Kodak moves to end health coverage for retirees 65 and older

[Earth_First]

Eastman Kodak Co. announced Monday that it is filing a motion in U.S. Bankruptcy Court to end health care coverage for most Medicare-eligible retirees.

A hearing on the motion is scheduled for March 20 in New York City before U.S. Bankruptcy Court Judge Allan Gropper.

In a letter to affected retirees, Patrick M. Sheller, Kodak’s senior vice president and general counsel, said the company understands that its move will be “difficult.” But Kodak indicated that it’s an essential step if the company is to successfully emerge from Chapter 11 and remain in business.

“Among the legacy costs that must be addressed as part of our reorganization are retiree health care costs that are not borne by many of the companies we compete against in the marketplace,” Sheller said in the letter.

http://www.democratandchronicle.com/article/20120227/BUSINESS/302270025/Kodak-retirees?odyssey=tab|topnews|text|Home

This will affect tens of thousands, their spouses, survivors, and dependants; would take affect May 1.

[cbayer]

1. Why should they pay for healthcare that the employees can access through

the government sponsored program that they have contributed to through their entire working lives?

[FLyellowdog]

3. Define "they" in your sentence please. Thanks.nt

[cbayer]

6. Kodak.

They are in bankruptcy because they couldn't successfully navigate the change to digital technology.

But they may also be in bankruptcy because they kept retirees who were Medicare eligible on their insurance roles. Why would they do that?

[Yo_Mama]

23. It usually converts into Medigap once the retiree moves onto Medicare

Nonetheless, when a company is shrinking, it often creates shedding of these liabilities through BK, because what was an affordable cost when the company promised those benefits becomes total unaffordable when the company has to contract to survive.

No contract is enforceable when one party doesn't have the means to comply.

[cbayer]

25. Thank you for that. I found this to be misleading. If it's about medigap policies,

that's a big difference.

And you are correct that the premiums for these have increased dramatically.

Thanks for the info.

[cyberpj]

38. Some employees can be Medicare eligible but with younger, non-working spouses who would go uncovered

if the employee dropped their employer-sponsored coverage. My brother is in this situation right now. Pays for Medicare AND employer coverage so his wife can have health coverage via the employer plan.

What a country! 'eh?

[mike_c]

7. because the employees bargained for it and signed a contract....

A contract that Kodak now wants to back out of, AFTER the employees have already met their side of the bargain, i.e. supplied acceptable labor under a collectively bargained contract.

I don't care if the former employees have a golden bower awaiting them at 65-- Kodak made promises in exchange for contract provisions and labor, the retired employees delivered their contractual obligations, and now Kodak OWES them.

[cbayer]

8. But they are all Medicare eligible. Why would this even be a bargaining chip?

I would be outraged if this were about pensions or some other benefit that the retirees could not otherwise access, but they have access to Medicare.

I guess I just don't get it.

[mike_c]

12. Kodak had the right to NOT make the promise...

...back when those retirees were still working. I'm a union officer, and I can tell you that my union doesn't simply leave it to trust that health care benefits will be there for retirees when they need them-- we negotiate continued access to affordable insurance for our retirees. There's nothing wrong with having choices.

The issue for me is that Kodak signed those contracts. It owes those retirees those benefits no less than it owes its creditors and its current employees. It can ASK them to help the company out, but it shouldn't be able to deny them benefits that Kodak agreed to under their labor contracts. As I said down thread, if a company cannot meet it's obligations to retirees, then the company assets should be handed over to the retirees until they are made whole.

Furthermore, if Kodak is having trouble paying those benefits because they did not properly fund their retirement programs, the fault is entirely their own. The retirees are blameless.

[cbayer]

15. I see your points. I thought there were pretty strict laws about the funding

of pension programs.

Are we sure this was a negotiated item, or was Kodak just doing it because they always had.

How many companies continue to provide benefits to retirees that have paid into and are eligible for Medicare? Is this something often on the table in negotiations?

[mike_c]

19. as I suspected, Kodak began robbing their retirees in the form of underfunding pension plans...

...a long time ago.

Source: http://www.spikeswebsite.com/Kodak.htm (yes, it's just Spike's Web Site but scroll down for the data and links to the independent auditor's report and etc. Oh GAWD I just noticed Spike's line up of links to conservative talk radio hosts and such on the left menu bar, LOL....)

Could the Kodak Retirement Fund go broke?

Retirement Plan

Under funded status of the retirement plan at 12/31/2010 is $210 million for the US plan and $1,002 million for the non-US plan. US plan seems to be in better shape.

