Kodak asks Judge to cancel retiree medical benefits

[Sal Santamaura]

Yes, it is. As a legal precedent this is going to allow other companies to do the same thing and bail out of their health care costs by declaring bankruptcy...

As usual, nobody reads the complete thread before posting. Also, you've confirmed that non-US people aren't the only ones who need educating on how things work here.

Please see post #37 above:

(there was a url link here which no longer exists)​

For virtually every US corporation that still offers retiree medical benefits, and not many are left, there's no reason to declare bankruptcy in order to terminate those benefits. It's simply a matter of announcing same. No further obligation to current retirees or those now on the payroll. None.

The only reason Kodak had to ask permission is that, in Chapter 11, it needs permission from the court for everything. In normal circumstances, this would have been a routine communication to those affected -- benefits gone. There's no legal precedent involved.

 

[Sal Santamaura]

Well that was quick. I guess the judge approved. Health benefits to end in 2 months for retirees.

http://news.yahoo.com/kodak-end-hea...0--finance.html;_ylt=A2KJjaj4.XxQpDsABFjQtDMD

I've seen nothing elsewhere to indicate the bankruptcy court has approved or rejected Kodak's request in this matter. However, the Reuters story you linked carries a date of October 10 and appears to be shoddy journalism that presumes the request will be approved, then erroneously describes the medical benefit termination process as already in place.

 

[Diapositivo]

... a very scary precedent for more than just the Kodak retirees who have just been screwed.

In one sense, it's just Chapter 11. A firm is entitled to ask what is basically "protection from creditors" so that it can adjust its mechanisms and emerge anew as a viable business. This protects some interests (mainly jobs. Remember that all this will maybe allow many jobs to be saved at Kodak) and damages some other interests, i.e. creditors of various sorts, and competitors which have to pay and service their debt while the Chapter 11 firm got away with a free lunch.

In the case of the medical "obligations" though, it should be noted that in case of plain and old bankruptcy (Chapter 7) creditors would probably have lost less, jobs at Kodak would be probably lost entirely, and those claiming health care benefits would in any case have lost everything as there is no legal obligation which can cause these claims to be included in the pool of credits to be satisfied.

Considering that Kodak is in the situation they are, I don't see how this would be a bad deal. As PE points out the problem is now to see how this diminished coverage is spread out among the beneficiaries. But on average I see it as a bargain as any other outcome would mean 0 health care benefit left.

 

[DREW WILEY]

Sal - I've seen my share of companies which deliberately bankrupted in order to raid not only health
but pension accounts. It's a bit difficult to do that if Calif per se anymore, simply because there were
some flagrant cases where bankrupty was performed simply by the CEO appointing himself mgr and
paying himself more than the profits could handle (analagous to what PG&E and SoCal Edison did in
the 90's by transferring more profits than they actually made from the utility to the parent corp);
but in most states it's still feasible to do it this way.

 

[BrianShaw]

For virtually every US corporation that still offers retiree medical benefits, and not many are left, there's no reason to declare bankruptcy in order to terminate those benefits. It's simply a matter of announcing same. No further obligation to current retirees or those now on the payroll. None.

The only reason Kodak had to ask permission is that, in Chapter 11, it needs permission from the court for everything. In normal circumstances, this would have been a routine communication to those affected -- benefits gone. There's no legal precedent involved.

Your'e right Sal. Notice that I did not use the word "legal" when I wrote "precedent". That was intentional but I guess it is natural to put them together. My concern of hte precedent is that my company, as an example, has not had the balls to renege omn the promise of retiree medical coverage and survivor benefits. My fear is that this will give them the courage to do so... bankruptcy or not, and legal precedent or not.

I love my job, need my job, and have great respect for my employer... but some of the tactics "required" to survive the tough economy are gatting brutal to us worker bees.

 

[BradS]

Y... but some of the tactics "required" to survive the tough economy are getting brutal to us worker bees.

man, you are not kidding! I'm seeing significantly increased demand and yet simultaneously, declining prices...that is to say, I have been getting more calls for work than ever but when I state my usual fee many balk at it and try to negotiate a lower fee...sometimes significantly lower. Who is John Galt?

 

[kb3lms]

...US corporation that still offers retiree medical benefits...

Sorry, I was referring to medical benefits for active working employees. That's where I see it going. Granted this thread is about retirees.

...would have been a routine communication to those affected -- benefits gone.

And therein lies the problem. Rulings like this that have become a matter of the public record just take it one step closer to terminate benefits for everyone. The legal precedent I am concerned about is such decisions make it harder for the working employee to find recourse when the benefits are cut. So, your company declares bankruptcy, cuts the benefits, and then magically emerges from bankruptcy. The courts said it was OK to cut for retirees, next the courts say it's OK for active employees. Soon after that it becomes the "new normal" to not offer medical coverage at all because the courts said they didn't have to. Employers know the economy stinks and you just can't change jobs on a whim - so to an extent they have you by the b#$$s. Not that they didn't anyway, but such decisions just give them a little tighter grip.

