The UAW Benefits Failure

via Bloomberg

A Ford Motor assembly plant in Louisville.

The experiment looked doomed at the start. Five years ago, General Motors, Ford Motor, and Chrysler, with the blessing of the United Automobile Workers union, created an independent entity to provide health insurance for more than 700,000 retirees and to manage the investments that would finance the benefits. The move was good for the automakers, allowing them to shed crushing liabilities that threatened to impede their recovery amid the Great Recession. The conventional wisdom was that the trust fund would quickly run low on money and ask union retirees to cough up large annual premiums or settle for more limited coverage. “People didn’t believe the math worked,” recalls Art Schwartz, GM’s labor negotiator at the time.

Contrary to expectations, the $61 billion UAW Retiree Medical Benefits Trust is thriving. Retirees’ drug costs are falling; dental, vision, and other benefits have even been added. What’s more, the investment fund that pays for all of it has booked double-digit annual returns in recent years. “A lot of people thought this wouldn’t hunt,” says Fran Parker, who came out of retirement in 2010 to run the trust. Parker, who previously headed a large health plan in Michigan, said in a July 10 interview that she relished the challenge. “I thought, Oh dear, I’m going to take care of the same people that I took care of when they were active. What a fitting bookend.”

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About thebenefitblog

Eric is a Producer at Lockton Insurance Brokers, Inc., the world’s largest privately held commercial broker. Eric has over 23 years of experience in the insurance industry and has spent the last 11 years with Lockton. Eric specializes in Health & Welfare Benefits, Retirement Planning, and Executive Benefits. Eric's clients utilize his expertise in the areas of Plan Due Diligence, Transaction Structure, Fiduciary Oversight, Investment Design, Compliance and Vendor negotiation to improve the operational & financial outcome for each client. The Benefit Blog is a place to share that expertise and industry news.
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