ArvinMeritor Inc. said Tuesday that it has started an 18-year plan that will lead to the elimination of health coverage for all of its retirees.
The supplier will begin next April, when it requires retirees under the age of 65 to double their monthly health care contributions. The supplier of aperture and undercarriage systems, drivetrains, braking and suspension systems and emission technologies said it will eliminate all coverage for retirees over 65 on Jan. 1, 2006.
Thats when expanded Medicare prescription-drug benefits take effect under the Medicare Reform Act passed by Congress and signed by President Bush last year.
ArvinMeritor retirees in the United States and Canada who are under 65 will see annual increases until 2023, when the supplier will phase out coverage for its retirees altogether.
Rich Greb, senior director for benefits at ArvinMeritor, said the changes were made because health care is rising at a rate of 10 percent each year, one of the companys fastest growing expenses.
The health care changes are due to the cost pressures were under and the industry were in, he said. With the changes taking place in medicare we hope to eliminate those costs. We gave our employees advanced notice of our changes so they could prepare.
Among the suppliers 32,000 employees, 2,000 are retirees under 65 and 5,000 are over 65. The retirees were sent letters this week explaining the changes.
Currently retirees under 65 pay an average of $50 per month for health benefits, ArvinMeritor pays about $450. Retirees over 65 pay about $25 per month for health benefits, the company pays $225.
Greb said health benefits for active employees are under review
Some retirees affected by the changes are represented by the UAW and the United Steelworkers Union of America unions. A UAW official declined to comment except to say that the union has a good relationship with ArvinMeritor.
Steelworkers official Michael OBrien said any changes made to employees represented by the union would have to be discussed during bargaining, which is set to take place at the end of the year.
ArvinMeritor is ranked 18th on the Automotive News ranking of top suppliers to North American automakers with nearly $2 billion in sales in 2003.