GM Retirees Ask, “Who’s Watching Out for Us?”

If your General Motors vehicle has doors that close smoothly, you can thank Gethin Jones and his colleagues for that. Jones worked on the assembly lines at six plants over 33 years, assembling cars and repairing any defects before they made their way to a sparkling showroom.

“When the doors close nice and they don’t make a funny sound, I’m the guy who did that,” he says.

Jones, 56, retired from a GM plant in Georgia two years ago and moved with his wife to Fort Myers, Fla., where his pension check would stretch farther because the cost of living was less expensive.

Now, as the nation’s largest automaker filed Monday for bankruptcy protection, Jones will be relying on his pension to stretch farther still. He and 485,000 other retirees and their families face cutbacks in health care coverage, including the elimination of dental and vision care and an increase in prescription drug costs. The cuts were included in a contract between GM and the United Auto Workers (UAW) that was ratified last week.

Perhaps more disturbing, the union contract allows GM to replace more than half of the $20 billion it owes to the retiree health care trust fund with stock—the value of which remains as uncertain as GM’s future—and with a $2.5 billion note. The UAW acknowledged that funding the plan with GM stock will “greatly increase the risks being assumed by retirees.”

“Depending on the value of the company’s stock, the trustees of the retiree health care trust fund may have to make further reductions in benefits in the coming years,” the UAW said on its website.

Health Care Plan Underfunded

The plan (known as the voluntary employees’ beneficiary association, or VEBA), which is headed by an independent body and run by the UAW, pays for the health care costs of GM’s retirees and their spouses. According to a White House fact sheet on GM’s restructuring, the VEBA plan will also get 17.5 percent of the equity of the newly organized company and rights to purchase an additional 2.5 percent of the new GM.

Still, given the underfunding of the VEBA plan and the uncertainty of the value of GM stock, cuts to health care plans are most likely “just the beginning” for GM retirees, says Ellen O’Brien, a strategic policy adviser at AARP’s Public Policy Institute.

“The trustees of the plan are going to be faced with tough choices over the next few years about whether to cut benefits and shift cost to workers to extend the life of the fund,” she says. “The cuts are going to be especially painful for low-income retirees for whom comprehensive health benefits are key to their financial security.”

Paying out of pocket for dental services and treatment, including dentures, crowns and cleanings, will most certainly eat away at retirees’ pension and Social Security income because Medicare doesn’t cover those expenses in most cases. Nor does Medicare cover eyeglasses, eye exams or other related treatment for those 65-plus. Those services can be extremely costly for people on a fixed income, advocates say, and vital to older adults’ health and well-being.

Not surprisingly, many retirees say they’re frustrated with health care cutbacks that result from union contracts they don’t get to vote on. At a televised roundtable discussion in Detroit involving retirees, one man accused the union of failing to represent retirees’ best interests.

Looking Out for Retirees

UAW President Ron Gettelfinger takes issue with that. “The UAW has a proud history of looking out for our retirees,” he told AARP Bulletin Today. “In accordance with our constitution, retirees do not vote, but that does not mean we do not represent them.”