Citing memos to workers, the report says that worker contributions to health care premiums would soar to about half of the medical plan costs from about 20% currently. The increases will be effective October 1. The changes, which affect 3,500 US employees as well as thousands of retirees, are expected to save the company $20 million a year.
Health care costs are widely expected to experience another double-digit increase this year (see HMO Costs Trend Higher ), while at the same time a growing number of employers are cutting back on perks and retiree health benefits.
The shift in burden is all the more disconcerting for workers in view of the company’s decision last summer to increase its health care contributions for retired workers by 2% each year for 10 years, according to the report.
The company is under extreme financial pressure, having already missed bond interest payments in July and August ? and says it will miss a payment to its banks later this month. The Cambridge, Massachusetts-based firm has reached interim agreements with the banks and some of the bondholders as it looks for buyers for some or all of its assets.
Last fall, Polaroid told retirees in another memo that if they had health coverage available from another employer, they had to quit the Polaroid plan, according to the Globe report.
The action is also likely to stir up concerns about the plunging value of Polaroid stock, which has lost 92% of its value this year. Many employees bought stock as part of an effort to block a hostile takeover attempt in 1988 by Shamrock Acquisitions. Additionally, Polaroid established an employee stock ownership (ESOP) plan at that time, in a controversial move to place even more stock in “friendly” hands.
Employees currently own about 17% of the firm’s 45 million traded shares.
From the Archives – the Impact of FAS 106 on the retiree health care decision .