According to a company Web statement , under terms of the agreement, AK Steel will transfer all of its health care (other post employment benefit or OPEB) obligations for the covered retirees to a Voluntary Employees Beneficiary Association (VEBA) trust, which will be managed solely by the retirees’ designees and will be used to fund the retirees’ covered benefits. AK Steel agreed to initially fund the VEBA trust with a contribution of $468 million and provide three subsequent annual contributions of $65 million each, for a total of $663 million.
In exchange for the funding, AK Steel will have no further liability related to the Middletown Works retirees covered by the agreement, according to the Web statement. The company said the settlement agreement covers about 4,600 current Middletown Works retirees.
The company said it expects the initial trust contribution to occur in the first quarter of 2008. As of June 30, 2007, AK Steel’s total OPEB liability was approximately $2.1 billion, of which approximately one-half was related to the Middletown Works retirees covered by the settlement, the announcement said.
The retirees filed the lawsuit in July 2006 asking the U.S. District Court for the Southern District of Ohio to bar the company from making them pay monthly health insurance premiums, eliminating vision and dental coverage, eliminating Medicare subsidy benefits, and reducing life insurance coverage (See AK Steel Retirees Ask Court to Bar New Health Care Plan ).
AK Steel said the settlement agreement is subject to approval by the court.