The 2010 gain on plan assets was $592 million (12%) for the US and $320 million for the non-US(12%)

In 2010 benefit payments amounted to $511 million for the US and $218 million for non-US

In 2010 Kodak contributed an additional $22 million to the US plan assets and $90 million for the non-US plan assets.

Other Retirement Benefits (health, dental, life insurance etc)

Under funded status at 12/31/2010 is $1,386 million for US and non-US

Kodak has no assets to fund this plan. It is completely unfunded. If I had to make cuts or modifications to the plan, I this is where I would cut and make the retiree pay more of this.

Benefit payments in 2010 were $168 million

Assuming this is correct, Kodak utterly de-funded their retiree insurance accts. Note too that they're giving lavish perqs to their executives while approaching and then entering bankruptcy.

[Yo_Mama]

24. This is true for most negotiated retirement medical plans

Very few of them are funded, in either the private or the public sector.

When these benefits were negotiated, it was never negotiated that they would be prefunded.

[Roy Rolling]

26. Yes, Kodak made a deal

...and they need to live up to their end of the bargain. If they are let off with the excuse "Medicare covers that" and Medicare goes broke (God forbid) then the retirees would be up s**t creek without a paddle.

And even though Medicare covers it, why should the taxpayer-funded Medicare cover medical costs that a private insurer paid by a compay like Kodak should be paying? Why should I have to pay and let Kodak off the hook for its contractual obligation?

[ProgressiveProfessor]

36. You are aware that the Federal government did essentially the same thing

and now forces Federal retirees on to Medicare?

[Betsy Ross]

29. +++++

Some don't seem to get it that many workers will compromise on wages to earn retirement benefits. Discontinuing those benefits after the fact is the same as stealing from the workers.

I was raised with these words: Go into private industry to earn more money; take a government job for stability and retirement benefits.

[Canuckistanian]

46. If these are binding contracts, then why do employees always lose their pensions?

Seems to me that these companies would be forced by any court of law to pay up if there WERE a fully valid contract.

I think these companies must have escape clauses you can fly a space shuttle through.

[mike_c]

53. Kodak is in bankruptcy-- their retirees just became another class of creditors...

...waiting in line for relief, but courts often prioritize suppliers, investors, and such over retirees. Basically, in bankruptcy Kodak can stiff anyone it wants until the court tells it not to, and retirees are low hanging fruit.

[IndyJones]

56. I agree. Are they going to cash them out for the value of the insurance. No, of course not.

Nope, sorry. Cut executive salaries before you cut benefits you signed a contract to provide.

[we can do it]

64. We Have a Winner!

also, I'd like to see the provisions made for the "management" (who ran the company into the ground) and their retirement, bet there is no change for the worse.

[Hassin Bin Sober]

21. Is (was) Kodak paying for FULL insurance as part of the retirement pkg. or was it supplemental?

My now deceased father retired from American Airlines. He had great benefits. Burt even HE had to use mdeicare as the primary insurer and AA picked up a prescription plan and supplemental with low co-pays and deductible..

My in-laws, on the other hand, were self employed. Their supplemental and prescriptions and deductibles and co-pays are crippling them.

Are we sure we know what is in play here? The article isn't too specific. I assumed everyone did it like AA.

[cbayer]

22. Good question. If it's about the supplemental, then that's a whole different story.

Those policies can be costly, as can the out of pocket expenses if you don't have one.

[csziggy]

2. They should have been required to pre-fund their pension fund 75 years ahead

The way the Postal Service is being required to.

If Kodak is whining about having to compete against companies from other contries, here's a thought - those foreign companies probably don't have to pay for health insurance for their workers. Their countries provide it for their citizens.

[dipsydoodle]

9. Not quite

UK employers pay 12.8% as a tax in addition to 11% paid by employees. Both on pay above £7000 pa in simple terms. Similar applies elsewhere to fund what you call socialised heathcare. Did you think it was free ?

[Marthe48]

20. Well said!

n/t

[mike_c]

4. dammit-- corporations should be dismantled and sold for scrap...

...before they are allowed to welch on promises made to employees who EARNED their retirement benefits. If meeting those obligations is "difficult," then the corporation needs to bleed a little, maybe a lot. Whatever it takes. If Kodak can't meet it's obligations to retirees, then the bankruptcy court should give the corporation's assets to those retirees. Fucking HELL this makes me furious! We need to stop running the country for the convenience and profit of the 1%!

[Earth_First]

5. The Plutocracy speaks, The Court abides... n/t

[boppers]

17. This corporation is being effectively dismantled and sold for scrap.

Hence, all the past workers suffer.

