2008 Woodie Awards
AK Steel reaches $663 million deal
Settlement concludes year-long retirement health care dispute
Chau Nguyen
Issue date: 10/12/07 Section: Community
AK Steel Holding Corporation recently announced a $663 million settlement with retirees from Middletown Works, the company's largest site.
The settlement transfers the company's health care obligations to a Voluntary Employees Beneficiary Association (VEBA) trust, which will be managed by the retirees.
Although AK Steel refused to comment, the West Chester-based company will initially contribute $468 million to the VEBA trust according to the company's press release. They will be responsible for three additional payments of $65 million to pay for retiree's health benefits and will affect nearly 4,600 retired steel workers.
Still waiting approval from the U.S. District Court in Cincinnati, the settlement is in response to a 2006 lawsuit filed by retirees from Middletown Works when the company attempted to change retiree health care costs.
AK Steel was unwilling to comment on what would happen if the court does not approve the settlement.
James Brock, a Miami University professor of economics, said the new settlement will alleviate the responsibility of healthcare from the company.
"(The settlement) eliminates a big chunk of (the company's) costs," Brock said. "The company has been responsible for paying the cost of health care so by transferring it away from the company, (they are) no longer reliable for those expenses."
According to a Form 10-K filed to the United States Securities and Exchange Commission, AK Steel would have been responsible for a total of $2.1 billion in health care benefits for retiree health care.
With the settlement, the company will only have to pay about half of that estimate and will no longer be responsible for the retirees covered in the agreement.
James Schultz, a plaintiff in the lawsuit, said AK Steel wanted to raise the costs of retiree health care.
"They were trying to escalate our costs and we wanted to keep our payments to a minimum," Schultz said.
Schultz, who retired from AK Steel after 35 years, said the settlement gives retirees more control over their benefits.
The settlement transfers the company's health care obligations to a Voluntary Employees Beneficiary Association (VEBA) trust, which will be managed by the retirees.
Although AK Steel refused to comment, the West Chester-based company will initially contribute $468 million to the VEBA trust according to the company's press release. They will be responsible for three additional payments of $65 million to pay for retiree's health benefits and will affect nearly 4,600 retired steel workers.
Still waiting approval from the U.S. District Court in Cincinnati, the settlement is in response to a 2006 lawsuit filed by retirees from Middletown Works when the company attempted to change retiree health care costs.
AK Steel was unwilling to comment on what would happen if the court does not approve the settlement.
James Brock, a Miami University professor of economics, said the new settlement will alleviate the responsibility of healthcare from the company.
"(The settlement) eliminates a big chunk of (the company's) costs," Brock said. "The company has been responsible for paying the cost of health care so by transferring it away from the company, (they are) no longer reliable for those expenses."
According to a Form 10-K filed to the United States Securities and Exchange Commission, AK Steel would have been responsible for a total of $2.1 billion in health care benefits for retiree health care.
With the settlement, the company will only have to pay about half of that estimate and will no longer be responsible for the retirees covered in the agreement.
James Schultz, a plaintiff in the lawsuit, said AK Steel wanted to raise the costs of retiree health care.
"They were trying to escalate our costs and we wanted to keep our payments to a minimum," Schultz said.
Schultz, who retired from AK Steel after 35 years, said the settlement gives retirees more control over their benefits.
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