UAW Retiree Medical Fund Reports $20.7B Shortfall
Wednesday, October 14, 2015
By: Aaron Cole
A United Auto Worker retiree medical fund created to reduce healthcare costs and increase services for more than 700,000 people reported a $20.7 billion difference between assets and future liabilities, Bloomberg reported Wednesday (via Automotive News). The shortfall increased be more than $16 billion over the last report. >p>A similar system proposed for Fiat Chrysler Automobiles workers in the union’s first proposed contract — which was rejected by workers nearly 2-to-1 — was scrapped in the second contract.
Accounting for future inflation and longer average lifespan are to blame for the increased shortfall, according to the report.
When it was created in 2007, the fund for retirees was created to stem out-of-control healthcare costs for former workers and their families, and to move health care costs off of the automakers’ books.
Funded in 2010 by $59 billion from the union and automakers, Bloomberg reported that the $60 billion in assets reported by the fund for 2014, was roughly the same as what it started with when it began.
The Wall Street Journal reported that conservative accounting and discount rate projections by the fund led to the higher-than-expected shortfall.
“Both of these changes … impact all private pension and retiree medical plans in the country,” the fund said, according to the Wall Street Journal.
The retirees’ health care fund filings were not made public before FCA’s first round of voting on its proposed contract.