SEC Must Approve Automakers' Accounting Methods Before VEBA Can Take Effect

Main Category: Health Insurance / Medical Insurance
Also Included In: Seniors / Aging
Article Date: 17 Mar 2008 - 0:00 PDT

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The Securities and Exchange Commission must approve General Motors' and Ford Motor's accounting methods before voluntary employees' beneficiary association plans can take effect, the Detroit Free Press reports. The automakers during last year's contract negotiations with United Auto Workers agreed to contribute a specified amount of money to a health care trust that would be responsible for retiree health care, thus removing those liabilities from their books.

However, the VEBAs cannot "go into effect until Detroit automakers get their preferred bookkeeping vetted by federal bureaucrats -- and if they object, automakers can quit the deal on short notice," according to the Free Press. Lynn Turner, former chief accountant for SEC, said, "The question is, what's the likely total obligation, and what is GM still on the hook for?" adding, "That's where the attention of the SEC and investors will be."

Under the VEBA deals, if SEC rejects the automakers' plans, they can reopen negotiations with UAW to try to settle SEC's objections, or they could back out of their VEBA plans. GM in its annual report to SEC wrote, "GM may immediately terminate the settlement agreement if, after discussions with the SEC, GM does not believe that the accounting treatment ... is satisfactory to GM."

According to the Free Press, there is "no indication when the SEC might give approval" to the VEBA deals (Hyde, Detroit Free Press, 3/14).

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