CTNA Makes Healthcare Funds Available for USW Retirees

The United Steelworkers stated on April 15 that Continental Tire North America, (CTNA) has agreed to make US$158 million in payments to a retiree health insurance fund. The settlement is in response to a lawsuit filed by the USW and a number of retirees when CTNA implemented a $3,000 cap on its payments for retiree health coverage, a change that increased monthly health coverage fees for some retirees up to $1000 or more.

“This was an unconscionable attempt by an employer to strip away benefits from retirees who had already paid for them with a lifetime of work,” said USW president Leo W. Gerard. “We couldn’t let that happen, especially given the current shambles of our country’s health care system.” The lawsuit asserted that CTNA’s changes to its retiree health care coverage in April 2007 violated federal law. Last July, Judge Jack Zouhary of the Northern District of Ohio agreed by ruling that the company had no right to reduce or terminate benefits.

The settlement provides for a fund to provide retiree health benefits for a group of about 2,300 retirees as well as about 100 active employees who are eligible for coverage upon their retirement. When the settlement becomes effective, CTNA will make payments into a Voluntary Employee Benefit Association (VEBA) to be used for retiree health benefits, which are worth about $158 million in today’s dollars. The payments include:

$40 million immediately; $3 million compensation to Class Members for the period in 2007 when Continental Tire’s $3,000 cap on its contributions for all Class Members was in effect; $21 million paid in seven annual instalments; and Retiree Medical Benefit Liability Payments paid over twenty years, with an approximate present value of $94 million.

CTNA’s corporate parent, Continental AG, is providing a corporate guarantee for $65 million of the $94 million Retiree Medical Benefit Liability Payments. If the settlement is approved by the court and becomes effective in 2008, retiree health benefits for this group will be provided through a new retiree health care plan that will be funded by the VEBA, as of January 1, 2009. If the settlement becomes effective in 2009, the new plan will begin to provide benefits on January 1, 2010. Until the settlement is approved, CTNA is providing interim benefits for most Class Members’ households.

The VEBA trust Committee will consist of five members, two of whom will be appointed by the United Steelworkers. CTNA will have no representatives. The committee will have the power to establish benefit levels, including the ability to raise or lower benefits for plan participants.