Big Three Union Retiree Medical Fund Suffering $20.7 Billion Shortfall

In 2007, the UAW created a trust fund that provides healthcare benefits for retired UAW members of the “Big Three” automakers. The fund is intended to help control healthcare costs for former workers and their families. This trust was supposed to be the answer to rising healthcare costs for retirees and the shrinking pool of active employees subsidizing the retirees’ costs. The union and automakers provided the fund with $59 billion in 2010, but the fund’s assets have only increased to $60 billion since then. In other words, the fund has made almost no progress in the past four years. Because healthcare costs are projected to continue increasing, this rate of progress will not be sufficient to continue paying for the retirees’ rising healthcare costs.

The fund recently reported a $20.7 billion difference between its assets and future liabilities. The report announcing the shortfall blamed future inflation and longer average life span for the projected shortfall. Notably, a solution to this deficit has not yet been articulated.

Rising healthcare costs continue to be a concern for retirees and active union members alike. It appears that the UAW’s healthcare solution will not have long-term sustainability. There is no doubt that healthcare will continue to be one of the most thoroughly negotiated provisions in collective bargaining agreements as employees do not want to eliminate coverage options and employers seek to have employees shoulder a larger percentage of the cost increases.

Matt Austin is a lawyer based in the Columbus, Ohio office of Roetzel & Andress, LPA who limits his practice to representing employers dealing with labor, employment, and OSHA matters. You can call Matt at (614) 723-2010 or email him at maustin@ralaw.com.

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