UAW-GM Contract Would Divert Cost-of-Living Increases To Fund VEBA

Main Category: Health Insurance / Medical Insurance
Article Date: 04 Oct 2007 - 10:00 PDT

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A "little-observed detail" in the tentative contract agreement between United Auto Workers and General Motors that would create a voluntary employees' beneficiary association is that "workers will be diverting a substantial amount" of their cost-of-living adjustments "to pay for the rising cost of health care, for both active workers and retirees," the Detroit Free Press reports (Webster, Detroit Free Press, 10/3).

Under the VEBA, GM will transfer about $50 billion in retiree health care obligations to an independent trust fund to be managed by the union. Earlier this month, UAW selected GM, which has been the strongest proponent among the automakers of creating a VEBA, as its lead negotiation partner. The GM contract expired on Sept. 14 and was extended on an hourly basis during negotiations. Contracts with Ford Motor and Chrysler Group were extended indefinitely while negotiations between UAW and GM were under way. Local UAW officials are presenting the contract to the union's 73,000 GM rank-and-file members, and they have until Oct. 10 to vote on ratification (Kaiser Daily Health Policy Report, 10/2).

The amount of COLA pay that will be diverted was reported in the contract as a continuation of a 2-cent quarterly diversion that was part of the 2005 UAW-GM health care deal. An additional 4-cent quarterly diversion will be added to the VEBA, and another 4-cent quarterly diversion will go toward active workers' health care. According to a Free Press analysis -- which three company and UAW officials close to the negotiations said is accurate -- the COLA diversion over four years equals $1.50 per hour.

In the last quarter of the contract, it will amount to $60 less per week per worker, or $240 per month. The COLA diversion would total about $6,240 in reduced pay per worker over the duration of the four-year contract. GM will receive $270 million through COLA diversions for active workers and $180 million for the VEBA, according to the Free Press. However, there will be small or no changes in comprehensive health care for active workers. UAW has said copayments for prescription drugs will remain at current levels and doctor visit copays will increase to $25, up from $10 under the 2003 contract.

Comments
Greg Shotwell, a GM worker and union activist who runs Soldiers of Solidarity, said, "They're pennies, but they are pennies per hour, and they add up."

Harley Shaiken, a labor expert at the University of California-Berkeley, said the COLA diversions were the "least painful approach" that UAW and GM "could likely come up with," adding, "It doesn't mean it's not painful -- it is painful -- but it's the least painful approach the union felt that it could take" (Detroit Free Press, 10/3).

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