Transcript “How Cuts in Retiree Benefits Fatten Companies` Bottom Lines”

“How Cuts in Retiree Benefits
Fatten Companies’ Bottom Lines”
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Companies have been cutting health benefits for their
retirees or requiring them to contribute more of cost
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In fact, well over half of large American cos face only limited
impact from increases – they’ve established ceilings on how
much they will ever spend per retiree on health care
Thanks to accounting rules, act of cutting retirees’ future
health-care benefits lets cos reduce a liability and generate
an immediate accounting gain
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FAS 106 required Ers that provided retiree health benefit to
estimate what it would cost to pay benefit over lives of retirees
When Congress passed Medicare drug benefit in 2003,
subsidies added for cos that retain drug coverage
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GM estimates Medicare prescription-drug plan will cut $4b from
its liability for retiree health care
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Source: Wall Street Journal, 3/16/04