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CarSpace Alternate RouteTurn off the nav system, crumple up that MapQuest printout, and let's find out where the next random turn may take us! Sep 18, 2009 - Follow The Money
WASHINGTON (Dow Jones)--The U.S. Labor Department on Thursday said the Big Three auto makers will pool together various types of assets and securities to cover retiree health-care benefits. The auto makers - General Motors Co., Ford Motor Co. (F), and Chrysler Group LLC - each has its own voluntary employee beneficiary association, or VEBA, account. However, involved parties, including the United Auto Workers, or UAW, have agreed to create one single entity. "But there will be separate accounts," said Alan Lebowitz, the Labor Department's deputy assistant secretary of the Employee Benefits Security Administration. "The assets for each plan, for example General Motors, will be used solely to provide benefits to General Motors retirees, and then similarly for Ford and Chrysler." Combining the VEBAs into a single entity, but with separate accounts to hold the companies' assets, was done for "investment and administration efficiency," Lebowitz said. Such a move could strengthen the companies' financial positions because they will share administrative costs. This comes after the Employee Benefits Security Administration announced Thursday afternoon a proposed exemption that would allow the old GM to transfer various company securities and assets to a health plan sponsored by the new GM. The exemption was put forth because the securities being transferred are not considered qualified investments and such a large transfer of employer securities to the health plan violates federal pension law, or the Employee Retirement Income Security Act. But ERISA grants Labor officials the ability to grant exemptions that protect the interests of plan participants and beneficiaries. The types of securities and assets GM plans to transfer include a large amount of common stock representing 17.5% of GM's equity, $6.5 billion in preferred stock, a $2.5 billion promissory note and stock warrants to purchase up to 2.5% of the new GM's equity. Lebowitz said the Labor Department has pending applications from Chrysler and Ford regarding its VEBA transfers. "Some action will be taken by us in the near future," he said. Regarding the mechanics of the single VEBA, an 11-member committee, made up of five UAW representatives and six bankruptcy-court representatives, will be responsible for administering the plan. The committee - similar to a board of trustees for single or multiemployer benefit plans - has the responsibility of selecting a fiduciary, or several fiduciaries, to manage the companies' accounts within the VEBA. "It is conceivable there could be, down the road, conflicts between the accounts of the different car companies in the VEBA," Lebowitz said. "But, the [exemption] proposal requires that the committee adopt mechanisms for dealing with any such springing conflicts." The proposed exemption includes several other mandates regarding the health plan's mechanics and is scheduled to be published in the Federal Register's Friday edition. -By Darrell A. Hughes, Dow Jones Newswires; 202-862-6684; darrell.hughes@dowjones.com (Jeff Bennett contributed to this article.)
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