Since Eastman Kodak filed for bankruptcy in January, its retirees have known that their benefits were in the center of the company’s attention. On Wednesday, Kodak has pulled the trigger.
The financially troubled company filed a motion in court saying it had reached an agreement with the committee that represents retirees to allow Kodak to stop the health benefits of the retirees by the end of the year. About 25,000 former employees residing in the Rochester area will be affected by the company’s move.
Kodak will provide $7.5 million in cash to the retiree committee as part of the deal. The company will also pay a total of $635 million for unsecured secured claims and $15 million for secured claims. The total amount paid to the committee would be used to pay some of the retirees’ benefits.
According to Kodak, they are ending the benefits because they can no longer sustain them.
The company CEO said this will save the company a lot of money and help to emerge from bankruptcy.
If the motion is approved, it will allow the company to eliminate $1.2 billion in liabilities and save approximately $10 million per month in retiree benefits.
EKRA, a group of Kodak retirees who were not involved in the talks, criticized the official retiree committee and Kodak management for not being transparent in the direness of company’s problems nor by any means indicating the severity of the result that they were going to reveal.
In a statement released by EKRA, it said that the group expects a complete disclosure on why Kodak’s situation is so severe that it will have to eliminate the health and welfare benefits.
There are about 56,000 retirees and dependents counting on Kodak for healthcare benefits.
In 2010, a study conducted by the Employee Benefit Research Institute showed that retirees without employer financial assistance would require more than $200,000 in savings in order to make sure they could pay for a Medicare subsidy, and more than $100,000 for drug expenses.
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