Modifications
to Retiree Programs
Joint Programs Modified
Joint Programs - Tuition Assistance Programs
The parties agreed to suspend the Tuition Assistance Program for the
current fiscal year. Effective June I, 2009, TAP will be suspended
for all active, retired, and laid off employees, as well as surviving
spouses of deceased employees. The UAW-GM Center for Human Resources
Joint Activities Board of Directors will review TAP in the future
to determine when funding is sufficient for reinstatement to levels
agreed to during 2007 bargaining.
Joint Programs - UAW-GM Scholarship Program for Dependent
Children (DSP)
Based on the projected decline in CHR revenue, the UAW-GM Center
for Human Resources Joint Activities Board of Directors agreed to
suspend the UAW-GM Scholarship Program for Dependent Children effective
January 1, 2009. It was further agreed that the Board would review
DSP in the future to determine if funding is sufficient and it is
feasible to consider the program for reinstatement.
Joint Programs - Child Care and Elder Care Resource and Referral
(CCECRR) Program
During these negotiations, it was agreed that sixty (60) days following
the effective date of the agreement, all CCECRR services will be
insourced and administered by the CHR Work/ Family Department utilizing
current CHR resources and staffing. The services of the CCECRR program
will be limited to the basic items such as providing Child/Elder
Care network information and disseminating Work/Life Balance material
to eligible VA W-GM active traditional employees. The cost to administer
the CCECRR program excluding employee wages and benefits will not
exceed $150,000 annually. The CHR Joint Activities System (JAS)
will also be utilized to disseminate agreed upon CCECRR basic information
and services to UAW-GM active traditional employees.
Addendum to Voluntary Employee Beneficiary Association (VEBA)
Agreement:
New funding structure aids company viability
The Future Outlook
In the early years of the VEBA's existence, it is unlikely that
the VEBA will be able to sell the GM stock. The new VEBA will therefore
be required to use the $10 billion in immediate contributions from
the Internal VEBA at GM, along with the assets of the Mitigation
VEBA and the $585 million annual cash dividend payment on the Preferred
Stock due in 2010 and 2011, to provide retiree medial benefits during
2010 and 20 II. Because of the uncertainty regarding the long term
value of the GM stock, the Committee will likely be required to
make further adjustments in the benefit levels for 2010 and 2011.
The extent of those future adjustments will depend on many factors,
including investment returns in the Internal and Mitigation VEBA's
during the remaining months of 2009.
If the GM stock can be sold in 2012 or thereafter for significant
value, the Committee will be able to take that new value into account
and restore some or all of the benefits that are being reduced under
these arrangements. [in other words, if the current restructuring
efforts are successful and the company returns to viability, the
UAW retirees stand to reap the benefit of that recovery through
the VEBA's significant stock ownership.
Pension Plan Maintained
At various points in the process, the Company, the Government and
other creditor groups argued that the pension plan covering UAW
retirees should be terminated. The Plan's funding status has been
negatively impacted by conditions in the stock and bond market,
and GM's UAW Pension Plan is currently underfunded.
A pension termination would have been devastating on UAW retirees,
since the government's pension insurance program does not guarantee
full benefits. In particular, early retirees who are receiving the
Social Security supplemental benefits would have seen very dramatic
reductions in their pensions.
The Company also demanded that the pension plan be "frozen,"
which would have meant that employees would cease earning additional
years of credited service, or that the UAW agree not to bargain
to improve pension benefits over the next ten years.
We successfully fought these efforts to terminate, freeze or otherwise
restrict the benefits payable under the pension plan for UAW retirees.
The agreement requires that GM maintain the UAW pension plan without
change, which means that retirees will continue to receive benefits
at their current levels without interruption or reduction. We also
did not agree to any limits on our ability to bargain over pension
benefits in future negotiations.
Retiree Life Insurance and Legal
Services Benefits
Both GM and the Treasury Department also argued that GM should eliminate
its responsibility for retiree life insurance and legal services
benefits, and that those benefits - if any - should be shifted to
the VEBA. We successfully resisted those efforts. Both the Life
Insurance and Legal Services benefits will remain the responsibility
of GM and will continue in accordance with the current agreements
covering those programs.
