It must be pretty scary right now to be a retiree of Kodak. You work with pride for decades for an iconic American company, only to learn late in life (beyond when you can find meaningful employment) that your health and pension benefits may just be gone. Poof. Thought you could afford to keep a little house on a lake in the summer for fishing and visits from your grandchildren. Forget about it. The $40,000 pension (give or take $5,000) is now at risk, as Kodak spent all its money trying to make printers when most offices were going paperless (hmmmm). Worse, the health benefits that cover you and your ailing spouse might disappear as well.
Of course—thank goodness—you have social security and medicare (let’s hear it for the New Deal and FDR), and a few pennies of lifesaving remaining (after paying for three college tuitions, two weddings and start-up capital for your son in law’s failed restaurant). But not much else; you can’t sell your house in Rochester, New York, for any amount because the town’s largest employer—yes, Kodak—is out of business and those U.S. Savings Bonds aren’t going to last too long if you have to pay for a basketful of prescription drugs.
Sadly, Kodak retirees are not alone. Workers at great smokestack stalwarts like Bethlehem Steel and the huge auto-parts giant Delphi faced the same plight. It’s a problem that politicians cannot ignore and continue to “kick down the road” much longer. Maybe the answer lies with the work of a little-known Washington lawyer, Andrew Kramer, who recently passed away (at 67, before he had to face a long retirement without income). From the Washington Post:
Mr. Kramer represented some of the biggest manufacturing companies in the automotive, steel, shipbuilding, aluminum and tire industries. He was best known for helping his most financially distressed clients reduce or eliminate “legacy costs,” the retiree health-care benefits that could mean billions of dollars of liability in perpetuity.
This became especially important over the past 20 years, when new financial accounting rules forced companies to put retiree health costs on their balance sheets as something other than a footnote. The psychological effect was huge: Company executives and shareholders suddenly had to reckon with the immensity of their obligations.
While private companies could simply eliminate health-care benefits for retirees, unionized industries would never stand for it. Mr. Kramer was among the first to use the trust structure known as a Voluntary Employees’ Beneficiary Association to offload a company’s entire financial obligation to retiree health care…
In recent years, Mr. Kramer was instrumental in crafting VEBAs for clients such as Goodyear Tire & Rubber, the auto-parts maker Dana Corp. and Crown Cork & Seal Co. In 2007, he helped orchestrate the agreement between GM, the country’s largest automaker, and the automotive workers union that resulted in a $35 billion payment by GM into the VEBA. In return, the VEBA would pay the retiree health-care bills.
Kodak did not have a VEBA. Why not? Will it take federal legislation to require all companies to do something to protect retirees (a status we all hope to attain because the alternative is, well, likely far less interesting)? Perhaps. I leave that to folks with more expertise than me in these matters, but—and here is where the Corporate Observer gets political—is Mitt Romney the guy to tackle this problem? The same Mitt Romney who was recently quoted as saying that $370,000 of income from speaking engagements was “not very much”? Ask retirees of Kodak if they could use $370,000 right about now.