U.S. Labor Department proposes exemption to allow new health plan for General Motors retirees to acquire company securities

The U.S. Department of Labor's Employee Benefits Security Administration (EBSA) today announced a proposed exemption that, if granted, would allow the General Motors Co. (GM) to transfer company securities including common stock, preferred stock and a $2.5 billion promissory note, to a health plan established for the company's retirees. The retiree health plan will cover approximately 700,000 retirees and dependents when it becomes effective on Dec. 31, 2009.

GM is the successor company that purchased substantially all of the assets of General Motors Corp. (the old GM), which filed for bankruptcy on June 1, 2009. GM is headquartered in Detroit, Mich.

The large transfer of employer securities to the plan violates the Employee Retirement Income Security Act (ERISA). ERISA prohibits certain plans from holding large percentages of plan assets in the form of employer securities. The law gives the department authority, however, to grant exemptions that protect the interests of plan participants and beneficiaries.

The exemption would allow the securities transfer, permit GM and its health plans to reimburse each other for benefit payments mistakenly paid by the wrong entity during the transition to the new plan, and permit GM to recover mistaken deposits to the plan.

A major condition of the proposal is the appointment of an independent fiduciary to represent the plan with regard to GM securities transactions. The independent fiduciary will determine in advance of taking any action regarding the securities that the action is in the interests of the plan and its participants and beneficiaries. The proposed exemption also requires the review of benefit payments by an independent third party administrator and auditor for each of the plans and an objective dispute resolution process. In addition, the proposal set time limits for return of mistaken deposits and an objective dispute resolution process.

The proposed exemption is scheduled to be published in the Sept. 18, 2009, edition of the Federal Register. Comments on the proposal and any requests for a public hearing should be submitted to gm@dol.gov or by fax to 202-219-0204. Paper-based comments should be sent to the Office of Exemption Determinations, Employee Benefits Security Administration, Room N-5700, U.S. Department of Labor, 200 Constitution Ave. N.W., Washington, D.C. 20210, Attention: Application Number L-11568.

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GM Retirees Call for Congressional Protection of Benefits

/PRNewswire/ -- Following denial by the federal bankruptcy court of the General Motors Retirees Association application for a benefits committee to protect GM salaried retirees, GMRA is now asking the U.S. Congress to act immediately in defense of the benefits these GM retirees earned through decades of labor and loyalty to GM.

"We at GMRA are deeply disappointed by the failure of the bankruptcy court to allow us to take reasonable steps under Section 1114 of the Bankruptcy Code to protect the health and security of all GM retirees," said John Christie, GMRA President. "The court, in our opinion, did not do what was necessary to permit all parties to be treated fairly."

"While the GMRA leadership will consider all the legal options available to us, we now look squarely to the Obama administration and to the U.S. Congress to make certain there is a fair process and outcome for all GM retirees," said Christie. "GM retirees always expected to sacrifice as part of GM's restructuring, but one group of retirees shouldn't bear the bulk of that burden. Surely our elected officials can intervene to protect the sick and elderly from poverty when these people worked hard and played by the rules."

The majority of all General Motors retirees have been represented by the United Auto Workers in negotiations with the GM leadership and bondholders on pension, healthcare, and other benefits.

However, over 122,000 salaried retirees and their surviving spouses were not part of the UAW agreement and have had no representation in discussions about the new GM. These non-union, salaried retirees were engineers, project managers, clerks, and other employees. Many earned annual salaries equal to or less than the wages earned by union employees.

For the non-UAW retirees, who live throughout the United States, the current GM proposal would reduce certain benefits by two-thirds, including the outright elimination of dental, vision, and long-term disability coverage. The retirees would see significant increases in premiums, co-payments and deductibles for health care.

The non-UAW retirees also would face an immediate reduction of life insurance benefits following the emergence of the new GM from bankruptcy. In some cases retirees would lose $70,000 or more in life insurance benefits.

"For people living on a fixed income, the benefit losses proposed by GM are breathtaking," said Karen DeOrnellas, Director of Communications for GMRA. "These retirees are old. Many are sick or disabled. In almost all cases they cannot make this money back or return to work."

GM retirees have written GMRA to say the latest proposals for benefit losses will make them choose between paying for prescription drugs and paying for food, electricity, and housing. Many will be unable to replace lost life insurance, jeopardizing the ability of their spouses to remain in their homes.

"We want a reorganized GM to succeed, but bankruptcy shouldn't push tens of thousands of retirees and their families into poverty or endanger their health when those people did nothing wrong," said DeOrnellas.

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