Feds balk at Kaiser benefits agreement
A federal agency playing a key role in Kaiser Aluminum Co.’s bankruptcy may scuttle an agreement that gives thousands of union members reduced – yet still significant – benefits including health insurance.
Union leaders are flabbergasted that the Pension Benefit Guaranty Corp., the federal agency insuring corporate pension plans, might not aid the Steelworkers’ attempt to salvage benefits from Kaiser.
“They think we got too rich of a deal from Kaiser,” said Steelworkers director David Foster, who said the PBGC told the union it didn’t like the terms of the deal.
Earlier this year, Kaiser and the Steelworkers reached a painful compromise: In order for Kaiser to survive its bankruptcy, it needs deep concessions from its adversarial union.
So the sides struck a deal to terminate the health insurance plans of workers and retirees, and surrender the pension plans – which are under-funded by several hundred million dollars – to the PBGC.
While older retirees can rely at least partly on Medicare to offset hospital and drug bills, those Steelworkers between the ages of 55 and 65, including about 1,000 in Spokane, were left looking for medical coverage.
The only bright spot is that the federal government allows such workers a tax credit that essentially would subsidize two-thirds of their health insurance costs.
Here’s the catch: To qualify for the tax credit, a retiree must be collecting a monthly check from the PBGC. If the PBGC decides not to go along with the pension plan, the Steelworkers would be responsible for covering the entire cost of their health insurance.
But the federal agency, beset by failed pension plans, apparently dislikes the terms of Kaiser’s agreement with Steelworkers, according to Foster.
Foster suspects PBGC leaders are upset that Kaiser wants the federal agency to absorb its huge pension debts while the company cuts side deals with creditors allowing it to emerge from bankruptcy.
“This is just a terrible snafu,” Foster said. “In essence, the PBGC’s objection is sound: Why should the federal government be bailing out companies and rewarding them for under-funding their pension plans?”
Yet Foster said it’s not so simple.
Kaiser’s current ownership won’t benefit from the deal struck with Steelworkers. Instead, money earned by the company after bankruptcy would be channeled to a trust set up to fund worker benefits.
Foster called it a pay-as-you-go plan, an apparatus that is not unusual in similar cases.
PBGC officials were unavailable for comment late Wednesday, and Kaiser spokesman Scott Lamb declined to elaborate on the situation. He said talks between the company and the PBGC were ongoing.
The problems spurred a letter from a half-dozen U.S. senators, including Washington Sens. Patty Murray and Maria Cantwell, who are concerned about Steelworkers in their states.
They asked PBGC director Bradley Belt to abide by a federal Bankruptcy Court ruling that Kaiser surrender its pension plans to the PBGC, thus triggering the tax credits to help Steelworkers. Some health-insurance plans could cost a family of three nearly $1,000 a month, according to a recent company memo to Steelworkers.
Dave Carlson, president of Steelworkers Local 338 at Kaiser’s Trentwood rolling mill, fears that if the PBGC doesn’t approve the deal and refuses to take over Kaiser’s pension plan, the entire bankruptcy could be jeopardized.
Kaiser hopes to emerge from bankruptcy reorganization later this year. It declared bankruptcy 2 ½ years ago.
If the company can satisfy creditors and resume business outside of Bankruptcy Court protection, it would be owned by a trust partially controlled by Steelworkers.
Profits of a “new Kaiser” would be routed into a series of health and pension plans benefiting Steelworkers and retirees, although to a much lesser degree than those workers enjoyed in the past.
First, however, every party involved in the bankruptcy needs to agree, and so far the PBGC has not, Steelworkers say.