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Judge asks tire maker, union for more information on health-care trust
By Jim Mackinnon
Beacon Journal business writer
Published on Saturday, Apr 12, 2008
A federal judge is in no hurry to approve the proposed $1 billion-plus independent health-care trust that would pay benefits for about 30,000 United Steelworkers who retired from Goodyear.
U.S. District Court Judge John R. Adams on Friday afternoon told lawyers representing the union, Goodyear and parties to a class-action lawsuit that he needed more and better information on the long-term financial viability of the Voluntary Employees Beneficiary Association, or VEBA. The Steelworkers and Goodyear agreed to create the VEBA as part of a settlement to the union's 85-day strike in 2006.
After ending a two-hour hearing at U.S. District Court in Akron, Adams left the bench shaking his head slightly after saying he will review the latest paperwork and might call another hearing in a week or ask for more evidence.
And that left teams of lawyers huddling and scratching their heads in the courtroom trying to figure out exactly what kind of actuarial information the judge said he needs.
Adams gave preliminary approval to the trust in December after Goodyear and the union agreed on the initial proposal in late October. Good
year has said it will pay $1 billion into the trust, after which it will no longer be responsible for Steelworker retiree health-care benefits. The trust requires court approval; the process began with the filing of a class-action lawsuit. Goodyear expects to save $110 million a year and take $1.2 billion in liabilities off its books with the creation of the VEBA.
Judge feels duty
Adams said he has a heightened sense of duty and obligation over the creation of the trust because of the number of people it will affect.
''My task here today is to decide if the proposed settlement is fair,'' Adams said. He said he needed to see such things as the projected number of retirees over at least the next five years, inflation rates, the age of retirees and more. The VEBA agreement, in part, appears to be based on the anticipation that the federal government will be involved in health care at some point, he said.
''There's a whole host of issues I hoped would be addressed here today,'' Adams said.
Instead, new information presented to him on Friday was a three-page, seven-paragraph affidavit, he said.
Short-term projections show the VEBA will be financially viable for the next three years, he said.
''I'm concerned over the long term, not the next three years,'' Adams said.
Young vs. old
Steelworkers who are currently working will be required to pay a substantial part of their earnings into the VEBA to keep it viable, Adams said. Working Steelworkers will pay part of their cost-of-living increases and profit sharing into the fund.
Because of that, the VEBA has the potential to pit the interests of current workers against the interests of retirees, Adams said.
Lawyers said the VEBA should be able to last as long as 30 years, depending in part on the amount of contributions from working Steelworkers and the cost of paying out benefits to retirees. While there is a risk the VEBA could find itself in financial trouble, there is also a risk that Goodyear could find itself in bankruptcy in 30 years, too, the Steelworkers argued.
''You say everything will be fine for three or four years. After that, I don't know. That's a problem,'' Adams said.
The parties to the VEBA preliminary agreement will provide any additional information that the court requests, said Goodyear spokesman Keith Price.
According to the Steelworkers, there were 3,625 retirees in the Akron and Stow area as of the beginning of 2006, plus an additional 1,403 spouses, who would be covered under the trust. Nationally, there were 30,068 Steelworker retirees and spouses whose health-care benefits would be covered by the trust. The trust will not pay benefits to retired Goodyear salaried employees.
Some observers pleased
Several retired Steelworkers who came to the courtroom said they were pleased with how Adams handled the hearing.
''He's giving it some thought before he makes a decision. I'm very impressed with him,'' said Joe Calhoun, 78. The Akron resident, who worked for Goodyear for 41 years, was accompanied by his wife, Jean.
''I was very impressed with the judge. He didn't make a rash decision,'' she said.
''His approach to the whole situation was nothing like what I expected,'' said Doug Werstler, 61, former president of Steelworkers Local 2 who retired from Goodyear after 38 years. ''He held everybody's feet to the fire and said you should have had this information for me.''
The VEBA will be run by a committee made up of three union representatives, two retiree representatives and four public members with expertise in benefits. Goodyear will have no one on the committee.
There were 29 objections to the VEBA filed with the court, according to Adams. Friday was the last chance to object in person before the judge; one person briefly objected on behalf of her elderly father.
Jim Mackinnon can be reached at 330-996-3544 or jmackinnon@thebeaconjournal.com.
A federal judge is in no hurry to approve the proposed $1 billion-plus independent health-care trust that would pay benefits for about 30,000 United Steelworkers who retired from Goodyear.
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