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Company: 1 Retiree: -1
by Jill Schlesinger

StrategicPoint of View
Company: 1 Retiree: -1

October 20, 2005: This week General Motors stock forged higher because it had successfully negotiated concessions from the United Auto Workers. The deal did not focus on wages or current employees but on health care benefits for union retirees. If you are keeping score, mark this move as follows: Company +1, Retirees -1.
I surely do not blame GM for making this dealóin fact, it was one of the few ways that the company can simply tread water in a an industry rife with problems. With skyrocketing health care costs that companies never anticipated, they just could not keep the original deal that they had negotiated without putting the core business at risk in the future. So GM followed a number of large employers like Sears, Delta, Lucent and Northwest Airlines, not to mention a number of municipal employers. This is one of those impossible situations where there are no good options. As a retired pilot said to me recently, "I know that they need to cut my benefits to save the company, but it still hurts me."
How likely is that you will lose what you have? The most vulnerable are former salaried employees. When companies seek reductions or are in bankruptcy, the first class of employee that is up for grabs is nonunion retirees. Yes, there may be some written contractual obligation, but often these agreements have language that allows the company to blow up the deal down the road under certain circumstances.
But donít think because you are unionized that you are immune from cuts. As the UAW retirees just learned, sometimes the union has to play ball with the company, especially in light of the recent bankruptcy by GM auto parts maker Delphi. The reasoning is that it is more important to preserve most of the retirement benefits, like pensions, than put the whole thing at risk with a potential bankruptcy. If the company does declare bankruptcy, you will likely lose your health benefits anyway.
So how can you protect yourself if you have been counting on health retirement benefits from a large employer? The first step is to imagine your retirement years without that very valuable benefit. You will quickly come to the conclusion that the best thing to do is to save extra money for health coverage while you are working. If you are already retired and are receiving health care benefits, you should be squirreling away extra money just in case. As is the case with most risks in your financial life, a little extra savings can usually help guard against unforeseen events.

The data referred to above was taken from sources believed to be reliable. StrategicPoint Investment Advisors has not verified such data and no representation or warranty, expressed or implied, is made by StrategicPoint Investment Advisors . For more financial information visit

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