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Corporations Will Likely Follow Patriot to Ax Retirees

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Economics professor Teresa Ghilarducci says other corporations are likely to imitate Patriot Coal's strategy of using the bankruptcy process to shed retiree health and pension obligations. Photo courtesy of The New School for Social Research.
Economics professor Teresa Ghilarducci says other corporations are likely to imitate Patriot Coal's strategy of using the bankruptcy process to shed retiree health and pension obligations. Photo courtesy of The New School for Social Research.
 By Dan HeymanContact
May 31, 2013

CHARLESTON, W.Va. – Observers of corporate bankruptcies say the ruling in the Patriot Coal case will open the door to other corporations that want to shed retiree obligations.

In a controversial decision Wednesday, a bankruptcy judge in Missouri ruled that the coal company could slash health and pension benefits as it restructures.

Economist Teresa Ghilarducci says Patriot has been especially aggressive about using the bankruptcy process to break the retiree parts of employee contracts, but it's not just Patriot.

"In fact there are many bankruptcy situations in which it seems that the primary reason the troubled company is going all the way to bankruptcy is in order to shed those obligations," she says.

The decision could allow Patriot to eliminate healthcare benefits for more than 20,000 retired miners and family members.

Patriot Coal says it has to slash costs to remain viable. The United Mine Workers says the company planned to abandon the retirees from the day it was founded in 2007.

The Patriot retirees could end up in a public healthcare trust administered by the mineworkers union. The federal government's Pension Benefits Guarantee Corporation has absorbed the pensions of other bankrupt companies. Both have been under-funded.

Sean O'Leary, policy analyst with the West Virginia Center On Budget & Policy, says retirees might end up having to depend on Social Security, Medicare and Medicaid – all part of a shift of costs from the company to taxpayers.

"A shift from what was a private business providing a pension to people on public services,” he points out. “And the end result of that creates a great deal of strain on our public services."

O'Leary adds the background to this story is a falling number of good paying industrial jobs and a decline in union membership. He says that tilts contract negotiations, and legal fights, in favor of the corporations.

"Fewer and fewer employees covered by unions,” he says, “that not only are there fewer companies offering those benefits, but it's possible for those who have those benefits to have those taken away. That could be a scary thing for a state like West Virginia."


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