[dmallind]

45. To the retirees?

Not the current workers who would then be unemployed, because the company can't keep operating and pay both retirees and current workers? Not to vendors who delivered products and services in good faith and who need that money to pay their own workers? Not to pension funds who invested in Kodak stock and debt and need the money to pay other retirees?

[cstanleytech]

10. I am all for this

provided no one at the corporate level for kodak can never again earn over 30000 a year and they get no stock options or any other special consideration, for some reason I suspect if that was part of this discussion kodak wouldnt be trying to screw over the retirees.

[Snake Alchemist]

11. This is why I will never be against 401Ks.

Pensions and 401Ks. Not either-or.

[Snake Alchemist]

13. And people thinkg pre-funding the USPS pension funds is a BAD thing?!?!? nt

[rfranklin]

14. The amount required is far beyond what is actuarily required, even by the most stringent

standards. The point of that prefunding requirement was to destroy the Post Office as a unionized entity.

And do you really think that the huge pool of money will not be siphoned off by Wall Street crooks and Republicans?

Postal Service’s Overfunding of Pension Plans Grows to $13 Billion
By Kate Muth
The Postal Service is overfunding its two pension plans by more than $13 billion, according to the latest projections by the Office of Personnel Management (OPM). This overfunding comes at a significant cost to the organization as it has racked up debt to pay for prefunding of its healthcare plan, while continuing to make large annual payments into overfunded pension plans.

http://mailingsystemstechnology.com/ME2/dirmod.asp?sid=&nm=&type=Publishing&mod=Publications%3A%3AArticle&mid=8F3A7027421841978F18BE895F87F791&tier=4&id=5477ADB5C767426CB6C11549AECFC876

[Snake Alchemist]

16. The prefunding of the USPS pension fund was applauded by the union and smartly so.

Even when the USPS stopped pension contributions from June until November they were still losing money.

[brentspeak]

49. Your source for roughly how much money USPS lost during those five months?

[Snake Alchemist]

50. Quarterly earnings

http://www.foliomag.com/2011/usps-loses-5-1-billion-fiscal-2011

[brentspeak]

54. Reads that losses would have doubled had the prefunding been in place

And yet you claimed that the prefunding was "smart".

[Snake Alchemist]

55. Prefunding or not they're going to be losing money. Might as well prefund. nt

[brentspeak]

57. Sure, what's an extra $5.5 billion lost a year?

It's not clear who you're intending to fool, here.

[Snake Alchemist]

58. Or end up like Kodak employees. There is a reason that pre-funding is required for pensions. nt

[brentspeak]

59. Is there a reason to prefund over a 10 yr span 80% of future retiree benefits?

Especially since USPS already had a well-funded pension system in place? You know any other business that operates under such a scheme? How come they don't adopt it?

Have you considered volunteering to set aside the majority of your own yearly personal income to prefund your retirement? Let us know how that worked out for you.

(BTW, Kodak USA actually did a good job funding its employees' pensions; the problem was Kodak UK and elsewhere).

As I said: It's not clear exactly who you're intending to fool, here.

[Snake Alchemist]

60. I do set aside my income to fund my retirement.

It's 12% this year.

I suppose you don't trust the GAO or actuarial tables in general?

http://www.pionline.com/article/20111013/DAILYREG/111019934

Every company loves to raid the pension fund when times get tough. That has to stop.

Here's a good example of a pension that was not pre-funded.

http://www.nytimes.com/2011/07/12/business/central-falls-ri-faces-bankruptcy-over-pension-promises.html?pagewanted=all

[brentspeak]

61. GAO: USPS prefunding for retiree health benefits should be eliminated or restructured

http://www.govexec.com/pay-benefits/2011/10/gao-weighs-in-on-postal-services-financial-health/35222/

As for the earlier report, the OIG disagrees: http://www.postalreporternews.net/2011/10/13/usps-oig-responds-to-gao-report/

Keep trying.

[Snake Alchemist]

62. Uh....

"Reports in April 2010 and February 2011 found similar results, and recommended USPS restructure its networks and workforce in order to continue operations.

All three scenarios that GAO considered would require USPS to adapt to lower mail volume and the watchdog recommended revising the policy of universal service."

You may want to try to respond to Yo Mama's post. Yo had a similar conclusion.

[Yo_Mama]

28. If you read that article carefully,

you see that there was a huge change in assumptions that produced most of the underfunding.

There is no explanation on the assumptions, so it is very suspicious. Perhaps it is related to plans to cut US postal workers and is well-founded - I don't know.

