Companies Cut Retirees’ Benefits

The money and the work are miles away from his days at Navistar’s Springfield plant. Six years ago, Retherford, 57, pulled down nearly $1,000 a week, supervising a work crew that sprayed paint on huge trucks on their way down the assembly line. After 31 years, the 6-foot, 1-inch ex-Marineretired for health reasons, but now works 40 hours a week for just a little more than minimum wage. Why?

Retherford finds himself watching the American dream of a comfortable retirement slip away because of health-care benefit cuts. Employers increasingly are cutting retiree benefits to balance corporate finances.

“I’m upset about what they’ve done by putting the company’s burden on us,” Retherford laments.

He’s not alone.

More than 40 percent of 1,380 companies said they planned to curtail retiree medical benefits by the end of this year, a 2001 survey found. “It’s a growing trend,” said Patricia Wilson, a principal at Foster Higgins in Philadelphia, who conducted the study. Foster Higgins is an employee benefits consultant.

Companies are chopping benefits in the face of mounting medical costs, swelling retirement rolls and rising business pressures.

Navistar’s a good example. Its ratio of retirees to active workers was 3.3 to 1. Its health-care costs have skyrocketed while its truck business has slumped. Those facts left Navistar’s management with few choices.

“We agonized over it,” said James C. Cotting, chairman of Navistar International Corp, who oversaw the cuts. Cotting initiated the reductions because he saw accelerating health-care costs eventually destroying the company.

National statistics show the alarming rise of health-care costs. The General Accounting Office, the Congressional watchdog agency, estimated that the company liability for retiree health care grew from $227 billion in 1998 to $412 billion in 2003, an increase of 80 percent. Inflation for the same period is expected to increase 24 percent, according to the Bureau of Labor Statistics.

The GAO report said federal law does not secure retiree health benefits. However, legislation requiring companies to get court orders to cut benefits was introduced in the Senate in July.

For many Navistar retirees, the annual bill for benefit cuts may total $1,980 a year in addition to the elimination of dental, hearing and eye care.

Before Navistar cut its fully paid health plan, Retherford and his wife, Barbara, 56, had a little money left over each month.

But now, only 24 cents of his $820 retirement pay is left for groceries after the increase in insurance costs. That’s why Mrs. Retherford now works 30-plus-hour weeks to make money for food and other expenses.

With the cut in health insurance, Retherford took a low-wage job.

“You feel like a throw away. It digs into your manhood,” he said.

Long-planned vacations are out of the question. And Mrs. Retherford, who has arthritis, put off medical tests because of their cost.

“I’ll probably have to work the rest of my life,” Retherford said.

Nevertheless, some Navistar employees see the cuts as the best step to save the company.

Gary Lough, 55, who works in the engineering department in Springfield, has been at Navistar for 36 years and still plans to retire in three years despite the cuts.

“I believe the retiree cuts are a do-or-die move,” Lough said. His wife Nancy, 57, has a pension coming from her job.

Lough said the cost of insurance isn’t going to be a problem.

What’s going on at Navistar is catching the attention of other retirees.

“We’re watching it very closely,” said George Parshall, a spokesman for a group of Armco retirees. Parshall said possible benefit cuts are a topic of conversation when hundreds of retirees gather at a Middletown VFW Hall.

“We set up an organization with a goal . . . look after our benefits,” said Parshall, a retired steelworker. The recently formed group is trying to set up meetings with company officials to discuss benefits.

Benefit cuts have hit high-tech companies as well as Rust-Belt ones. They’re also generating retiree lawsuits and tough bargaining for labor unions seeking to protect benefits.

Retirees of the computer-maker Unisys Corp. learned last year that the company would phase out health-care coverage. Retirees could be stuck with a $900-a-month bill by 2009 when the coverage is phased out, said the International Union of Electronics Workers.

The IUE represents Unisys workers and filed a lawsuit, alleging the reductions represent a breach of contract. Unisys decided to cut benefits because of rising health-care costs.

Meanwhile, the IUE and the United Auto Workers union are headed for a showdown this summer with GM over health-care benefits. The nation’s No. 1 automaker has said it needs concessions in health-care expenses, and UAW President Owen Bieber has bluntly said the union will strike any automaker over health-care reductions.