Addendum to Voluntary Employee
Beneficiary Association (VEBA) Agreement:
New funding structure aids company viability
Benefit |
Change |
| Prescription Drug Co-Pays |
Retail (34 day supply) |
| |
• $10 Generic
• $25 Brand
Mail Order (90-day supply)
• $20 Generic
• $50 Brand |
| Catastrophic Plan for retirees and surviving
spouses who fail to pay required monthly contributions |
No longer offered. Retirees and surviving spouses
currently in Catastrophic Plan will be given opportunity to
join regular plan. |
Coverage for Erectile Dysfunction (ED) medications
(e.g. Viagra, Cialis, Levitra)
|
No longer offered, except in prior authorized
cases of Pulmonary Arterial Hypertension
|
Coverage for the Proton Pump Inhibitor drug
class (e.g. omeprazole, Prilosec, Zegerid,
Nexium, Achiphex, Prevacid, Protonix)
|
No longer offered, except in prior authorized
cases of Barrett's
Esophagitis and Zoellinger-Ellison Syndrome
|
| Vision Program |
No longer offered |
| Dental Program |
No longer offered |
| Emergency Room Co-Pay |
$100 (waived if admitted) |
Medicare Part B Special Benefit ($76.20 per
month for retirees enrolled in Medicare)
|
No longer offered by health plan.
This modification is not applicable to approximately 21,500
retirees and surviving spouses who retired or began receiving
surviving spouse benefits before October 1979, and whose benefit
is provided through the pension trust. The payments will continue
for these pre-1979 retirees and surviving spouses.
|
| "Low Income Retirees" (less than
$8,000 annual pension and monthly basic benefit rate of less
than $33.33) |
Monthly contribution requirement of $11 (flat
rate regardless of family status)
In all other respects, these retirees and surviving spouses
will be included in same plan as other retirees and surviving
spouses.
|
| Monthly Contribution Requirements (General
Retirees) |
No Change (currently $l1/single and $23/ family) |
| Deductible and Co-Pay Requirements (General
Retirees) |
No Change (currently $164 annual deductible
and $273 annual (single) out-of-pocket maximum) |
Sponsored Dependents and Principally Supported
Children
|
Consistent with changes made to the active
medical program, the retiree medical program will not allow
the designation of new "sponsored dependents" or "principally
supported children." The provisions allowing new dependents
to be added as
a result of adoption or legal guardianship will continue in
effect.
|
Addendum to Voluntary Employee .Beneficiary
Association (VEBA) Agreement:
New funding structure aids company viability
Mitigation VEBA Assets Transferred. Under the 2005 agreement, an
independent VEBA is already operating and is responsible for providing
dental benefits and certain "mitigation" payments (i.e.
covering a significant portion of the co-pays, deductibles and contributions
that retirees would otherwise be required to pay under the 2005
agreement). Under the 2007 Agreement, the assets in this existing
independent VEBA (called the "Mitigation VEBA") will be
transferred into the New VEBA on January 1,2010. It is expected
that the assets in the Mitigation VEBA will be approximately $700
million on Janary I, 20 I 0 but the actual balance will depend on
investment performance and other factors during the balance of 2009.
VEBA Committee can adjust benefits beginning in
2010: As under the 2007 Agreement, the VEBA will be governed by
an II-member Committee, including 5 members appointed by the UAW
and 6 Independent Members. Under the 2007 Agreement, that Committee
had the authority, starting on January 1,2012, to adjust benefits
so that benefit levels can be kept consistent with the assets in
the Trust. Under the tentative agreement, the Committee will be
allowed to make necessary benefit adjustments beginning when the
VEBA assumes responsibility on January 1,2010.
The VEBA will have the right to designate a member
of GM's Board of Directors, with UAW consent. The VEBA will be required
to vote its GM shares in accordance with the direction of the Independent
Directors on GM Board.
Immediate Changes in Benefit Levels Required
Under the 2007 Agreement, GM remained responsible for providing
retiree medical benefits through the end of 2009, with the new VEBA
taking over responsibility on January 1,2010. In the discussions
over the last several weeks, the Company sought an "early implementation"
of this transition. Had we agreed to that approach, the assets of
the VEBA would have been depleted to pay benefits for the remainder
of 2009.
We succeeded in avoiding this depletion of the VEBA's
assets during 2009, and GM will therefore continue to provide retiree
medical benefits for the balance of 2009 until the new VEBA takes
over responsibility. In exchange, however, the Treasury Department
insisted that the benefits be immediately reduced to reflect GM's
difficult financial situation. In order to maintain the support
of the Government, therefore, we were required to agree to the changes
in benefits detailed in the chart on page 13. These changes will
be effective on July I, 2009 (or later if court approval is delayed
beyond that date).
