Megacorp Reneges on Retiree Health Care

[davebarnes]

For my brother-in-law it was Siemens.
He and his wife took the early retirement package at ages 58.
Cheap, good quality medical insurance until it was cancelled.
He got to learn about ObamaCare after being insured by his one and only employer for 35 years.

 

[Chuckanut]

Thankfully, many in the younger generations, seeing what happened to their parents and grand parents, are taking control of their own financial future. And, they are not placing much trust in what the big shots are promising. Good for them.

We need to overhaul things like IRA, 401k and especially 403b laws to reflect the realities of the world the young folks are working in. They are no longer supplements to pensions. They are the pension for most working people today.

Edited to Add:

Ted Benna, known as the father of the 401K has some intereting things to add. Note that this article was written in 2013.

https://www.marketplace.org/2013/06...ther-modern-401k-says-it-fails-many-americans

It was never Benna's idea for do-it-yourself to replace pensions. It just kind of happened.
But today?
Benna: "This is kinda the whole enchilada."
Tong: "So what's your thought on it now having become the whole enchilada?"
Benna: "Well, it's not good, but it's reality.

 

[mickeyd]

We retired military are fortunate to be covered by Tricare-for-life, which is essentially a Medigap plan that we receive at no cost as long as we enroll in Medicare A and B. Also all meds can be obtained at the base medical facility @ no cost.


I predict that some day in the future that Congress will take a look at this costly benefit and make adjustments to it costs us more and the military less.

 

[SecretlyFI]

Oh I forgot one more "great" thing emerging from my mega lately-moving away from having employees and toward contractors. Touted as embracing the "gig economy", they have lots of communications on how great this is for me!

I just heard this week the goal is to shift from the 2% contractor personnel they have now, to 25% by 2025. So, this means the "no-benefits" trend is creeping into the years you're employed, not just the post-retirement years. Great, thanks!!

 

[Midpack]

Just curious, why do posters not name names of these quote unquote Megacorps? As an investor I am interested in knowing the names of companies who screw retirees.

I’d like to see the list of private companies that haven’t reduced employee and/or retiree benefits - I’d guess it’s a very short list...

And my former mega froze or eliminated retiree benefits in 1994 after a hostile takeover attempt, would something that happened in 1994 really influence your investment decision?

A blanket characterization of companies “screwing” employees by changing benefits is unfair anyway. It can become a necessity to survive in today’s global competition - would you rather they just go bankrupt (which would just as likely “screw” retirees)?

 

[Chuckanut]

I’d like to see the list of private companies that haven’t reduced employee and/or retiree benefits - I’d guess it’s a very short list...

Add in many states. My state has gone from a DB plan to a hybrid DB/DC plan for new employees. It makes sense to me.

 

[JDARNELL]

We retired military are fortunate to be covered by Tricare-for-life, which is essentially a Medigap plan that we receive at no cost as long as we enroll in Medicare A and B. Also all meds can be obtained at the base medical facility @ no cost.


I predict that some day in the future that Congress will take a look at this costly benefit and make adjustments to it costs us more and the military less.

You are correct. We see it with increases in cost for prescription drugs. I choose not to go to the base to get meds as it reminds me too much of the things I didn’t like about the military. But as long as they don’t raise the out of pocket cap I don’t care how they rearrange the deck chairs on the titanic.

 

[CaptTom]

...Then Dilbert points out that the company brags to the shareholders that their employees are above average (or their 'most important resource', or something like that). Ahh, the irony.

I love it! That'e exactly what "my" MC did! They wanted "top decile" performance but set compensation for each job description to max out at the median for the industry.

We called it "striving for mediocrity."

A blanket characterization of companies “screwing” employees by changing benefits is unfair anyway. It can become a necessity to survive in today’s global competition - would you rather they just go bankrupt (which would just as likely “screw” retirees)?

No, I'd rather they take SOME of that money from the top executives.

Ours would routinely get large raises and bonus packages, as the employees were getting their benefits cut.

I don't think I'm being all that unfair calling that "screwing."

 

[Donno]

I retired this year after 35 years with my company. During those 35 years they quit offering the pension plan I had in 2000, stopped it altogether in 2006, froze everything in 2018 and stopped offering health insurance effective January 1, 2019.

I elected to take a monthly annuity when I left and that may not have been the best move, but I was more comfortable with it. Somehow they managed to recalculate the cash payout for those retiring next year and it went down by nearly 10% which caused a mass exodus this year.

I have watched that company go from the best you could work for to one of the worst you could work for. The company name is Arconic, formally Alcoa which was a member of the DJI 30 for over 50 years until the management and our trade policies ruined it.

 

[Midpack]

No, I'd rather they take SOME of that money from the top executives.

Ours would routinely get large raises and bonus packages, as the employees were getting their benefits cut.

