private-sector defined benefit plans – the kind that typically pay a set monthly amount at retirement. If your plan ends (this is called “plan termination”) without sufficient money to pay all benefits, PBGC’s insurance program will pay you the benefit provided by your pension plan up to the limits set by law. (Most people receive the full benefit they had earned before the plan terminated.) Our financing comes from insurance premiums paid by companies whose plans we protect, from our investments, from the assets of pension plans that we take over as trustee, and from recoveries from the companies formerly responsible for the plans, but not from taxes. Your plan is insured even if your employer fails to pay the required premiums.

          http://www.pbgc.gov/about/faq/pg/general-faqs-about-pbgc.html

    • toothpick

      Sorry, that was how I read your question. Of course these funds will get bailed out again, but not before Republicans are beaten about the head and neck for being “cruel and unfeeling toward working people” for expecting them to pay for their own health benefits. Obama will step in with some pompous teleprompter-lip synching to intone “If Congress won’t act to save these loyal Americans, I will.”

      And then bingo, another $20B of taxpayer money up in smoke. With another bailout proposal sure to follow shortly before the next election.

  • izoneguy
    • bk

      how these same Democrats who funnel hundreds of millions of dollars of taxpayer money to unions, who in turn kick back a huge chuck of it to the same politicians, are the same people who wanted to see Tom DeLay in prison for years for “laundering” a mere $190,000 of non-taxpayer that they wanted to contribute to bucket B instead of to bucket A.

      Pitiful. $190K is a slow DAY for a liberal.

    • texabama

      to “we don’t know what they are doing with all the money” was , “well, duh, donating it to liberal politicians”. Where do they think the millions of dollars come from if not their donations which are supposed to be funding their needs.

      I feel bad for them because they’ve been lied to, but at the same time you have to wonder where they thought the money tree was planted. You think it’s in the same garden with the unicorns?

  • DerKrieger

    Well, as it turns out, the UAW

  • Common_Cents

    Obama can blame him.

  • spinoneone

    is a word the UAW, or any other union, never wants to hear. But, how do they know they are $20bn in the red? Show us the paper! How much did they take in; how was it invested; and, how was it spent if it wasn’t invested.

    • Death_of_the_Donkey

      Most pensions are considered 100% funded if they have enough cash on hand to pay out like 20-30 years of expected expenses. The VEBA has plenty of money to cover near term benefits, just not enough to pay out that longer term benchmark. This is all based on future returns and the projections thereof. If the markets go through another 1982-2000 like stretch all will be fine, if they repeat the last 12 the VEBA (and just about every other retirement vehicle) is SOL.