Addendum to Voluntary Employee Beneficiary Association (VEBA) Agreement:
New funding structure aids company viability
Background
Retiree medical benefits were one of the most significant issues
addressed in 2007 bargaining. The 2007 National UAWGM Agreement
established a new Trust Fund (called a "Voluntary Employee
Beneficiary Association" or "VEBA"), which is responsible
for retiree medical benefits starting on January 1, 2010. The 2007
Agreement established a series of cash contributions by the Company
to the VEBA, beginning on January 1,2010.
As described in the letter at the front of this
summary, GM today stands at the very brink of bankruptcy. Without
government financial assistance, GM would certainly fail, with devastating
consequences including massive plant closures and a probable liquidation
of the company. In a liquidation, the VEBA funding would likely
be completely eliminated, which could likely mean an immediate and
permanent termination of all retiree medical coverage. In liquidation,
the pension plan would also certainly have been terminated, which
would cause dramatic and painful reductions in pension benefits
for many thousands of GM retirees. In order to avoid a liquidation,
the government will be providing massive additional financial support
to assist GM in completing its restructuring.
In order for GM to receive the necessary government
support - which will allow the Company to complete its restructuring
and continue operations into the future - we were required to support
a series of changes to the retiree medical and VEBA agreements.
Tentative Agreement Restructures Future
VEBA Funding Obligations
Existing Internal VEBA Assets Transferred on January 1,2010. Along
with the new payment structure described below, on January 1, 2010
the VEBA will receive the assets of an internal trust fund maintained
at GM (called the "Internal VEBA"). The value of the assets
in that fund is currently approximately $10 billion. The Company
had sought to use these assets to cover the cost of benefits prior
to the January 1,2010 implementation, which would have depleted
these assets and diminished the cash balance in the New VEBA. We
successfully resisted these efforts and so the New VEBA will receive
the full value of these Internal VEBA assets on January 1,2010 consistent
with the approach outlined in the 2007 agreement.
The assets in the Internal VEBA have been invested
by GM on the VEBA's behalf since January 1,2008. The value of these
assets has been negatively impacted by conditions in the investment
market during 2008 and so far in 2009. These assets will continue
to be invested during the balance of 2009 and will be transferred
to the New VEBA on January 1, 2010.
New $2.5 Billion Note. Under the new funding structure,
the VEBA will receive a new Note, payable in cash, with a Principal
Amount of $2.5 billion. Cash payments under the new Note (including
accrued interest) will be $1.384 billion payable in 2013, 2015 and
2017.
New $6.5 Billion in Preferred Stock. The VEBA will
also receive Preferred Stock in the restructured company with a
face value of$6.5 billion. This Preferred Stock includes a 9 percent
cash dividend payment structure, under which the VEBA will receive
$585 million annually for as long as it holds this stock.
VEBA to own Significant GM Common Stock. Another
requirement of the Treasury Department loans was that a portion
of the value received by the VEBA be in the form of common stock.
To meet that requirement, the VEBA will receive 17.5 percent of
the stock in the restructured company. The remaining stock will
be allocated between other creditors of the company and the United
States Government. The overall restructuring of GM will eliminate
a tremendous portion of GM's other debt obligations. With a greatly
improved balance sheet, as well as with the significant restructuring
of business operations, there is a realistic prospect that the stock
in the new company will represent significant value in the future.
If and when that occurs, a significant portion of that value will
be captured by the VEBA through this stock ownership.
Warrants.
In addition to the direct ownership of the Preferred and Common
Stock described above, the New VEBA will also receive a Warrant,
which represents an additional 2.5 percent of the Common Stock of
the new company, with a strike price determined by an aggregate
$75 million in equity value. This will allow the VEBA to realize
additional value if the stock of the company exceeds that value
at any point prior to expiration of the new Warrant.
The new VEBA agreement includes mechanisms for the
VEBA to sell the Common and Preferred Stock, as well as the new
Warrants, to other parties under certain conditions.
Pension Pass Through Eliminated
One funding mechanism under the 2007 Agreement was called the "Pension
Pass Through." Under that arrangement, the new VEBA was scheduled
to impose an additional monthly contribution requirement, and the
GM pension benefits were to increase in a corresponding amount.
This mechanism has been eliminated and its value is instead reflected
in the new Note and other instruments described above.
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