UAW could put VEBA on shaky ground

Union agrees to take half from Detroit 3
BY GREG GARDNER •

PRESS BUSINESS WRITER • APRIL 28, 2009

With ranks of active UAW workers shrinking and the pool of retirees growing, the union's decision to accept half of what General Motors and Chrysler owe to the retiree health care trust is putting the fund on shaky ground.

a Voluntary Employee Beneficiary Association, or VEBA, the trust fund was hailed as part of a transformational labor deal the UAW reached with Chrysler, Ford and General Motors in 2007.

The union would take responsibility for managing health care benefits for retirees. The automakers, meanwhile, would get to take a crushing cost off their books.

But to get it started, all three companies agreed to make huge initial payments -- GM had to pay $20 billion, while Chrysler's tab was $10.6 billion. Now, with the UAW's consent, each company will pay half those amounts. "I said a year ago it wasn't viable when the market was going up," said Lance Wallach, a consultant in New York. Now, he said the VEBA is even less feasible."

Instead of the VEBA failing in 15 years, now it will fail in 6," Wallach said.

As GM announced plans to shed an additional 7,000 to 8,000 hourly jobs, the pool of people who may someday depend on the VEBA is swelling."

Everyone is very concerned about losing their health care. That's what the union fought for," said Kandy O'Neill, 40, who works at GM's Orion Township assembly plant. Thousands of hourly workers won't have the luxury of retiring early. If their plants close, they may have to shop for new coverage.

Arthur Augustus, who has 31 years with GM, said he thinks about retiring all the time. "But I'm worried about my pension and my health insurance," he said as he left work at the Detroit-Hamtramck assembly plant Monday.

Mike Earl, who works at the Delta Township assembly plant near Lansing, said he's nervous, even though his plant is to run without any breaks through summer."

There's going to be people all over the nation laid off with more seniority than me," he said. "I could lose my job."
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Lance Wallach, CLU, ChFC, CIMC, speaks and writes about benefit plans, tax reductions strategies, and financial plans. He has authored numerous books for the AICPA, Bisk Total tape, and others. He can be reached at (516) 938-5007 or lawallach@aol.com. For more articles on this or other subjects, feel free to visit his website at www.vebaplan.com.     

Lance Wallach, the National Society of Accountants Speaker of the Year, speaks and writes extensively about retirement plans, Circular 230 problems and tax reduction strategies.

He speaks at more than 40 conventions annually, writes for over 50 publications, is quoted regularly in the press, and has written numerous best-selling AICPA books, including Avoiding Circular 230 Malpractice Traps and Common Abusive Business Hot Spots. He does extensive expert witness work and has never lost a case.
Contact him at 516.938.5007 or visit www.vebaplan.com.The information provided herein is not intended as legal, accounting, financial or any other type of advice for any specific individual or other entity.  You should contact an appropriate professional for any such advice