Washington — The United Auto Workers union has agreed to a $355 million settlement to fund an independent health care trust to pay for retiree health care for unionized staff members and relatives — and the UAW agreed to strict financial conditions until it completes the payments.
The proposed settlement was filed in U.S. District Court in Detroit on Jan. 30 and seeks to resolve a 2014 lawsuit brought on behalf of the Office and Professional Employees International Union Local 494 and other unions including International Union, Security, Police and Fire Professionals of America Amalgamated Local 119, Staff Lawyers Union and the Newspaper Guild/Communications Workers of America Local 34022. It also covers some UAW office retirees who weren’t part of a union.
Under the deal signed by the sides in December, the UAW will pay $346 million for health care and $8.5 million to adminster a new Voluntary Employee Beneficiary Association, the same style health care trust used by Detroit’s Big Three automakers to fund health care for UAW hourly worker retirees. Similar suits were brought by the UAW against Detroit’s Big Three automakers to approve VEBAs for UAW employees.
The settlement also includes the proceeds of an earlier UAW internal retiree benefit trust, which are about $158 million. The plans cover about 2,500 active and retired employees and relatives.
The UAW will contribute $85 million to the fund upfront and pay off the balance over 15 years and will pay 5.5 percent interest on the balance. The UAW agreed that 30 percent of the net proceeds “from the sale of any real estate formerly owned by closed UAW locals” will be used to fund the health care payments.
The unions as collateral will get the first mortgage on the UAW’s Black Lake property as well as a security interest in 30 percent of the UAW affiliate credit card royalty stream. In 2013, the union wrote the value of its Black Lake Golf Course and conference center in northern Michigan to $5.7 million, down from $7.6 million.
The UAW cannot incur new debt until the balance is paid, except for short term lines of credit incurred for the purpose of strike support and total debt incurred can’t exceed $10 million.
The UAW noted the unions “have joined with the UAW in requesting court approval of the settlement, which was ratified earlier in 2014 by UAW active employees represented by the unions. The proposed settlement is similar to the retiree health care settlements the UAW reached previously with GM, Ford, and Chrysler with respect to UAW-represented employees and retirees from those companies. The settlement would create and fund an independent VEBA trust to provide retiree health care benefits to current and future retirees from UAW staff,” the union said in a statement.
David M. Cook, a lawyer for the unions who sued, noted that under the deal the UAW’s size has fallen dramatically — from 1.53 million to 391,000 at the end of 2013. Under the settlement “the assets of the new VEBA – the initial funding, along with future funding as received — will be beyond the reach of the UAW and its creditors.”
Beginning in the fall of 2013, the unions representing office workers and the UAW discussed “UAW’s ongoing financial difficulties and other challenges, and the critical importance to the UAW of restructuring its retiree health care obligation,” the proposed settlement says. “The importance of permanently restructuring post-retirement medical coverage for UAW retirees is underscored by the fact that the UAW modified retiree health care coverage for current retirees in 20I3, and asserts the right to make those and similar modifications in the future.”
U.S. District Judge Denise Page Hood must still approve the plan.
Detroit News Staff Writer Mike Wayland contributed.