Labor peace threatened over a cut down in employee benefits

Several big companies could likely face labor strikes as a result of the push in cutting employee benefits, starting from pensions to health insurance. Considering major employers, like Detroit, CSX Corp., Verizon Communications Inc. and others, an approximate number of union workers would be 400,000 whose contracts are up for negotiation this year.

The labor talks offer companies a means to reduce their pension burdens, which have ballooned since the financial crisis, thus leaving several plans underfunded and piling up on profits. Most labor talks involve some head-butting over benefits. But this time, it’s the “Cadillac tax” on health-care plans and pension burdens that are cutting off on profits. The tax, that is meant to help fund insurance for the previously uninsured under the Affordable Care Act, is 40% a year on the amount by which employer-sponsored plans exceed $10,200 for individual coverage and $27,500 for family coverage.

According to Fran Shammo, the Chief Financial Officer, executives at New York-based Verizon want to “redesign and reshape” health plans in a bid to cut overall cost, as also to rein in pension expenses. In an attempt to do so, the company is in talks in Rye, New York, and Philadelphia with the Communications Workers of America as well as the International Brotherhood of Electrical Workers. The opening offer included pension-plan changes, increases in employee health-care premiums, a 2% boost in wages for this year and the next, and a lump-sum payment of $1,000 per worker in 2017 in lieu of a raise. However, none of the two unions appreciated it.

While, as per Verizon, its union health plans for a worker with one or more family members will cost an average $20,000 a year, well above the $16,800 national average; the unions are of the view that having made many concessions during the financial crisis, and with the companies collecting in record profits, they don’t want to give up any more.

As a matter of far-sightedness, big employers foresee a hefty excise tax kick on the generous employee health-care plan in 2018. The tax is urging them to consider shifting workers to less costly plans, especially the ones with high deductibles.

According to Detroit, health costs have been growing unsustainably fast, and that there will be measures taken to keep them in check. Meanwhile, CSX has implemented consumer-driven plans co-paying for prescription drugs to try to “ratchet back” costs. About 85% of the company’s workforce is unionized.

One of the representatives in the ongoing talks was of the opinion that the aim wasn’t to cut down the value of the plans below the Cadillac Tax, but hold their rate of growth in order to mange the expense.

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