Trust Updates Archive
(Feb. 26, 2009--Chicago, IL) -- Health and life insurance costs to retired salaried employees are not vested benefits, a federal bankruptcy court ruled yesterday, clearing the way to terminate them. The ruling for Delphi Corporation, a General Motors spin off, is expected to save the firm $70 million a year, reducing long-term debt by more than $1 billion.
Delphi can cut funding as early as April 1, 2009, under the ruling by Judge Robert Drain, U.S. Bankruptcy Court for the Southern District of New York. However, that date may be extended if the Delphi Salaried Retirees Association, a group formed earlier this month, appeals the decision, as is expected.
Drain's ruling also requires the bankruptcy trustee to report to the court by March 6, if any retiree benefits are vested, for example disabled employees. However, the trustee only has to review the benefits of those retirees that file an appeal with the trustee "in an individual capacity." Additionally, the bankruptcy trustee is also to determine if retirees are eligible for a federal tax credit that would pay 65 percent of their health care premiums, of the Pension Benefit Guarantee Corporation were to takeover the pension plan. Drain has scheduled a March 11 hearing to review the trustee's reports.
While many companies have reduced or frozen benefits, totally eliminating them, say legal sources, is rare. Drain's ruling could have widespread impact as more large firms are expected to cut costs through bankruptcy reorganization. Health care costs in the U.S. account for 15.2 percent of Gross Domestic Production, according to the World Health Organization or more than $2 trillion a year.
For a copy of the ruling (Click Here) .
For more on this topic, see the upcoming issue of Trust Regulatory News.
No statement in this issue is offered as or should be
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