Kodak asks Judge to cancel retiree medical benefits

RattyMouse · Oct 10, 2012

Sad news for the folks who gave their lives to Kodak. Stiffed (potentially) by Kodak.

http://www.washingtonpost.com/busin...85774a-1341-11e2-9a39-1f5a7f6fe945_story.html

Pioneer · Oct 10, 2012

As seems normal today, the people who actually did the work are left holding the bag. Promises that were made upon hire, and again upon retirement, are conveniently forgotten so that the leaders whose hands have not been dirty in years can keep their grossly oversized paychecks.

Araakii · Oct 10, 2012

Don't bet your own benefits on anyone else.

Pioneer · Oct 11, 2012

Yep, we certainly know that now but what people were being told several years ago was completely different. "Don't worry, come work for us and you will be taken care of when you retire!" Pfft!

Steve Smith · Oct 11, 2012

I find it strange that this is even possible. Over here, a company pension fund is managed by a third party financial institution and the company has no access to the funds. I would have thought the same would be true of a US medical/pension fund.

As far as medical care is concerned, over here,the NHS covers everyone before, during and after their working lives.

Steve.

MattKing · Oct 11, 2012

Most of the pension obligations are already mostly or fully funded, and are safe from the bankruptcy procedure.

The problem is with the additional retirement benefits. Unlike pensions, which can be funded by purchasing annuities (where the insurance companies take the risk) medical and other benefits cannot practically be funded by buying "insurance" at the time of retirement. A company offering such retirement benefits is forced to pay them out of monies generated by current operations, plus any monies set aside by the company at the time of retirement.

Kodak may very well have set aside what seemed to be sufficient funds at the time of the affected employees' retirements, but the costs for the benefits have escalated more than expected, and the returns on monies invested have shrunk more than expected.

If Kodak was financially healthy, they would be able to cover these shortfalls as part of their recurring expenses. They are not, so they have proposed funding them at an amount slightly more than 1/2 of the expected full costs (657 million vs. 1.2 billion). If the proposal is accepted, the employees will end up not having to share the benefit of that 657 million with the other unpaid creditors.

In the US, those benefits are very expensive. I would say though that for the employees, having pensions substantially secured along with more than 1/2 of the other retirement benefits is painful but still far from being "stiffed" in the context of a bankruptcy as large as Kodak's.

Kodak's other creditors are apt to lose far more. And its shareholders (many of whom were employees) will lose vastly more.

AgX · Oct 11, 2012

Steve Smith said:
I find it strange that this is even possible. Over here, a company pension fund is managed by a third party financial institution and the company has no access to the funds. I would have thought the same would be true of a US medical/pension fund.

Here we got something similar: a fund, financed by all employers who offer company pensions, that in case of insolvency will take care of the company pension funds, to keep them off the insolveny assets.

But as the Agfa/AgfaPhoto case shows an insolvency still can produce severe difficulties for pensions.

But to avoid confusion:

This appeal by Kodak is aimed at the medical benefits, not the pension.

A statement by a Kodak retiree Association:

"...in the motion going to the court Kodak proposes to eliminate Kodak retiree health and welfare benefits. This includes benefits such as health care, life insurance, dental insurance, and some portion of the SIB. It DOES NOT affect the pension plan known as KRIP (Kodak Retirement Income Plan). KRIP is funded and managed separately from Kodak operations. We have been advised that KRIP is currently sufficiently funded to continue to provide the monthly pension check everyone receives. The very best way for KRIP to continue unaffected is to have Kodak successfully exit bankruptcy in 2013."

arpinum · Oct 11, 2012

I brought this up a year ago. While it is true that the pension fund is short by at least $1.5B (and I say closer to $2.5B as their growth assumptions are unrealistic), PE stated that most retirees took a cash-out or are in a separate fund. So while some retirees will lose out, most have taken steps to protect themselves.

Pioneer · Oct 11, 2012

Hmm. How easy it seems to be. As a Kodak employee you were promised certain benefits.

But...guess what, we seem to have underfunded your pensions. The exact amounts are uncertain but let's just say that it is A LOT OF MONEY!!!

Oh...those medical benefits we promised to provide throughout your retirement years. Hmm, not so sure about those. We may have to toss those promises in the toilet. That kidney transplant you needed, sorry, you will have to pay for that. Sure hope you have Medicare or some other health insurance plan. That hip replacement? You may have to postpone that.

But, that's ok, everyone certainly understands that we need that money to survive as a company. Oh, and to pay our salarys, and pay for our stock options, and pay for our Senior Executive Retirement Plans.

