True to form, George Bush is kicking working people in the gut one last time on his way out the door -- and not even the retirees will be spared this time. The administration's auto bailout package calls for all manner of new concessions from the United Auto Workers, but
the one that really caught my eye comes straight from the playbook of Marie Antoinette: using automaker stock to fund retiree health care. The deal calls for the union to "accept stock as half the companies' payments into a trust fund that will take over retiree health care expenses in 2010."
So there's the Bush Administration solution to the rising cost of health care for retirees. Let them eat stock!
Here's the background. The UAW struck a deal last year with the Big Three to take over retiree health expenses via a series of three trusts in contract talks last year. The companies are facing the need to make nearly $60 billion in payments to bankroll the trust funds for its hourly workers. Granted, those obligations are a central question needing resolution in any effort to get Detroit back on its feet. But forcing beneficiaries to rely on the automakers' near-worthless, fluctuating stock to fund health insurance? That's a new high in circular creativity.
Employer-funded retiree health plans are a disappearing breed, and the shrinkage isn't limited to unionized workers. GM, for example, announced plans earlier this year to cancel retiree health benefits for its salaried workers. For people over 65, these benefits supplement Medicare, but for younger retirees -- including those who have been laid off -- these benefits are the sole lifeline.
Overall, the rising cost of retiree health poses a serious threat to the financial security of older Americans. Two studies released earlier this year pegged out-of-pocket health expenses during the retirement years at well over $200,000 for most people.
Fortunately, the Bush targets are non-binding, and likely will be revisited by the Obama Administration next year. Here's hoping the new team replaces cake with something a little more substantial....universal health insurance, perhaps?
I've posted more background and resources on this issue over at RetirementRevised.com.