Levi Strauss Hems Retiree Health Benefits

September 18, 2003 (PLANSPONSOR.com) - Escalating health-care costs and financial woes have led Levi Strauss & Co. to hem retiree health benefits and cut off future retirement health benefits for new employees as well as many current employees.

The cuts come as Levi’s forecast a $40-million payout for retiree health claims this year and “stagnant or declining sales in our primary retail channels,” according to a San Francisco Chronicle report. Among the changes to the retiree health plan, scheduled to go into effect January 1, 2004 are:

  • a $10 to $15 increase in copayments for most brand-name prescription drugs, bringing the copayment to $30 or $45
  • a $50-per-person annual deductible applied to the drug benefit
  • discontinuing other Medicare-supplement benefits for retirees who are 65 and older
  • discontinuing coverage for “any portion of the cost of Medicare Part B,” limitations that also apply to benefits for retirees’ spouses.

However, the alterations, which will impact approximately 1,300 retirees and their spouses, do not affect former plant workers, Levi’s said. The company declined to say how much it expects to save by cutting back on retiree medical plans.

Current Employees

In addition the reductions being folded into the retiree health benefit, current and future employees will also see the reduction scissors. Among the changes being run down the current employee seam:

  • a new $50-annual prescription drug deductible
  • “slightly higher” co-payments factored into medical plans effective in 2004.

Future medical coverage is also impacted for current employees. Under the new plan, current Levi’s employees will qualify for future retiree medical coverage only if they are over 40 by January 1, 2004, with at least 55 years combined in age and service at Levi’s. In addition, at the time of retirement they must be at least 55 years old and have 15 or more years of service to qualify for post-employment medical benefits.

As for new employees, Levi’s plans to zip up all future retiree life and medical benefits for new hires at the company’s San Francisco headquarters and its other US sales offices.