Besides, MOST of our former employees have already taken some steps to try and protect themselves so not very many people will be hurt by this action. Probably just the ones that need it the most.

What? You say that those former employees don't have enough to cover those extra expenses? Well, that isn't our fault. They shouldn't have relied on our promises. They should have known better and taken care of themselves.

Ken Nadvornick · Oct 11, 2012

Bankruptcies are always ugly. This one is no different.

Ken

Pioneer · Oct 11, 2012

Ken Nadvornick said:
Bankruptcies are always ugly. This one is no different.

Ken

I guess what I am most angry about is that our government allows this to happen.

Funding a pension? Well, as long as you put in a small percentage of what is required every year, and promise to make up the rest, you are fine.

Market didn't grow like you had hoped throughout the year so there is a shortfall? That's OK, you don't have to put in the money at the end of each year to make it up, you can just gamble that the market will increase twice as fast next year.

What? You say that medical costs are climbing 5 times faster than you VERY CONSERVATIVE estimates. Don't worry about it. I am sure it will improve in the next year or two.

Just be sure and put A LOT of money into my re-election campaign and next year we will let you deduct those "expenses" so you can pay less taxes.

And don't get me started on 401K plans. :confused:

BrianShaw · Oct 11, 2012

This type of medical and surving member benefit is threatened in many companies (including mine) even without bankruptcy. Unfortunately that kind of promise was made when times were good, and now it is just a promise -- not a guarantee as we may have been lead to believe.

Pioneer · Oct 11, 2012

BrianShaw said:
now it is just a promise --

Exactly my point. I am not trying to pick on you specifically, or anyone else in this forum. I am just letting off steam and ranting a little.

It seems to be a national malaise. It's OK. It is an ugly bankruptcy. It was just a promise. Everyone just seems to accept it. Nobody seems to get pissed about this anymore.

Sorry, I'm sure it appears that my liberal roots are showing, but I was raised to believe that my promise was my word. I don't think of it as liberal or conservative. If you do not believe that you can continue providing this benefit then quit promising it. Those that hire on after you quit promising it have no expectation. But don't take it away from those that were promised. Especially when you have been providing it.

In my opinion many of the gains that were made in the 20th century are being rapidly bled away and we will soon be back where we were in the early 1900s. Companies can do anything they believe is necessary to secure their own future, as well as the future of the wealthy class that own and run these businesses. God forbid some banker should go bankrupt. Without his wealth everyone will suffer!!

And people wonder why the difference between the haves and have-nots has grown so massive over the past few years in the United States.

Sorry for the extended rant. I'll settle down and be quiet now.

BrianShaw · Oct 11, 2012

Pioneer said:
Exactly my point. I am not trying to pick on you specifically, or anyone else in this forum. I am just letting off steam and ranting a little.

You'r certainly not picking on me... I live in fear daily that my med and survivor benefit may not survive. I've been busting my hump for my company for nearly 25 years on the promise that those benefits will be there. IF this gets taken from Kodak retirees that could be just the court prededent to support taking it from all the rest of us who work for companies that are suffering the economy. All the while... the seniors in my company are making multi-million dollar compensations with a contractual guarentee that THEY will continue to have those benefits. This case scares me to the core!

Pioneer · Oct 11, 2012

I feel for you. I think it is a national shame that this type of thing can happen today but it certainly is.

My uncle worked all his life for a large foundry in the midwest and retired with a comfortable pension, including medical benefits. He was not rich by any means but he was not afraid he would lose his house or be begging for food. He passed away about 5 years ago and is survived by my aunt, a wonderful woman. The foundry is now struggling a bit in this economy and has recently been making many of the same noises and it is scaring my aunt half to death.

It is people like this that are hurt the most, and they are the ones who need it the most. Yet we are willing, and seemingly perfectly happy, to yank the rug out from under them in their few remaining years while preserving the incomes and lifestyles of those that were supposedly responsible to ensure this didn't happen.

DWThomas · Oct 11, 2012

As a practical matter, I doubt we can expect government to ride herd on these problems, as they do the same stupid thing. Many states and municipalities have been "balancing the budget" by underfunding retirement plans for years -- that's part of the financial black hole some of them found themselves in during the past few years.

Although I do agree such plans should be structured in a way that effectively guarantees them. If nothing else, that might force the plans to be structured more conservatively. Things have been tightened up compared with several decades ago; I remember when the Horn & Hardart restaurants closed in Philly there were interviews with waitresses and the like who had worked there 30+ years and were told "oops, sorry, there's no money in that pension plan." (And folks wonder why every now and again somebody stomps into a business with guns blazing!)

