In a 1998 letter from his former boss, David George was promised health insurance for the rest of his life. In a letter in May, the same boss told him those benefits will be yanked at the end of August.
For George, a former employee of Schmidt Baking Co. in Fullerton, the company's move to terminate health care benefits for him and 66 other retirees has left him and others angry - at the bakery and his union - and grasping for options.
The situation has grown so touchy that the company felt compelled to craft another letter telling retirees that the Aug. 31 deadline will be extended while Schmidt seeks less costly health benefits for them, an official said yesterday. The company, one of the largest commercial bakeries in the region, will mail the new letter this month, the official said.
"We don't want to be hostile; we just want what was promised to us in retirement," said George, 64, who worked as a bread delivery salesman for 33 years. "We all put a lot of years in with the company. We all got the same letters."
Schmidt's move to phase out retirees' health care benefits for both union and non-union members began 2 1/2 years ago as part of a plan to cut costs and avert a bankruptcy filing at the financially troubled company, union and company representatives said.
Over that period, about 200 nonunion retirees lost their coverage.
Faced with double-digit health care cost increases and a weak economy, many companies across the country have been scaling back their contributions to health care coverage for current and future retirees.
And, in rarer cases, health policy experts said, companies are simply ending the benefits for current and future retirees - a move that Schmidt has made.
The number of employers offering retiree health benefits declined from 66 percent in 1988 to 34 percent last year, said Tricia Neuman, vice president and director of Medicare policy for the Kaiser Family Foundation, a nonprofit health policy research organization.
"There has been a fairly steady decline in the share of employers offering retiree heath care benefits at all," Neuman said. "But typically they tend to terminate coverage first for future retirees and protect current retirees."
Schmidt is a 117-year-old company that makes Sunbeam, Blue Ribbon and Old Tyme bread brands. Its majority owner is John Paterakis Sr., a prominent Baltimore real estate developer and owner of other food businesses that include H&S Bakery and Northeast Foods Inc. Paterakis bought a 58 percent stake in Schmidt three years ago.
The bakery employs about 600, and is run by C. Peter Smith Sr., Schmidt's president and a descendant of the company's founders.
Neither Paterakis nor Smith, who sent the benefit termination letter to George and other retirees in May, returned phone calls seeking comment.
But Don Mann, vice president of human resources of Paterakis' Northeast Foods company, said the company would let retirees know in the forthcoming letter that it is negotiating with health care providers for better rates for the retiree group.
He said retiree health care costs had become an "enormous liability" for Schmidt, though he could not say how much the company spent each month on their health care bills.
"The intent is not to drop anybody cold ... ," Mann said. "We've been talking to the union and we've let them know we're in the process of putting something together [for the retirees]. We're not going to bounce them on the street at the end of August.
"We're shopping for better deals for them," Mann said. "What we're really looking for is something suitable that we can transition these folks into so the cost will be minimal to them."
Mann said the company's move to reduce retiree health benefit costs is part of a broad effort to stabilize its financial health. Over the past three years, Schmidt has cut three vice president positions, abandoned territories in Pennsylvania and New Jersey, and closed a bakery in West Virginia, he said.
Schmidt was able to eliminate nonunion retiree health care costs sooner because it did not have to deal with labor contracts. But the company was also able to negotiate with the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union to eliminate language in various labor agreements that provides for retiree benefits, according to union and company representatives.
"We're working with them to keep them from filing bankruptcy and losing all our contracts," said Gary Oskoian, the principal officer and financial secretary for Local 68 of the bakery union.
"Bankruptcy is a possibility. ... We would have to renegotiate new contracts if they file bankruptcy."
Said Mann: "It's not going to be nearly as bad as people want to think it is. Perhaps when we address some of the uncertainty on their part, that will calm things down for them."
