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FAQs about Retiree Medical Coverage/Costs and Other Aspects of the AFA US Airways Contract Proposal for 2004
1. At this time can anyone give us reliable advice about whether retiring now would ensure continued benefits in the future?
No one: not AFA, the Company, MEC or LEC officers, nor any other flight attendant can give you reliable advice about whether retiring now will help you to ensure continued benefits in the future. This is particularly true of retiree medical coverages.
2. Why is this the case?
There are two main reasons why it is impossible to give reliable information now. The first reason is that there is not a definitive agreement yet with the Company. Several proposals have been exchanged and negotiations are continuing. The Company has announced that, if an agreement is not reached, it may ask the Court to reject our existing collective bargaining agreement. That action, if successful, may well affect the retiree health benefits of current employees. Second, the Company has announced that it will seek to modify or terminate retiree medical coverages under section 1114 of the Bankruptcy Code. |
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November
5, 2004 E -Line Addendum |
| In this MEC E-Line
message concerning retiree medical benefits, we advised you of the
uncertainty which exists concerning what will happen with those
benefits both for current retirees and actively employed flight
attendants. We have just received notice that US Airways has
posted its own statement on the Hub concerning retiree medical
benefits which describes the changes which the Company intends to
seek through negotiations or the Bankruptcy Court process.
It is critical to note that
the Company's proposed changes have not yet taken
effect, and that it is uncertain if they ever will take effect
as set forth in the Hub. As we advised in the E-Line, and the
Company states at the end of its posting, the changes proposed
will require Bankruptcy Court approval, and the ultimate form of
retiree medical benefits may differ from what the Company has
currently proposed. While it is important for flight attendants to
be aware of USAirways' intentions, it is also important to keep in
mind that today's posting on the Hub is only a statement of
intention, not a description of changes which have been approved. |
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The Company is currently negotiating with a Retiree Committee on this issue, and may well file a motion asking the Court to impose a change. Thus, until the issues of possible contractual changes (either through negotiation or a Court order) and of possible retiree health benefit changes through section 1114 are resolved, we cannot know the kind or cost of retiree coverage that will be available in the future. In addition, as long as the Company is in bankruptcy, it has the statutory right to seek even additional modifications to retiree health benefits.
3. Is COBRA continuation coverage available for retirees?
Yes, retirement is a qualifying event for COBRA. Typically, the term for COBRA coverage is 18 months. There is a special rule for retirees when the bankruptcy of the company is the reason for losing coverage. In that case, the retiree must be offered COBRA for life. Spouses and others claiming COBRA through the retired employee are entitled to coverage until the first to occur of their death or 36 months after the retired employee dies.
4. In light of this lifetime COBRA right, isn't it best to retire as soon as possible?
Not necessarily. Remember that COBRA provides the right to continue to participate in the underlying group policy by paying the full premium amount plus an administrative fee of 2%. The problem with COBRA coverage is that it depends on the continued existence of the group plan. There are several scenarios under which the underlying group plan might be changed or terminated. The Company could seek to modify or terminate retiree medical coverage under section 1114, or later cease offering that plan altogether whether because of liquidation or sale of the business, or other means. Retiree medical coverage is a benefit that is particularly vulnerable to modification, change, and termination.
5. Do we know what the cost of retiree medical coverage would be?
No. At this time the Company has not yet priced the cost of the COBRA premium for either pre-65 or post-65 retirees. Remember that the COBRA cost is the full cost of the plan for each participant. There is no Company subsidy. In addition, the Company can charge a 2% administrative fee on top of the premium amount. There is no limit on how much the cost of coverage can increase each year.
6. Medical coverage is critical to me. What choice is most likely to help me keep coverage?
The choice most likely to help you maintain coverage is to keep working. Although coverages and cost for the current medical plan for active employees may change in the future, the medical benefit for active employees is probably far less likely to be eliminated or dramatically reduced than medical coverages for retirees. Also, the cost is likely to continue to be significantly subsidized by the Company.
7. The current proposal talks about a catastrophic coverage plan. What does that mean?
In the proposal, the Company agrees to look into the availability of a lower cost catastrophic option for post-retirement medical coverage for pre-Medicare retirees. This kind of plan would cost less than a traditional major medical plan and would have high deductibles, in the range of several thousand dollars. This kind of plan is designed to cover only those kinds of medical treatments that cost many thousands of dollars, such as heart surgery or treatment following serious accidents. This kind of coverage is not readily available. The Company is open to looking for this type of policy but has said that it is not interested in offering it in addition to the plans presently available. If found, this type of plan might be offered instead of one of the plans presently offered.
8. Are other options being explored?
Yes. AFA is looking into other options. We are hoping to find other plans that cost less than the COBRA option for retirees and may be more stable in terms of coverages and costs in the future. We met last week with an ALPA representative and Company representatives to talk about a Medicare supplement plan for post-65 retirees. This plan appeared to offer coverage in the range between the 90% and 100% options presently offered by the Company for less than the current cost. Follow-up is needed with the Company's bankruptcy counsel to see if this plan could be offered as a substitute plan for the Company plan with COBRA. Bankruptcy Court approval would be necessary to offer this plan in any event.
We also talked to CWA representatives about joining with AFA to offer this type of plan and other plans for retirees. CWA is interested in exploring this option further. To offer such plans, we would create an entity known as a VEBA. VEBA stands for a voluntary employee benefit association. This is a type of tax exempt entity created solely for the purpose of offering voluntary employee benefits. One useful feature of a VEBA is that it is independent of the Company and the plans offered through the VEBA would not be affected by the liquidation or sale of the Company.
9. When will we know more about what the Company is going to do?
We are asking the Company now for details about retirement dates and policies and retiree
medical. We hope that more information about dates, the retirement process, and retiree
benefits will be available soon. However, it may not be until later than definitive answers are available about the medical
coverages and costs for retirees. The statutory process for changes to the contract and to retiree medical benefits involves periods for notice and an hearing, and thus the timing of any further information may depend on schedules determined by the Bankruptcy Court.
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AFA Local Numbers
Council 40 PIT 724-695-3329
Council 41 DCA 703-690-6859
Council 69 BOS 978-352-7401
Council 70 PHL 215-492-0840
Council 82 LGA 201-803-6141
Council 89 CLT 704-527-0325
New Hotline Number Toll Free: 866-USA-AFA2
US AIRWAYS Benefits Information 800-872-4780
Reply to Inflight: askinflight@usairways.com
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