News Release

What’s VEBA? Behind the GM-UAW Tentative Healthcare Deal


Former UAW Local 751 president in Decatur, Ill., Solomon worked at Caterpillar for 34 years. He said today: “The UAW better be very careful about this Voluntary Employees Beneficiary Association that GM is pushing.

“For years, we were told by Caterpillar that we were getting an invisible paycheck in the form of free healthcare for the rest of our lives. Then, just as I was retiring in 1998, they put a VEBA in place. The fund ran out in 2004. So now, me and the wife are paying $200 a month for coverage in addition to all kinds of out of pocket expenses we were never supposed to deal with — and those expenses are likely to rise. Other members of the union have begun a lawsuit.”

Editor of Labor Notes magazine, based in Detroit Michigan, Kutalik wrote the piece “Auto Makers Push VEBA Solution for Industry Crisis” a month ago.

He said today: “On the surface, a VEBA is nothing more than a federally recognized non-profit 501(c)(9) corporation set up to insure that healthcare, pension, unemployment, or other benefits are routinely paid out to workers covered by the trust. There are at least 2,700 VEBAs currently already in existence for union and non-union employees in industries ranging from steel to utilities to telecommunications.

“On closer examination, red flags pop up. A number of the trusts start off under-funded. Many UAW members fear that under-funding could lead to a simple, grim arithmetic: each dollar shortchanged will presumably translate into a dollar that can’t be spent on healthcare premiums, co-pays, deductibles, or quality of care. Under an under-funded VEBA, the remaining costs of maintaining healthcare benefits are often shifted back to workers themselves.”More Information

Davis was a UAW regional director for 19 years. He and two other former UAW executive board members have written a series of open letters to the current union leadership. Their latest statement, released yesterday, states: “We regret the decision by the UAW negotiators to tentatively agree to place the future health care protection of hundreds of thousands of UAW retired members under a union run Voluntary Employee Beneficiary Association, or VEBA. …

“We have previously noted the lack of any real discussion or debate among the members and secondary leadership of the union prior to the negotiations on the VEBA. Springing a new and potentially hazardous economic concept on an unsuspecting membership, either active or retired, is alien to the democratic principles in our governing constitution. …

“From the start, this round of negotiations was projected by the media to be about what autoworkers could do — meaning give up — to help the domestic auto manufacturers out of the ‘competitiveness’ hole they’d dug themselves into. Yet GM showed a profit last quarter of $891 million as reported July 31, 2007 in Market Watch and their stock is soaring.” The full letter is available.

For more information, contact at the Institute for Public Accuracy:
Sam Husseini, (202) 347-0020, (202) 421-6858; or David Zupan, (541)