When employers don't honor contracts, we're all
in trouble

By Edward J. McElroy
President

Last month, USA TODAY invited me to write about retiree healthcare. Without question, the price of healthcare is a serious problem that we need to address.

We’ve all seen the headlines about how more than $1,000 of the cost of a new General Motors car goes to pay for the healthcare of current and former GM employees. Companies like GM are trying every trick in the book to shed collectively bargained obligations that guarantee retiree health benefits. In both the public and private sectors, retiree healthcare is seen as a budget buster.

How serious is this problem? While costs vary, a 2004 study prepared by the Citizens Research Council of Michigan found that the state’s retiree healthcare bill will grow to 20 cents of every dollar of payroll by 2020, triple the cost in 2004 and seven times what is was in 1991.

Creating even more sticker shock, new Government Accounting Standards Board requirements will change how the accounting is done in a way that may create unnecessary hardship.

Pressure to roll back employee benefits is growing across the country. Employers are saying they must rein in the cost of retiree healthcare. Last year, AFT members in Minnesota’s Crosby-Ironton School District went on strike for 39 days, one of the longest teacher strikes in the state’s history. The only issue on the table: retiree health benefits.

We can’t expect citizens who have few or no retirement benefits to stand up for those of us who do. As I pointed out in USA Today, in the 25 years that I negotiated contracts for AFT affiliates, no one ever threw money at me.

Retirement health benefits weren’t a gift, either. No one gives away these benefits. They are traded.

Hard-working AFT members and others earned these benefits over many years, in effect deferring compensation until now. Workers trusted that these benefits would be there when they needed them most. As painful as it may be, employers need to honor their contractual obligations. Violating these long-held promises is nothing short of theft.

We need to work toward a national healthcare solution, but that will take time. Meanwhile, obligations don’t disappear. We’re not talking about a commodity. We’re talking about people in their retirement years.

As a nation, we’re in the middle of a retirement security crisis. The just-released federal budget calling for billions in cuts to Medicare makes it worse. We dodged a bullet in the Social Security fight last year, but it created a feeling of “social insecurity” in millions of Americans. And no one can feel good about the fact that more than 2,000 companies have unloaded their pension obligations on the federal Pension Benefit Guarantee Corp.

The elimination of pensions and other retiree benefits at companies like United Airlines, while top executives lock in lucrative retirement awards, is scandalous.

Our retirement security problem, as bad as it is, moves to a completely new level when the government fails to live up to its obligations.

Everyone who has a pension or retirement benefits should be alarmed. If employers are allowed to walk away from their obligations, contracts of all kinds become meaningless. And when the government doesn’t live up to its obligations, it doesn’t matter where you work. We’re all in trouble.