I don't think I'm being all that unfair calling that "screwing."

So you were the CEO. Then why did you screw your employees and pad your own pockets? Otherwise I don't know how you'd actually know that. I was a mid level exec and I certainly didn't know the details re: wages and bonuses above me. I have seen an income statement go from black to deep red in short order, lots of execs did 2008-09, there are no easy answers when that happens. Some execs do share the pain, without boasting about it.

Don't get me wrong, there are plenty of stories of C-level execs taking care of themselves first, and that's what makes the news and subsequently around the water cooler. But that doesn't mean that's how it works at every company, which rarely makes it around the water cooler.

My only point was the broad brush gets overused...

 

[pb4uski]

Megacorp Reneges on Retiree Health Care

I don't think you can really say they "reneged", it was never a contractual obligation.

Sure it sucks, I know. But as you say it's a "promise". Promises can be broken. If you want something stronger, you need a contract. ...

No, they definitely reneged...

go back on a promise, undertaking, or contract.

IMO to use the term renege doesn't matter whether it was a promise or a contract. You are right that in most cases retiree medical is a promise and not a contract... but there is less recourse to go back on a promise like retiree medical... if you go back on a contract the other party can sue you for damages or specific performance.

 

[CaptTom]

So you were the CEO. Then why did you screw your employees and pad your own pockets? Otherwise I don't know how you'd actually know that...

My only point was the broad brush gets overused...

Actually, executive compensation information is available for just about any large company. And yes, I did look it up.

Through my 401k, I got MC's reports to stockholders. As an employee, I got all the BS they were feeding us. Let's just say the messages to those two audiences were very different.

IMO to use the term renege doesn't matter whether it was a promise or a contract.

I've been present when CEOs and upper management have made bold-faced lies to employees, and seen lots of disingenuous "spin" from these same folks.

At one employee meeting a new senior executive was introduced. He had the audacity to actually admit, in that open forum, that he hadn't figured out yet what his job title would be, or even what he was actually going to do there. This was after mentioning in his introduction that he'd gotten the job because he'd been a close friend of the CEO in college.

From personal experience, from people I know, from people who post on line, and from the Dilbert comic strip, I have concluded that I'm not too far off by painting all modern MegaCorps with a very broad brush.

 

[youbet]

once you’re on Medicare, you’re on your own.

Well, not exactly on your own. You have the pre-65 insurance for DW and Medicare for yourself. All you have to pay for is Part B, Part D and a supplement. Far from free, but far from a disaster for most.

If you and DW were both under 65 and Mega was suddenly dropping the pre-65 coverage, then I'd say that's a storm a-brewing! But as you describe the changes, unless you're cutting things mighty close in your financial plans you're still in good shape.

 

[Oz investor]

Because they're all the same.


There was a Dilbert where the boss was announcing that they've done studies and can assure the workers they are paid commensurate with other employees in their industry.

Then Dilbert points out that the company brags to the shareholders that their employees are above average (or their 'most important resource', or something like that). Ahh, the irony.

-ERD50

oh dear , Dilbert .. so funny , but so often true .

i remember a 'can do ' campaign at the ( former Megacorp ) including a competition for the employee ' who would go the extra yard in pursuit of perfection '

... so i nominated a recently resigned employee who traveled 1,500 miles to re-enlist with the Navy ( disappointingly, the nominated employee didn't win the prize )

 

[youbet]

IMO to use the term renege doesn't matter whether it was a promise or a contract. You are right that in most cases retiree medical is a promise and not a contract... but there is less recourse to go back on a promise like retiree medical... if you go back on a contract the other party can sue you for damages or specific performance.

The problem often comes with documenting the promise. Was it actually printed in an employee HR or benefits manual? Did the wording imply it was an ongoing, earned benefit or only describe how it worked at that time? Doing something for people is not a promise that you'll continue doing it.

At the Mega where I toiled, post 65 medical benefits were given in two tiers depending of your original hire date. Recently, they reduced this to a single tier, eliminating the higher (more $) tier and moving those folks to the lower tier. Rumors are now spreading that the lower tier will be removed soon.

The older guys at my Friday morning breakfast group who were on the higher tier were plenty grouchy when it happened. But all readily admitted they knew the whole retiree medical plan was voluntary and at the discretion of the company. No one, including me, could come up with any documentation showing it was an earned benefit (like our DBP's). No law suites emerged. One guy said he was seeing a labor attorney, but has never come back with anything.

So, maybe it was a promise, or maybe it was something they were doing for a while and now stopped doing. And there was never a "promise" of an ongoing benefit. Everyone readily admitted knowing Mega could stop the program at any time.

It seemed a lot like when Mega discontinued our bonus system which had been quite lucrative for a while. Since they used the same formula for years, it seemed "promised" that that's how we'd always get incremental pay in profitable years. Then it was gone. I felt reneged on. But there was indeed nothing that said they were obligated to go on with that bonus formula/system forever.

