AK Steel Corporation said June 1 that it will modify the health care benefit plans, effective October 1, for about 4,600 of its current retirees in order to be more cost-competitive with other steelmakers, and to be consistent with the company's other retiree health care benefit plans. The 4,600 retirees were hourly and salaried members of the Armco Employees Independent Federation (AEIF), the union at AK Steel's Middletown (Ohio) Works, the company's largest plant.
Currently, AEIF retirees do not share in the cost of their virtually unlimited health care benefits, except for minimal co-pays for office visits and prescription drugs. AK Steel said that about 70 percent of its retirees company-wide already share, in a significant way, in the cost of their health care benefits, including non-union salaried retirees who have shared in the costs since 1996. AK Steel said only its AEIF retirees, and retirees from its Butler (Pa.) Works who were union-represented, do not currently share in the cost of their health care benefits, but for the minimal co-pays.
The retiree benefit modifications announced June 1 are similar to those AK Steel has negotiated with the United Autoworkers of America (UAW) and the United Steelworkers of America (USW) unions, which represent AK Steel employees at its other plants. For example, the USW and AK Steel agreed in 2005 to health care benefit cost-sharing covering approximately 8,000 hourly USW retirees associated with AK Steel's Ashland (Ky.) Works, as well as numerous operations previously shut down. Last month, AK Steel and the UAW negotiated health care cost-sharing for about 400 current hourly retirees of the company's Zanesville (Ohio) Works. All of the negotiated changes, as well as those announced today, cap the company's retiree health care costs at a future date, after which the covered retirees assume all further cost increases.
AK Steel said that its retiree health care costs have risen nearly 50 percent since 1999, when the now-expired AEIF contract was ratified. Notably, the increase has been led by prescription drug costs, which have more than doubled during that period.
"The continued rise in the cost of health care has contributed significantly to AK Steel's lack of cost competitiveness," said James L. Wainscott, chairman, president and CEO of AK Steel. "Most of our competitors have lowered their employment and retirement costs with the aid of bankruptcy laws -- dumping pensions onto the federal government and abandoning retiree health care benefits. The management of AK Steel has worked tirelessly to reduce that cost disadvantage while continuing to fund the generous pension and health care benefits of retirees who worked for many generations in support of this great company."
