Kaiser to Court: Let Us Drop Retiree Benefits, DB Plans

January 12, 2004 (PLANSPONSOR.com) - As part of its effort to emerge from bankruptcy by mid-year, Kaiser Aluminum wants to dump a broad range of retiree programs including post-retirement benefits and its DB plans for hourly workers.

>According to a news release from the Houston-based firm, it has asked a Delaware US Bankruptcy judge for permission to drop:

  • post-retirement benefit programs (including medical and life insurance) that were expected to cost $60 million in 2003. The cutbacks would affect 4,000 salaried retirees and dependents in company retiree medical programs and 7,000 hourly retirees and dependents in company hourly retiree medical programs.
  • its hourly employee DB plans that would be taken over in a distress termination by federal pension insurer Pension Benefit Guaranty Corporation (PBGC). The request also covers the implementation of replacement benefits under DC plans for active hourly employees. Approximately 7,000 hourly retirees or surviving spouses are currently receiving monthly payments from various Kaiser-sponsored defined benefit retirement plans. The PBGC takes over private DB plans from distressed or bankrupt companies to continue making pension payments.

“This is a difficult but essential step in order for Kaiser to complete it’s restructuring and emerge from Chapter 11 in mid-2004. Unfortunately, the exhaustive analysis that we’ve done in support of our business plan shows that the restructured Kaiser Aluminum will be unable to continue to fund pension and other post-retirement benefits as they are presently offered,” said Kaiser President and Chief Executive Officer Jack. Hockema in the statement. “We have discussed possible compromise positions with organized labor – and with the official committee of retired salaried employees. Despite the filing of these motions, we expect to continue such discussions.”

Kaiser has also asked for the OK to throw out some of its US-collective bargaining agreements including those with the United Steelworkers of America and the International Association of Machinists. The affected collective bargaining agreements cover the following Kaiser plants in the United States: Trentwood and Mead, Washington; Gramercy, Louisiana; Newark, Ohio; Sherman, Texas; Tulsa, Oklahoma; and Richmond, Virginia.