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Auto Parts Retirees Benefit from Auto VEBA Trust

By Carolyn J Dawson
TMCnet Contributor

Subsidized healthcare benefits will now be accessible to thousands of retirees of auto part manufacturers. A Voluntary Employee Benefit Association or VEBA known as the Auto Retiree VEBA Trust will be created as per direction received from the U.S. Bankruptcy Court for the Southern District of New York. Due to VEBA participation, substantial federal tax credit will be made available for the subsidized healthcare benefits. Health Coverage Tax Credit eligible benefits will be provided for the first time through this industry-wide VEBA.

Retirees of Metaldyne Corporation of Plymouth, Michigan will be the beneficiaries of this trust. A VEBA under Bankruptcy Code Section 105 and IRS Code Section 35(e)(1)(K) was successfully established by Farella Braun + Martel Restructuring & Insolvency practice partner Dean M. Gloster. Retirees of Metaldyne and other auto part manufacturing companies with ages between 55 and 65 will benefit from the Auto Retiree VEBA Trust. The headquarters of these auto part manufacturing companies however need to in the states of Ohio, Michigan or Wisconsin in the past or present. The federal Pension Benefit Guaranty Corporation also needs to be providing the pensions for these companies. Regardless of current state residency, retirees of Allis-Chalmers, Amcast, Collins & Aikman, Delphi, Hayes-Lemmerz International and dozens of others are now eligible for the subsidized healthcare benefits.

The advantage of the federal Health Coverage Tax Credit can be taken by Auto Retiree VEBA Trust participants. Participants, their spouses and dependents can reimburse sixty-five percent of health insurance and prescription drug premiums. This includes dental and vision care premiums of any combined program. If the Trade Adjustment Assistance program is renewed by President Obama on October 21, 2011, the reimbursement rates are expected to rise to 72.5 percent.

In a release, Gloster said, "The Auto Retiree VEBA Trust offers a lifeline to tens of thousands of retired auto parts workers across the country facing high healthcare costs who were forced to retire at a much younger age than expected, with reduced pensions."

According to Gloster, affordable and critically important benefits for retirees will be provided by the Auto Retiree Trust VEBA and its use of the Health Coverage Tax Credit.