I do know that a few years ago I looked at the situation, and the postal service plans still appeared underfunded.

100% financing is the rule for private pension plans, contrary to what everybody is writing. The postal service is a hybrid public/private company, but its obligations SHOULD be 100% funded, and that includes retirement medical.

GASB standards (government) are very different than FASB (private) pension accounting standards. This is one of the factors that has led to dire underfunding of many government pensions.

Well, pension accounting is not the most thrilling topic, but here is a relatively readable explanation:
http://www.actuary.org/pdf/pension/fundamentals_0704.pdf

[Marthe48]

18. LIke other companies Kodak promised then reneged

The benefits were offered in lieu of wage increases. Even if someone is eligible for Medicare, there is still the 20% and prescriptions that are not covered. My m-i-l pays about $240.00/month for secondary insurance through AARP. My husband retired from ORMET, with promises of life-time health benefits in lieu of higher wages. Well, ORMET filed for bankruptcy 2 years later, got rid of our benefits, and we went from paying about $1000.00/yr to 8000.00, +plus 20% of hospital visits and so on.
Example: He went to ER a few yrs ago, spent night in hospital, about 12 hrs. total. Cost: about $8000.00. We had to pay $1600.00. We asked for an itemized bill and saw he was charged for 12 bags of IV fluid. They had him on slow drip, which took over an hour to administer. And they took him off IV about 10 PM, so he was only on it for 6 hours. There was no freaking way he got 12 bags of IV. We questioned that and got no adjustment.
Anyway, if you take early retirement rather than get laid off, you have to have some kind of insurance-God, if they can charge $8000.00 for a stomach upset, you better plan on losing the farm if you have to have heart surgery, God forbid. And even after you get Medicare, plan to pay anywhere from $50.00/month on up for secondary insurance and prescription coverage. That's probably what the Kodak employees are losing and my heart goes out to them.

If companies enter contracts with employees, it should be binding. If the employees tried to open a contract and change the agreement, well, it just wouldn't happen. You young people who still have jobs--get your cash on the barrelhead and put it away for the rainy days that are coming.

[FarCenter]

27. Most private companies were extremely careful for decades to not contract for retiree health care

Pensions and health care are two different things.

Pensions are backed up by ERISA.

Most company's health care documents have included language that makes them not contracts for retiree health care.

So who at Kodak has a contract (possibly union retirees) has to litigate the fine print.

[ProgressiveProfessor]

37. Please note that the Federal government did much the same thing...

[primavera]

30. I wonder if Kodak is also planning to end executive compensation

No? I didn't think so.

[liberal N proud]

32. I would bet they get bonuses after all is done.

That would par for the course.

[The Wizard]

33. If corporations are people

the CEO and Board of Directors should be indicted for fraud.

[WestSeattle2]

35. It's safe to assume that all those demanding Kodak honor contracts they agreed to when they

were profitable, have not lost their homes to foreclosures or short sales. I mean, just because you lost a job is not an excuse to stop making those house payments you agreed to when you had a job, right? Come on now, you can keep the house, just give up the kids for adoption and sell the cars to raise cash. A contract's a contract, right?

[Fumesucker]

48. Giving up the home to foreclosure if you cannot or will not make payments is part of the contract..

Is there a similar clause in the Kodak contract with their former employees?

[WestSeattle2]

65. As with any financial contract, if you cannot or will not make payments than you

file for bankruptcy or otherwise forfeit property. No clause needed, that's just a fact. Labor contracts aren't exempt from financial realities.

[stuffmatters]

39. I don't understand how this works?

And how many layers of bilking are going on here by Kodak?

I never had a job that included healthcare after retirement, so don't understand this system very well. I understand these employees sacrificed wages to have their company pay for their retirement healthcare.

I think a portion I pay of income tax every year as a self employed person, just as social security, goes towards my eventual medicare. Does the Kodak system mean that Kodak and the employee's contributions were never paid into the medicare pot at all? Was Kodak supposed to have contributed and maintained a private account over the years that would fund retirees healthcare in toto? Or did the employees via Kodak pay towards medicare and this is about Kodak refusing to provide only the supplemental coverage (medigap?) they promised?

I'm just trying to get a handle on how big a swindle Kodak is pulling here. Are they cheating their employees out of this medicare bridge policy they always were promised and salaried with that included? Or were medicare payments never paid to the government at all over the decades for their employees, and Kodak is now pushing them onto medicare rolls?

There are so many instances of corps leveraging, draining and destroying their employee pension accounts, leaving Govt Pension Insurance and taxpayers to pay the bill.(Romney's candidacy has lately highlighted this syndrome.)

