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Kodak seeks to shed Medicare plan payments for some retirees

Rochester Business Journal
February 27, 2012

Eastman Kodak Co. wants to eliminate its contribution to post-1991 retirees’ Medicare plans.

Some 16,000 retirees would be affected. Cutting contributions to retirees’ Medicare premiums would shave $13.5 million off its costs this year and save $20.5 million a year thereafter. Total savings would be some $223 million, Kodak states in a Bankruptcy Court filing on Monday.

Kodak is entitled under non-bankruptcy law to cut the contributions, the company maintains in the filing. A Bankruptcy Code provision that might have prevented the elimination does not apply because the benefits reaped by workers who retired after 1991 are not vested, Kodak states in court papers.

“As part of its restructuring initiative, Kodak has determined, regrettably, that it is necessary to reduce the burden of its substantial retiree medical and survivor benefits liabilities that it can no longer afford to service. Accordingly, Kodak’s current goal is to significantly reduce its retiree medical and survivor benefits costs and obligations,” the company states in the motion.

If approved by the court, Kodak seeks to have the change to Medicare enhancement benefits take effect on May 1.

The leadership of EKRA Ltd., an association of Kodak retirees, was informed of the move Monday during a meeting with Patricia Obstarczyk, director of the global benefits organization and vice president of human resources of Kodak, the organization said.

“EKRA is extremely disappointed that Kodak made this determination without discussion of alternatives with us. We have been working on such alternatives for several months with our advisors and believe a more suitable, cash-saving option is available for Kodak. We will continue to seek a cooperative relationship with Kodak despite this recent event,” said Bob Volpe, president of EKRA, in a statement.  “We were totally surprised by this action…After many months of attempting to collaborate with Kodak, and having received several signals from Kodak of their interest in working with EKRA, the timing of the meeting was scheduled at the same time as this motion being filed. We were blind-sided.”

EKRA will continue its efforts to seek a win-win resolution for Kodak and retirees, Volpe added.

The organization has accelerated the activities underway with its attorneys to execute an appropriate response to the motion and to formalize the establishment of the EKRA position regarding retiree representation in the bankruptcy proceedings.

EKRA believes Kodak’s motion conflicts with the bankruptcy statute protections limiting the alteration of certain benefit plans during bankruptcy, Volpe said.  EKRA advisors will request that the judge require Kodak to negotiate with EKRA and representatives of the affected retirees to reach a more appropriate arrangement.

“Everyone in Rochester, everyone watching Kodak through its bankruptcy, has known that retiree health care was very likely to go. This is earlier than expected in the bankruptcy process, but it also preserves a bridge of coverage to Medicare for many retirees,” said George Conboy, president of Brighton Securities, in a statement. “This is better than most expected. One of the most at-risk groups, retirees under the age of 65, has been saved from the health care axe, for now.”

Current employees’ medical benefits would not be affected by the proposed change, but it would affect coverage they would get after leaving the company, he added.

MVP Health Care said Kodak retirees and their spouses affected by Kodak’s proposal will be able to maintain current coverage under federal COBRA provisions. MVP administers all of Kodak’s health care coverage.

“We want the affected Kodak retirees and their spouses to have the peace of mind that they will continue to have coverage options through MVP,” said Lisa Brubaker, MVP executive vice president for the Rochester region and government programs. “Should the bankruptcy court accept Kodak’s proposal, post-October 1, 1991 affected plan members will be eligible under COBRA to maintain their current coverage and benefits by assuming responsibility for the monthly premium, which Kodak currently pays.”

If the bankruptcy court accepts Kodak's proposal, premium information will be available by the date of termination, MVP said. MVP Health Care has scheduled a series of informational meetings in the Rochester area to help Medicare-eligible Kodak retirees and their Medicare-eligible spouses better understand their coverage options.

(c) 2012 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or e-mail

What You're Saying 

michael thornton at 5:58:48 PM on 2/27/2012
As usual, the worker suffers while the executives thrive on the destruction of business caused by executive's poor decisions. Companies continually break promises to employees and that's considered the way the free market operates, but when the executive class needs a govern...  Read More >

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