And, no Sal, I didn't read the whole thread or your post #37, but I did just now. I don't feel that the employer/employee relationship is necessarily adversarial and that unions are the answer, although at times they serve their purpose. As benfits provided decline, union importance/usefulness will, of course, rise. I see the relationship with my employer as more cooperative. I take care of them, they take care of me, and that starts with the old hip pocket. But medical benefits run a real close second.

Since I am OT, I've said my piece. Kodak was a good place to work. It is a shame to see them come to this.

 

[BrianShaw]

... I have been getting more calls for work than ever but when I state my usual fee many balk at it and try to negotiate a lower fee...

We are on the fourth iteration of the "do more with less" philosophy in the last 5 years. It is driving me into the grave prematurely. There ARE limits to how much one can do with less, and we've exceeded those limits a long time ago. Oh.. and don't get me going on the "we have to better prioritize our efforts"...

 

[DREW WILEY]

That's why unions exist (whether you admire them or not). Here is Calif, Brad, there's a dramatic difference in standard of living and of overall community finances right at the union/nonunion divide, which is largely the geographical divide between the Bay Area and Central Valley. Here the economy is relatively strong for a number of reasons including a better sustained payscale, while over the hill it still looks like the Great Depression in places. Glad you are able to work in a field where you can choose to live where you want; but many cannot. But things are getting ugly everywhere in terms of
trying to pluck the last feathers off the middle class. I'd classify just plain ole greed as the number one factor. But when the the parasite gets as big as its host, they both die. That's what happened
with all the sub-prime mortgage scams and big sprawl developers behind them. In the long run, tapeworms aren't all that smart!

 

[BrianShaw]

In the long run, tapeworms aren't all that smart!

... but in the end of time the only organizms that will likely survive the tapeworms are the cockroaches.


Cockroaches aren't that smart either.

 

[kb3lms]

...are the cockroaches.

And there is no shortage of them. Greed often equals stupidity. And stupidity is the only truly renewable resource.

 

[Sal Santamaura]

...I've seen my share of companies which deliberately bankrupted in order to raid not only health
but pension accounts...

This is about retiree medical benefits, not pensions. Even in California, there's no problem with corporations terminating non-vested retiree medical plans. Bankruptcy is neither necessary nor useful for that purpose; a simple announcement will suffice.

In post #37 I explained how US pensions work so those outside the country would understand the distinction between medical coverage and pensions. From employees' points of view, Pension Benefit Guarantee Corporation (PBGC) coverage provides quite good security of their vested monthly pension payments against company bankruptcies (up to certain dollar limits affecting highly compensated retirees). This protects against plan insolvency resulting from underfunding.

A new threat to pension security is now manifesting. Corporations able to get their pension plans up to 100% funded are permitted to perform a "standard termination." In this process, several options may be offered to those with vested benefits in the plan, among them cash buyouts, individual annuities or a master annuity for all participants. One corporation that recently took this route is General Motors (GM):

http://media.gm.com/media/us/en/gm/...t/Pages/news/us/en/2012/Jun/0601_pension.html​

The PBGC must approve standard terminations, but has no incentive not to. When a retiree's company enters bankruptcy, beneficiaries of the qualified retirement plan can count on the PBGC to continue their monthly payment. After a standard termination such as GM's, those who are retired, depending on which choice they make now, will either be in full possession of investment yield risk, managing the lump sum payment they get on their own, or at the mercy of an insurance company's solvency, in this case Prudential. Their PBGC guarantee no longer exists. Approving "standard terminations" gets the PBGC out of potential future liability, so why wouldn't it approve?

To the small number of US workers still receiving or eligible for defined benefit pensions, I view plan "standard terminations" as the biggest threat, not company bankruptcies. Again, this pension tangent is completely separate from the thread's topic, namely non-vested retiree medical benefits, which could always be terminated at an employer's whim.

 

[Sal Santamaura]

...The legal precedent I am concerned about is such decisions make it harder for the working employee to find recourse when the benefits are cut...The courts said it was OK to cut for retirees, next the courts say it's OK for active employees. Soon after that it becomes the "new normal" to not offer medical coverage at all because the courts said they didn't have to...

The courts don't have to say it's OK to terminate benefits for active employees. Unless you're bound by some collective bargaining agreement, there is no recourse should your employer announce the end of medical or any other non-vested benefit. If a trend develops and offering no medical coverage becomes the norm, it won't be because a bankruptcy court approved one corporation's request. It'll be because the supply of labor is greater than the demand and employers can purchase the labor they need without offering medical coverage.

...I don't feel that the employer/employee relationship is necessarily adversarial and that unions are the answer, although at times they serve their purpose. As benfits provided decline, union importance/usefulness will, of course, rise. I see the relationship with my employer as more cooperative. I take care of them, they take care of me, and that starts with the old hip pocket. But medical benefits run a real close second...