Is this a case of Kodak now doing this with their employees health retirement fund as well?

I'm just trying to understand the depth of Kodak's scam here and appreciate being better informed than I am.

Whatever the answer, the Kodak bankruptcy seems just one more example why it should be medicare for everybody. INHO.

[SemperEadem]

40. what kinds of pay cuts are CEO's and

the top managment getting who mismanaged the company's assets? Why aren't their salaries cut down to 40k/yr?

They're filing bankruptcy, but I'll bet the top managers get golden parachutes for running the company to ground by fiscal mismanagement.

Why is it always the worker, who has given and given and given and given, who gets shanked?

[Yo_Mama]

41. Because of ballooning pension costs, I suspect we are going to see a lot more of this

http://www.bloomberg.com/news/2012-02-28/ge-to-3m-pension-pain-mounts-as-fed-rate-policy-boosts-company-liabilities.html

General Electric Co. (GE), Boeing Co. (BA) and 3M Co. (MMM) will join big U.S. employers in making a record $100 billion in 2012 pension contributions, 67 percent more than two years ago, as low interest rates boost companies’ liabilities.

[CTyankee]

42. Could this turn out to be a GOOD thing in the long run, as more workers see the need for

Medicare and thus boost Medicare's support even further? Could it also lead to Medicare for all, since the workers would want coverage for non-Medicare eligible family members?

AFter all, wasn't this an argument liberals were making at the beginning of health care reform, that the business community should welcome single payer health care because it takes a cost burden off of them?

[Yo_Mama]

43. We were all always reliant on Medicare

Retiree medical benefits are indexed to Medicare, so that once a retiree moves onto Medicare, their benefits are supplemental. Otherwise no one could ever have afforded to offer the retiree medical benefits in the first place.

Medicare only covers 80% and there are deductibles, and some medical costs are excluded (such as dentistry, orthopedics). Also you have to pay separately for prescription drug coverage. So retiree medical coverage is quite valuable even if you have Medicare. Private insurance that would cover all that would run many couples at least $500-600 a month, with more limitations, and many couples would pay more than $800 monthly. With an average SS check somewhere close to $1,100, that doesn't leave a lot to live on.

We're playing with fire right now on Medicare. Everything tips over without it.

Retirement medical benefits have usually allowed workers that have them to retire earlier - who can afford to retire at 62 when a private insurance plan will run a couple upwards of 20K annually? Only rich people.

Most of us are not and never will be rich. Trying to make a country that only works for the rich just increases irresponsible behavior.

Right now very few of us REALLY have medical insurance in the private sector. We may have it now, but if we get sick or get laid off and we are older, we are going to be uninsured. That's pointless - only a system that guarantees that you can always have coverage is really worth it.

[CTyankee]

44. I know very well the costs of what is left out of Medicare.

Hubby and I are both on Medicare and our medigap is running $400 not counting the Part D and Part B costs which are withdrawn from our SS checks each month. We have a pretty good AARP plan that in my husband's case has more than paid for itself for his 3 week intensive PT and OT following spinal surgery...

[Yo_Mama]

47. Eeek

Yep, that adds up quickly.

After spinal surgery you need the therapy. How is he doing?

[CTyankee]

52. OK. So far so good. Nerve damage takes a LONG time to heal, and maybe then only at a certain

percent. We're hoping for 80%, at best.

There was no way I could manage for him, since they sent him home too early from the hospital following the surgery. A nurse from the VNA led the effort to get him admitted into rehab, since she saw what a train wreck this whole thing once he got home and simply couldn't leave the second floor of our house! I was ready to shoot myself...

If we hadn't had the AARP medigap policy, we would have been stuck with over $100 a day (for 24 days!) over the amount Medicare paid. We both got the most extensive coverage that AARP offered and it really paid off. However, this policy really only covers the 20% that Medicare doesn't cover. If Medicare doesn't cover part of it, the policy doesn't pay. We also had to have nearly $1,000 worth of retrofitting, plus extra appliances and equipment, which I had arranged to get done while he was still in rehab. I'm hoping we can get some of that back next year when we do our 2012 taxes.

[truthisfreedom]

51. Socialization of corporate debt.

They promise, then break promises. But if their employees break promises, they're fired.

Kodak, seriously, you're fired. I'm boycotting all Kodak products forever.

[flexnor]

63. Any contract between an individual and a corporation is a one way street

it is drafted by the corporation, it is enforced by the corporation, and if the corporation wants to breach, the individual is faced with a wall of corporate lawyers and paid off politicians and judges