On Friday the steelmaker and the United Steelworkers of America (the Union) said they don’t expect to have enough money in the Voluntary Employee Beneficiary Association (VEBA) trust to pay retiree health care claims incurred after that date.
LTV said that if there are any funds remaining in the VEBA trust after the payment of claims incurred on or before March 31, a plan will be developed with the Union that will provide for a ‘fair and equitable’ distribution of the remaining assets on behalf of the retirees and eligible dependents now covered by the VEBA trust.
Hourly retirees and surviving spouses who are currently receiving medical insurance coverage from LTV Steel will have the opportunity to continue coverage for a limited time if they pay the full premium for this coverage under the terms of COBRA.
Last December a federal bankruptcy judge approved a plan that extended unemployment and insurance benefits to laid off and retired workers of LTV through the end of February, as the company worked to sell its mills. At the time, it was thought that medical and life insurance benefits for retirees might be preserved until the middle of the year. However, the US Bankruptcy Court’s order said that LTV’s obligation to pay for hourly retiree health care and life insurance benefits would cease when the funds in the VEBA trust were exhausted.
The exhaustion of the VEBA trust funds will not affect the Company’s hourly pension plans.
The steel industry continues to struggle with the burden of its pension obligations, and some large firms have broached the idea of government-supported consolidation of those obligations as part of an overall rescue plan for the industry.
LTV, which was the nation’s third-largest integrated steel company, filed for bankruptcy protection last December.
The steel industry has presented the PBGC with some of its largest liabilities on a historical basis (see A Table of the Top 10 Pension Fund Failures ), and the large retiree pension and health liabilities continue to represent a financial challenge for the beleaguered industry. Some of the older steel firms have been lobbying for a government package that would permit the consolidation of those obligations.
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