Labor is a commodity. Employers purchase that commodity. You can elect to view the relationship any way you like but, like all other purchase and sale negotiations, the parties involved are adversaries, each trying to get what they want. I don't see unions as a panacea, since forces conspiring against employees control so much more than just individual employers, but instead think of collective bargaining as a last stand. Recent history has shown that, without it, there's essentially no way to push back.

 

[Sal Santamaura]

We are on the fourth iteration of the "do more with less" philosophy in the last 5 years. It is driving me into the grave prematurely...

Prematurely in your mind, perhaps, but not necessarily from your employer's point of view. The earlier you die, the quicker any benefits you might still be receiving, vested or otherwise, will stop. If you don't live to retirement age, it will not be a problem to replace you for less, either through hiring an H-1B Visa holder or by exporting the work.

I think the slogan many firms use needs to be corrected so it reads "Our employees are our most important liability."

 

[BrianShaw]

 

[DREW WILEY]

I can understand the situation with Kodak because it is a legit bankruptcy and they're backed into a
corner with few options. But anagous things are happening with corps wallowing in record profits:
layoffs, longer hours with reduced pay or cancelled benefits, no new hiring, etc. This kind of tactic might be feasible to get away with at the moment, just because everyone else is doing it; but in the long run it almost never benefits the corporation. Skilled workers are not in fact a commodity, and when they're screwed over, sometimes turn out to be your most serious competitors. I've been at dinner parties for multi-billion dollar international companies celebrating their world dominance in this or that industry that were broke in six month due to such behavior. And I've listened to keynote speeches by youthful billionaires (on paper) that probably couldn't afford cab fare a year later.

 

[kb3lms]

Drew, I think you said it best yourself,

trying to pluck the last feathers off the middle class

That about sums it all up.

 

[Sal Santamaura]

...Skilled workers are not in fact a commodity...

Perhaps not in one region or country but, on a global basis, they are.

...I've been at dinner parties for multi-billion dollar international companies celebrating their world dominance in this or that industry that were broke in six month due to such behavior...

There are many, many stupid management decisions that can result in bankruptcy. Recognizing and taking advantage of the fact that governments around the world have supported treating skilled labor as a commodity isn't one of them.

...I've listened to keynote speeches by youthful billionaires (on paper) that probably couldn't afford cab fare a year later.

Youthful billionaires are no different that any other managers. Except perhaps they haven't yet made as many stupid decisions as those older than them. Buying skilled labor on the world market does not inherently lead to their downfall.

 

[DREW WILEY]

Hey Sal - I'm trying to retire and can't even find anyone to fill my shoes. There are all kinds of acquired skill sets had to be learned through years of actual experience. I'm lucky to work for a family corporation rather than a publicly-traded one, and the heirs apparent started their career here
with a broom in hand, and have to learn the ropes a step at a time like eveyone else, though of course at an accelerated rate. The only commodity career I know out there is an MBA - with a mere
diploma some of those guys can sink any business ever devised in six months!

 

[BrianShaw]

You are a better man than I, Drew. When I get ready to retire I doubt that I will have enough emotion left in my soul to care who replaces me.

 

[Photo Engineer]

When we went to work for Kodak, we signed a contract that outlined our NDA obligations and Kodak's obligations in therms of "valuable consideration" in return for our work. Valuable consideration was outlined in terms of pay, retirement and medical benefits. Over the years, all of this changed as Kodak changed. They added and then removed dental benefits and they added insurance benefits. So, the plans changed gradually. There was never a hint that they would stop. In fact, at one time Kodak added some procedures in their bylaws that would prevent a buyout / split by some takeover corp.

Today, letters were received by all retirees covering what is going on. It stated clearly that there will be no health care enrollment this year. I suspect that our carrier will notify us of what comes next.

PE

 

[BrianShaw]

Ron... was that strictly an NDA, or an employment contract? I've seen hundreds of NDAs but never one that specified compnay obligations... other than their obligation to prosecute if the NDA is violated. Most people, as I understand it, are "at will" employees and only the senior managers have employment contracts. At least that's the way it is in my field.

 

[BrianShaw]

p.s. Sorry to hear that you received "the letter". That sucks!

 

[Prof_Pixel]

I suspect that our carrier will notify us of what comes next.

Ron,

Got my letter today as well and like you, will be waiting to hear from our carrier.

Fred

(When are you next planning to go to the GEH?)

 

[Photo Engineer]

Ron... was that strictly an NDA, or an employment contract? I've seen hundreds of NDAs but never one that specified compnay obligations... other than their obligation to prosecute if the NDA is violated. Most people, as I understand it, are "at will" employees and only the senior managers have employment contracts. At least that's the way it is in my field.

I used the words "valuable consideration". That was all that was specified. At that time, I was handed a group of booklets and an employees handbook which detailed the valuable consideration. The wording of the "contract" or the contract and NDA was very vague. I never implied anything more than that. The handbooks and notebooks of information contained everything which made it non binding. In fact, as I said, it varied quite a bit over the years and we got nearly yearly updates on this. I have many of these, some of which were entitled "You and Kodak".

Fred, Mark and I are still trying to work out a date. He is very busy next week so it will probably be the week after.

PE