Kodak asks Judge to cancel retiree medical benefits
Sad news for the folks who gave their lives to Kodak. Stiffed (potentially) by Kodak.
As seems normal today, the people who actually did the work are left holding the bag. Promises that were made upon hire, and again upon retirement, are conveniently forgotten so that the leaders whose hands have not been dirty in years can keep their grossly oversized paychecks.
Don't bet your own benefits on anyone else.
Yep, we certainly know that now but what people were being told several years ago was completely different. "Don't worry, come work for us and you will be taken care of when you retire!" Pfft!
I find it strange that this is even possible. Over here, a company pension fund is managed by a third party financial institution and the company has no access to the funds. I would have thought the same would be true of a US medical/pension fund.
As far as medical care is concerned, over here,the NHS covers everyone before, during and after their working lives.
"People who say things won't work are a dime a dozen. People who figure out how to make things work are worth a fortune" - Dave Rat.
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Most of the pension obligations are already mostly or fully funded, and are safe from the bankruptcy procedure.
The problem is with the additional retirement benefits. Unlike pensions, which can be funded by purchasing annuities (where the insurance companies take the risk) medical and other benefits cannot practically be funded by buying "insurance" at the time of retirement. A company offering such retirement benefits is forced to pay them out of monies generated by current operations, plus any monies set aside by the company at the time of retirement.
Kodak may very well have set aside what seemed to be sufficient funds at the time of the affected employees' retirements, but the costs for the benefits have escalated more than expected, and the returns on monies invested have shrunk more than expected.
If Kodak was financially healthy, they would be able to cover these shortfalls as part of their recurring expenses. They are not, so they have proposed funding them at an amount slightly more than 1/2 of the expected full costs (657 million vs. 1.2 billion). If the proposal is accepted, the employees will end up not having to share the benefit of that 657 million with the other unpaid creditors.
In the US, those benefits are very expensive. I would say though that for the employees, having pensions substantially secured along with more than 1/2 of the other retirement benefits is painful but still far from being "stiffed" in the context of a bankruptcy as large as Kodak's.
Kodak's other creditors are apt to lose far more. And its shareholders (many of whom were employees) will lose vastly more.
“Photography is a complex and fluid medium, and its many factors are not applied in simple sequence. Rather, the process may be likened to the art of the juggler in keeping many balls in the air at one time!”
Ansel Adams, from the introduction to The Negative - The New Ansel Adams Photography Series / Book 2
Here we got something similar: a fund, financed by all employers who offer company pensions, that in case of insolvency will take care of the company pension funds, to keep them off the insolveny assets.
Originally Posted by Steve Smith
But as the Agfa/AgfaPhoto case shows an insolvency still can produce severe difficulties for pensions.
But to avoid confusion:
This appeal by Kodak is aimed at the medical benefits, not the pension.
A statement by a Kodak retiree Association:
"...in the motion going to the court Kodak proposes to eliminate Kodak retiree health and welfare benefits. This includes benefits such as health care, life insurance, dental insurance, and some portion of the SIB. It DOES NOT affect the pension plan known as KRIP (Kodak Retirement Income Plan). KRIP is funded and managed separately from Kodak operations. We have been advised that KRIP is currently sufficiently funded to continue to provide the monthly pension check everyone receives. The very best way for KRIP to continue unaffected is to have Kodak successfully exit bankruptcy in 2013."
Last edited by AgX; 10-11-2012 at 03:23 AM. Click to view previous post history.
I brought this up a year ago. While it is true that the pension fund is short by at least $1.5B (and I say closer to $2.5B as their growth assumptions are unrealistic), PE stated that most retirees took a cash-out or are in a separate fund. So while some retirees will lose out, most have taken steps to protect themselves.
Hmm. How easy it seems to be. As a Kodak employee you were promised certain benefits.
But...guess what, we seem to have underfunded your pensions. The exact amounts are uncertain but let's just say that it is A LOT OF MONEY!!!
Oh...those medical benefits we promised to provide throughout your retirement years. Hmm, not so sure about those. We may have to toss those promises in the toilet. That kidney transplant you needed, sorry, you will have to pay for that. Sure hope you have Medicare or some other health insurance plan. That hip replacement? You may have to postpone that.
But, that's ok, everyone certainly understands that we need that money to survive as a company. Oh, and to pay our salarys, and pay for our stock options, and pay for our Senior Executive Retirement Plans.
Besides, MOST of our former employees have already taken some steps to try and protect themselves so not very many people will be hurt by this action. Probably just the ones that need it the most.
What? You say that those former employees don't have enough to cover those extra expenses? Well, that isn't our fault. They shouldn't have relied on our promises. They should have known better and taken care of themselves.
Bankruptcies are always ugly. This one is no different.
"They are the proof that something was there and no longer is. Like a stain. And the stillness of them is boggling. You can turn away but when you come back they’ll still be there looking at you."
— Diane Arbus, March 15, 1971, in response to a request for a brief statement about photographs