But if it makes OP or others feel better, by all means use negative terminology about all these negatively impactful business decisions. It's likely therapeutic. I know my geezer work buddies at Friday breakfast sure seemed to feel better after we spent numerous mornings bitching about it. And it still comes up from time to time. Just assume that an activity of one time set a precedence that morphed into a promise of eternal continuation and its current elimination is a renege. I get it.

 

[Chuckanut]

No, they definitely reneged...



IMO to use the term renege doesn't matter whether it was a promise or a contract. You are right that in most cases retiree medical is a promise and not a contract... but there is less recourse to go back on a promise like retiree medical... if you go back on a contract the other party can sue you for damages or specific performance.

I am not a lawyer, but if a person says "work for me doing xxxx and I will pay this salary plus, this pension, plus medical", and I do the work.... Isn't my work over may years consideration, thus a valid contract is in place. Maybe not a written contract, but we all know contracts don't always have to be in writing.

Obviously, there is something I don't know about labor law. Anybody care to enlighten me?

 

[ncbill]

Close relative rec'd free retiree health insurance in addition to a COLA pension when he retired from a skilled, blue-collar job in his early 50s.

He & his wife then complained to me about the "high cost" of Part B premiums when they turned 65 (his retiree health plan converted to a free, generous Medicare supplement)

 

[jollystomper]

I am not a lawyer, but if a person says "work for me doing xxxx and I will pay this salary plus, this pension, plus medical", and I do the work.... Isn't my work over may years consideration, thus a valid contract is in place. Maybe not a written contract, but we all know contracts don't always have to be in writing.

Obviously, there is something I don't know about labor law. Anybody care to enlighten me?

In most Megacorps, they have written documents outlining the benefits... but also within that document is a statement along the lines of "these current benefits are not guaranteed, we reserve the right to change or eliminate them at any time at our discretion".

When my Megacorp started doing this with pensions and healthcare in the late 90s, it was a wakeup call for me that I should base any retirement plans more on my own savings/investments and less on their retiree benevolence.

 

[pb4uski]

+1 sort of like these retiree medical benefits are our past and current practice but are paid at the discretion of the company and are not guaranteed... or something along those lines.

 

[jazz4cash]

I was two weeks shy of qualifying for retiree healthcare at Mega when they changed the policy. A couple years later they cancelled it for everybody but did provide a monthly $ payout up to age 65. No regrets.

 

[Just_Steve]

The below is a summery of legislation in the NYS Assembly and Senate to protect municipal workers. It has broad support and many cosigners. If it passes I will sleep even more soundly than I do now.

"Prohibits the diminution of health insurance benefits of public employee retirees and their dependents or reducing the employer's contributions for such insurance; defines employers to include the state, municipalities, school districts, and public authorities and commissions."

 

[SecretlyFI]

Yes, public employees are very lucky to be protected like that. Sounds like that type of legislation prohibiting the benefits from being reduced would be like a contract and those benefitting will sleep quite well. Too bad everyone’s taxes will have to support it, no matter how expensive it gets and those same taxpayers will also be paying for their own retiree healthcare as well.

Sorry to vent here, but explanations from mega about freezing and eliminating benefits are always about escalating, unsustainable costs. The same would be true for the programs covering public employees, but they should be guaranteed by legislation? Doesn’t seem right.

 

[Just_Steve]

Yes, public employees are very lucky to be protected like that. Sounds like that type of legislation prohibiting the benefits from being reduced would be like a contract and those benefitting will sleep quite well. Too bad everyone’s taxes will have to support it, no matter how expensive it gets and those same taxpayers will also be paying for their own retiree healthcare as well.

Sorry to vent here, but explanations from mega about freezing and eliminating benefits are always about escalating, unsustainable costs. The same would be true for the programs covering public employees, but they should be guaranteed by legislation? Doesn’t seem right.

Public employees also pay taxes.

 

[SecretlyFI]

Of course, but that’s why public employees are so lucky, that they are not also having to support their own retirement benefits while also paying taxes. I’m sure that’s what was meant about being able to sleep much better if the legislation passes, right?

 

[ERD50]

No, they definitely reneged...



IMO to use the term renege doesn't matter whether it was a promise or a contract. You are right that in most cases retiree medical is a promise and not a contract... but there is less recourse to go back on a promise like retiree medical... if you go back on a contract the other party can sue you for damages or specific performance.

Yes, it's semantics on my part, and the dictionary definition does include "promises". I was just trying to differentiate between a contractual obligation and a promise.

I guess when I see "reneged", I think "re-negotiated" and that makes me think of a contract. But alas:

https://cleanlists.wordpress.com/2016/12/02/renege-or-renegotiate/

Renege does not originate from renegotiate

-ERD50