Employers rethink retiree benefits

August 20, 1992|By Leslie Cauley | Leslie Cauley,Staff Writer

Long-term employees at Maryland companies once could look forward to fully paid health-care benefits in their twilight years, something retirees on fixed incomes expected -- and employers gladly provided.

Times have changed.

Pummeled by health-care costs that are rising 15 percent to 20 percent a year, many companies are scrutinizing retiree benefits and deciding they can't afford them. The upshot: Companies are asking retirees to shoulder more of those costs.

"Companies used to pay for their retirees forever," said Pennie Hinds, senior consultant practice manager with W F Corroon-Herget Division in Baltimore, an international health-care consultancy. "Now they're saying 'We'll pay X dollars towards benefits, but no more.' "

The contract dispute between Bell Atlantic Corp. and two labor unions has focused attention on the benefits issue. Retiree health care is amajor sticking point in negotiations on a new, three-year labor contract -- Bell Atlantic wants new retirees to eventually pay as much as 50percent of health-care cost increases.

And many more companies -- in Maryland and across the nation -- are likely to face such fights. Nearly two-thirds of the companies that offer retiree health-care plans have taken steps to limit benefits in the past two years or plan to do so by 1993, according to a study released this week.

That's the case at Baltimore Gas and Electric Co., which instituted a new benefits program July 1 for people who retire after that date. The program also is available to current retirees on an optional basis.

Under the program, retirees are given an allotment of benefit dollars, issued as a monthly credit, that can be spent on any health care plan available through the company. Retirees who choose the more expensive plans will have to cover some costs. Those who choose less expensive plans will wind up with a surplus of credits, which the company will reimburse with cash.

Before the new plan, the company covered all medical expenses for its 3,200 retirees.

"We wanted to continue to offer health care to our retirees despite the fact that costs are going through the roof," said Elaine Johnston, senior benefits analyst for BG&E. "The only way for us to do that was to have some level of control over those costs."

McCormick & Co. also requires retirees to pay a portion of health-care costs. Company spokesman Jack Felton said the retiree plan was altered about three years ago to reflect that change. Previously, he said, McCormick picked up the entire tab.

Some companies have gone to extremes to limit retiree health costs.

One local manufacturing company, for example, plans to stop paying insurance premiums for employees who retire after Jan. 1, Ms. Hinds said. The company, which she declined to name, will maintain a group retirement plan, but employees will have to pay the premiums.

"Most companies feel they can't change benefits for people who are already retired," Ms. Hinds said. "That means changing benefits for those who are retiring in the future."

"The most common changes employers are making involve 'take-aways,' such as raising premium contributions and increasing cost-sharing provisions," said the study of health-care benefits, released this week by Foster Higgins, an international employee benefits consulting firm based in New York.

Nearly half of the 1,380 employers surveyed either have raised retiree contributions or plan to do so by 1993. Others have tightened eligibility requirements. And 3 percent of the respondents have ended coverage for future retirees altogether.

According to the study, the cost of retiree medical plans in 1991 averaged $2,486 per retiree, 9.3 percent more than in 1990.

Bell Atlantic wants its future retirees pay up to 50 percent of increased health-care costs. Those costs have historically been covered by the company, which currently lists 41,800 retirees on its books.

The unions contend Bell Atlantic is trying to break an unwritten promise to workers that was made long before the company was spun off from American Telephone & Telegraph Co. in 1984.

"Our feeling is that, over the years, workers have worked very hard to win employee-paid benefits," said Gaye Mack Williams, a CWA spokeswoman. "Once they are retired and on a fixed income, it becomes very important that they not be required to pay, and for the company not to go back on that promise."

Just ask Charlie "Boots" Buttiglieri, 40, executive vice president of CWA Local 2101 in Baltimore and a 21-year veteran of the telephone company.

Mr. Buttiglieri joined up when the telephone company was a monopoly -- and the promise of post-retirement care was guaranteed. Like other longtime workers, Mr. Buttiglieri is alarmed that Bell Atlantic would even consider asking retirees to pay so much of their health-care costs.

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