Retirees Control Their Benefits

By Gunsch, Dawn | Personnel Journal, August 1993 | Go to article overview

Retirees Control Their Benefits


Gunsch, Dawn, Personnel Journal


When The Jesup Group Inc. bought Uniroyal Plastics Company Inc. in October 1986 for $110 million. it was counting on the newly acquired firm to bring in $13.5 million a year, based on information supplied by the seller.

The buyer and seller based the purchase price and funding on this amount--an amount necessary to help The Jesup Group cover not only the interest payments from the acquisition but also the acquisition's retiree benefits, pension obligations and environmental liabilities. As The Jesup Group began to total the year-end figures, however, it discovered a terrifying truth: Uniroyal Plastics had brought in less than $5 million.

For the next four years, The Jesup Group, then based in Stamford, Connecticut, sold off its operations to make ends meet, but it wasn't enough. Although the company's total annual sales in 1990 were $200 million, it was paying out $17 million a year in health-care costs alone, 14 million of which was for benefits for retirees of Uniroyal Plastics. (Employees of Uniroyal Plastics belonged to the United Rubber Workers (URW) union, which had negotiated a lifetime, fully paid medical-insurance plan for its members and their dependents.)

The high benefits costs, combined with a greatly underfinded pension plan, large environmental liabilities and an income that was much lower than had been predicted, meant financial doom for The Jesup Group. Efforts to restructure the company proved unsuccessful. In November 1991, the operations of The Jesup Group filed Chapter 11 in South Bend, Indiana.

When the case reached the courts, the interests of retirees became a major topic. While it was in financial trouble, The Jesup Group had failed to pay for many of the medical claims that retirees of Uniroyal Plastics had filed. (The plastics company had been self-insured.) Some former employees had bills that were outstanding from medical practitioners that totalled between S20,000 and $50,000, which the practitioners were unable to collect from either Uniroyal Plastics or The Jesup Group. One retiree owed nearly $150,000 in medical bills.

The court and the company's trustees appointed 25 retirees to serve on an official retirees' committee and represent the retirees' interests. he court also authorized the committee to hire legal counsel and consultants. Committee members hired Randall Light, a senior manager in the Human Resources Management Consulting Group of Crowe Chizek, based in South Bend. Light attended committee meetings and asked the retirees what they wanted.

"Those meetings were pretty emotional," Light says. "The retirees didn't trust the company." The retirees indicated to Light that they felt that the firm had lied to them and cheated them out of money, and that they weren't happy at all about the way in which things were handled. The bankruptcy code required that if the operating organizations of The Jesup Group were providing benefits to retirees at the time during which their parent company filed the bankruptcy petition, then part of their reorganization plan must include benefits for retirees. The code didn't specify the amount of funds that The Jesup Group had to allocate to the retirees or how much time was allowed for it to continue payments.

By December 19, the company, the URW and the retiree committee agreed on a new, scaled-down benefits plan. The organization would pay only for prescription coverage for retirees older than 65 who were eligible for Medicare, and only for catastrophic medical coverage for those retirees who were younger than age 65. Although the retirees agreed to this plan, they didn't like it. They wanted more-extensive benefits than what the company could give them.

They also had strong opinions about what they wanted for their future benefits. They didn't want the same situation to occur again. They no longer wanted their former employer to self-insure their benefits but instead wanted a plan that was fully insured by an insurance company. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Retirees Control Their Benefits
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.