[We’re pleased to welcome Frank Giancola, HR researcher and retired practitioner for companies like Ford Motor Company, Eastern Michigan University, and the US Air Force. Frank recently published an article in Compensation Benefits Review entitled “The Turbulent History of the Nation’s Largest Voluntary Employees’ Beneficiary Association.”]
I decided to write an article about the U.S. auto workers’ healthcare VEBA for several reasons. First, I thought that the VEBA concept was not well-known in the benefits profession and that additional coverage was warranted. Second, the history of the auto workers’ VEBA tracks the timeline of the recent decline, bankruptcies, and revival of the auto companies, one of the nation’s most important industries that directly and indirectly is responsible for millions of American jobs. Legacy health care costs were an important factor driving the bankruptcies. Third, I had the good fortune to work for one of the involved companies, Ford Motor Company, as a benefits professional, so I had first-hand knowledge of the issues and how the companies work with the hourly employees’ union, the United Auto Workers, to establish innovative employee benefit programs.
The union proposed the VEBA to the companies, as a means to protect the health care benefits of its retired members. Because of its commitment to its members, and the companies’ responsibility to its retirees and need to mitigate huge legacy costs, the parties were able to overcome monumental challenges that threatened the existence of the VEBA. The success of the VEBA demonstrates the ability of the collective bargaining process to deal effectively with a major issue in our country.
I was pleasantly surprised to see that the VEBA was able to provide medical benefits to over 500,000 retirees without encountering significant start-up difficulties, and that supplemental plan funding was obtained from reductions in the pay of active employees.
It is my hope that readers will find this history to be interesting and informative, so that when faced with the rising costs of providing health care benefits to retirees, they will have another option to consider to meet the challenge.
The abstract for the paper:
The Detroit automakers’ Retiree Medical Benefits Trust is the nation’s largest Voluntary Employees’ Beneficiary Association (VEBA). It is an independent trust with assets of $60 billion that is responsible for providing medical, prescription drug, dental and vision benefits to 720,000 hourly retirees, surviving spouses and dependents of General Motors, Ford and Fiat Chrysler. It was established in 2007 through the joint efforts of the Big Three Detroit automakers and the United Automobile Workers Union primarily to protect the health care benefits of hourly retirees and to provide the companies with financial relief from the burdens of legacy costs that eventually contributed to their bankruptcies. Although it is now viewed as a success, there were times in its history when its inception and future were seriously in doubt. A review of its history will inform HR professionals of the problems and solutions they may encounter in establishing a VEBA.
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