Expert: Allen - 2/28/2008

Question
I worked for, and retired early from, a local plant of a worldwide manufacturing company. The pension is funded thru Northern Trust. This plant is closing down this year. My monthly pension is about $500, minus the $288 each month they take out to cover our medical insurance. There are about 50 employees left in this plant. They are being offered a $240,000 buyout, or monthly pension of $1450. Neither has medical insurance included. The insurance ends for all in Oct of 2009. How is it fair to offer the remaining employees, some who worked a lot less years than the retirees, a pension so much higher than the existing pension? There may be a raise of up to $23 per month for the existing retirees. They are basically dividing up the balance in the pension fund, which is about $142,000,000 at this time, among the remaining employees. Shouldn't it be divided between all employees, including retirees? They are, in effect, cutting the retirees pensions, by eliminating their insurance. It will take the whole pension to purchase health insurance thru other means. Is there any group that I can notify to find out if this is legal?

Answer
Unfortunately, I believe everything they are doing is legal.

There are two separate issues;
1. They are giving an extra pension benefit but it only goes to current employees. This is permitted.

2. They are discontinuing retiree medical insurance. This is usually permitted. It would depend on the wording in the benefit package.

There are two possible ways you can proceed if you want to check that this is legal. You can contact the local office of the U.S. Dept. of Labor - Employee Benefits & Security Administration. They may be able to verify this and help you. Alternatively, you can contact an attorney who is knowledgeable about ERISA. Unfortunately, the attorney could be very expensive.