Kodak to End OPEB Benefits
October 11, 2012 (PLANSPONSOR.com) – Kodak and its Official Committee
of Retirees have agreed on a proposal to terminate retiree health care and
survivor benefits, or other post-employment benefits (OPEB), the company
announced.
The benefits to be terminated include medical, dental, life insurance
and survivor income benefits, and the proposed date of termination is
December 31, 2012. This will relieve the company of $1.2 billion in OPEB
liability. The proposed settlement does not impact retiree pension
benefits.
Kodak will provide the Official Committee of Retirees a $7.5 million
cash payment to support initial administration and benefit obligations; a
$635 million unsecured claim; and a $15 million allowed administrative
claim that would have priority status in Kodakfs reorganization
proceedings. These funds can be used at the committeefs discretion to make
payments to retirees to subsidize a limited portion of future benefit
costs. Additional information will be provided to retirees once Kodak
coverage ends.
The agreement is supported by the debtorfs Official Committee of
Unsecured Creditors, and will significantly reduce one of the companyfs
most substantial legacy liabilities, marking a step towards Kodakfs
emergence from Chapter 11.
As of December 31, 2011, the companyfs aggregate U.S. OPEB liability
exceeded $1.2 billion. OPEB coverage currently costs the company about $10
million a month. Since filing Chapter 11, Kodak has paid 100% of its share
of the costs for these benefits, resulting in cash expenditures in excess
of $90 million.
The company said that the proposed agreement results in significant
cost savings and liquidity enhancement and eliminates the need for costly
and lengthy litigation. The agreement is subject to approval by the
Bankruptcy Court and is scheduled for a hearing on October 29, 2012.
In February, the company asked the court's permission to end health
care benefits for approximately 16,000 Medicare-eligible retirees (see "Kodak Asks to Drop Benefits for Medicare-Eligible
Retirees"). The company is facing an employee lawsuit about the
bankruptcy and its effect on the companyfs retirement plans.
Kristen Heinzinger
editors@plansponsor.com