Employee Benefits: A Perilous Chopping Block
Crain's Detroit Business (05/12/02) Vol. 18, No. 18 p.11; Bailey, Laura

Legally, unless the benefit has already been accrued, businesses can terminate retirement plans or health benefits--but in doing so could lose employees. An automotive supplier, DCT Inc., filed for Chapter 7 bankruptcy and left employees with thousands of dollars in unpaid medical bills that it promised to pay through its self-funded insurance plan, but never did. The failed company was not required to offer COBRA benefits and employees were left with the bill. Other options for struggling companies exist--employers can eliminate peripheral coverage, like dental benefits, they can share the costs of benefits with employees, and can negotiate with health care providers for cheaper coverage. Self-funded plans are also an option for failing companies, but their unpredictability should be strongly considered. Companies can also cut retirement benefits-- reducing or suspending their match in 401(k) plans or vying for a blended retirement plan. Those businesses that work with unions may have more difficulty because benefits cannot be altered or extinguished without the union's approval, unless settled in bankruptcy court. Steel companies, like Vision Metals Inc.--which went bankrupt because of high cost benefits--file for bankruptcy protection, and then terminate their health care and retirement benefits.

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