Kodak retirees lose health, welfare benefits

Matthew Daneman and Tom Tobin, USA TODAY | USATODAY

Eastman Kodak won court approval Monday to quit providing health and welfare benefits to 56,000 U.S. retirees and dependents.

The ruling, made Monday by U.S. Bankruptcy Court Judge Allan Gropper, is a major one in Kodak's Chapter 11 bankruptcy and restructuring. Kodak had been seeking court OK to quit offering such benefits by the end of the year.

Kodak currently spends about $10 million a month on such benefits.

In bankruptcy, "Individuals may see their life savings lost or lose their jobs. Bankruptcy can have a particularly painful affect on retirees," Gropper said, before going on to say — regardless of the financial pain to retirees — that the benefits move is legal, fair and reasonable.

The two largest wedges of the retiree-related debt are health coverage for 32,000 Medicare-eligible retirees, representing a $440 million liability on its balance sheet, and the Survivor Income Benefit for 7,500 people representing a $510 million liability.

The Survivor Income Benefit, which Kodak quit offering in 1995, guaranteed that 30% of a retiree's pension annuity would get paid to a surviving spouse. It came at no cost to Kodak workers, unlike the related Joint & Survivor pension benefit, through which retirees could elect to receive less money monthly with the guarantee that a surviving spouse would continue to receive payments.

Since filing for Chapter 11 protection in January, Kodak has made a number of painful cuts to stay afloat. By the end of the year, it will have laid off nearly 4,000 workers worldwide, sold off numerous operations, vacated real estate around the nation and shut down its digital camera business.

Many retirees already have felt financial hardship from the bankruptcy. The company in January ended the Kodak Excess Retirement Income Plan and Kodak Unfunded Retirement Income Plan — a pair of supplemental pension plans for highly compensated retirees.

Kodak first targeted retiree benefits in March, when it proposed eliminating the Medicare Advantage plant it provides to post-1991 retirees. The company yanked that proposal after objections from retirees and prodding by Gropper, with the end result being formation of a committee to represent retirees' interests in Kodak bankruptcy. That committee negotiated a settlement with Kodak that allows it to end its retiree health spending in exchange for $635 million in claims against the company. When Kodak emerges from bankruptcy, the money paid toward those claims will be put into a fund to help pay for future retiree benefits.

Daneman and Tobin also report for the Rochester (N.Y.) Democrat and Chronicle