Heard Off the Street: Steelworkers given new benefit option

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More than 45,000 displaced steel industry workers who are concerned about getting health insurance, or about the cost and benefits of existing coverage, have another option.

A federal bankruptcy court judge in New York approved creation of a retiree benefit plan for hourly and salaried workers at more than 50 steel companies whose pension plans were taken over by the federal government's Pension Benefit Guaranty Corp.

The companies were headquartered in Pennsylvania, Ohio and Michigan, and there are more than a dozen companies that operated Pennsylvania plants on the list, including Bethlehem Steel, LTV Steel, Edgewater Steel, Copperweld and Wean United.

The new plan is a voluntary employee beneficiary association, or VEBA, a trust set up for workers in a specific company or industry. While many VEBAs are funded with money from a company's bankruptcy reorganization plan or a union contract, the steel retiree VEBA trust created last week will be funded by a federal tax credit set to expire after 2013.

The tax credit is available to workers aged 55 to 64 who receive pension checks from the Pension Benefit Guaranty Corp. or who receive benefits through a federal program that assists workers who lose their jobs because of unfair trade. Workers in that age group who are covered by Medicare are not eligible for the tax credit.

The credit pays 72.5 percent of their health care premiums.

Workers who enroll in the trust will pay the other 27.5 percent of premiums, said Cathy Cone of Cone Insurance Group, the Houston insurance broker who negotiated group insurance rates for the trust and will administer it. Ms. Cone said depending on their age and where they live, those who enroll in the plan will pay $175 to $215 a month for medical, drug, dental and vision coverage.

Unlike "the one size fits all" steel industry, VEBA plans created for union workers, the trust will give members options to select higher or lower levels of coverage, Ms. Cone said.

"We view this as a win-win situation for a lot of these people," said Gary Kaplan, an attorney with Farella Braun + Martel, the San Francisco law firm that organized the trust.

The United Steelworkers union, which has negotiated VEBAs at Wheeling-Pittsburgh Steel, ArcelorMittal and other companies originally objected to the plan. USW spokesman Wayne Ranick said the union has established benefit trusts covering about 250,000 former workers, with about half of them being steelworkers.

According to the decision issued Tuesday by U.S. Bankruptcy Court Judge Burton R. Lifland, the union dropped those objections. However, the order requires the new plan to make clear that it is not affiliated with or endorsed by the USW. Also, the plan must make it clear to those eligible that if they drop out of their existing USW-organized VEBA to enroll in the new plan, they may not be able to get back into their old plan if they want to at a later date.

VEBAs covering retirees at Wheeling-Pitt and the former Republic Steel prohibit VEBA members from re-enrolling after they drop out.

John Saunders, a USW official with the Wheeling-Pitt VEBA, said the provision prevents members who drop out to seek cheaper coverage from re-enrolling after they have serious health problems that are not covered or are expensive under their existing plan. Mr. Saunders said it is not fair to VEBA members to burden the plan with those added expenses.

"There has to be a balance to protect those assets," he said.

Members of the Wheeling-Pitt VEBA can take advantage of the same tax credit the new plan is based on, Mr. Saunders said.

There are potential problems for VEBAs that rely on company funding. They do not guarantee that the same level of benefits will be maintained or that they will not be eliminated. Moreover, company contributions to them hinge on their ability to pay. When companies can't, retirees bear a greater portion of premium costs.

On Friday, the USW sent a message to its retirees warning the new plan is supported only by a tax credit that expires at the end of next year and that its administrative costs "appear to be higher than many existing VEBAs negotiated by the USW."

"It could be risky for any retiree currently covered by a USW-negotiated VEBA to change coverage," it warned.

Mr. Kaplan said the tax credit has been extended several times since it was established in 2002.

"I think the expectation is that it's going to be renewed again," he said. "It's a very politically popular program on both sides of the aisle."

Representatives of Cone Insurance are on a monthlong tour of Pennsylvania, Ohio, Michigan and Wisconsin explaining the steel VEBA and a similar plan for auto industry workers. They will visit Western Pennsylvania the last week this month, with stops at the Sheraton Station Square June 25 and 29, at the Ramada Inn in Greensburg on June 26, the Holiday Inn in Johnstown on June 27 and the Four Points by Sheraton in Cranberry June 28. Sessions will be held from 9 a.m. to noon and 1 to 4 p.m.

More information on the sessions can be found at www.conebenefits.com or by calling 855-407-8335.


Len Boselovic: lboselovic@post-gazette.com or 412-263-1941. First Published June 10, 2012 12:00 AM


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