Photo Engineer · Oct 11, 2012

arpinum said:
I brought this up a year ago. While it is true that the pension fund is short by at least $1.5B (and I say closer to $2.5B as their growth assumptions are unrealistic), PE stated that most retirees took a cash-out or are in a separate fund. So while some retirees will lose out, most have taken steps to protect themselves.

I don't think I said "most", but I know quite a few did. I actually do not know the ratio of those who did to those who did not.

Also, the cash benefit option was being reduced yearly for most people when I retired and the aim was to eliminate it entirely. By now, I think that option no longer exists. The cash benefit option required that EK calculate how much cash you would need with the current interest rate and based on your estimated retirement payment in order to have payments to the average age you would be expected to die. At that time it was 85. So, Kodak had to give us enough cash to live until we were 85 from the date of retirement, and based on then current interest rates. It was in our interest to leave when interest rates were low, thus giving us more cash!

As for the current "change" in benefits, there appears to be 2 or 3 levels based on whether you get Medicare or not. I have yet to see what is involved.

PE

Ken Nadvornick · Oct 11, 2012

Pioneer said:
It is people like this that are hurt the most, and they are the ones who need it the most. Yet we are willing, and seemingly perfectly happy, to yank the rug out from under them in their few remaining years while preserving the incomes and lifestyles of those that were supposedly responsible to ensure this didn't happen.

Was it Karl Marx who first wrote "Capitalism is savagery?"

I'm not necessarily agreein', I'm just sayin'...

Ken

Steve Smith · Oct 11, 2012

BrianShaw said:
and now it is just a promise

"That was just an idle promise" - Homer Simpson.

Steve.

Pioneer · Oct 11, 2012

Ken Nadvornick said:
Was it Karl Marx who first wrote "Capitalism is savagery?"

I'm not necessarily agreein', I'm just sayin'...

Ken

It would sure be nice though if we had figured out something a little more benign than what Karl Marx was describing.

And while I do agree that we seem to have gotten a little better over the years, it does seem to be such a little thing to require our own government to structure and enforce the rules to help ensure that companies really do keep the promises they make. Instead they make up laws and regulations with enough holes to make a lawyer happy! Oh yeah. Most of them are lawyers.

I completely agree that requiring companies...and States and Municipalities, to fully fund their obligations at the end of each year would certainly keep people a bit more realistic about the promises they make. But why do that? Don't worry, we trust you. And if it don't work out you can always hire a lawyer and sue them.

It was getting to the point that I was actually checking every year that my own company had deposited the matching funds they promised into my 401K. In my case they had actually done it when they said they would, but that little thing is not very well enforced either. Look at Enron, they were able to fund that with their own stock! Pretty handy for them but, as it turned out, not so handy for their employees.

pentaxuser · Oct 11, 2012

Given the vulnerability to this kind of thing for the vast majority of working people with the exception of the very rich it always amazes me and I suspect most of the people in the U.K. and the rest of Europe why there is such opposition to a form of state/country health service which through taxes is free at the point of use.

pentaxuser

BrianShaw · Oct 11, 2012

Steve Smith said:
"That was just an idle promise" - Homer Simpson.

I find this difficult to write... but I agree with Karl Marx and I agree with Homer Simpson even more.

Photo Engineer · Oct 11, 2012

pentaxuser said:
Given the vulnerability to this kind of thing for the vast majority of working people with the exception of the very rich it always amazes me and I suspect most of the people in the U.K. and the rest of Europe why there is such opposition to a form of state/country health service which through taxes is free at the point of use.

pentaxuser

Consider this:

Many Canadians and Europeans come to the US for our expensive health care because it is the best. Clinics in border cities here are busy treating Canadians who cross the border for treatment. Oh, it is also quickly available. You don't have to wait months for treatment.

I went to a doctor at 9, had an MRI at 10 and was back in his office looking at 3D models of the scan on his computer. I have friends in England waiting months to see a doctor. My wife had a bug recently and called her GP at 8:30, and had a 9:30 appointment.

PE

Steve Smith · Oct 11, 2012

Photo Engineer said:
Consider this:

Many Canadians and Europeans come to the US for our expensive health care because it is the best.

Yes... If you consider rated 37th in the world by the World Health Organisation to mean best!

I don't know of anyone who has travelled from here to the US for health care.

Steve.

BrianShaw · Oct 11, 2012

I met a cab driver in England who was told theat he had 4 months to live, but the soonest they could schedule a heart operation was 6 months.

I was only able to have this conversation because he came to New York (I seem to recall) and payed for it himself.

Kodak asks Judge to cancel retiree medical benefits

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