Peabody and Patriot now want to cut retiree health benefits in addition to sloughing them off to a new underfunded trust

The struggle by the United Mine Workers of America (UMWA) to protect the health care and retirement benefits for more than 10,000 retired miners from being destroyed took a nasty new twist last month on two fronts in the ongoing legal battle:

• Patriot Coal, spun off by Peabody Energy in an effort to off-load its retiree obligations for health care, asked the bankruptcy court for permission to unilaterally change their union contracts to reduce future retirees health care benefits in addition to trying to rid themselves of the obligations totally by creating an independent, totally underfunded, health care alternative – a  Voluntary Employee Beneficiary Association (VEBA) – which would be responsible for paying reduced benefits.

• In a bizarre twist, Patriot Coal last week also sued Peabody Energy to prevent them from reducing benefit payments Peabody makes to them, charging that if they were allowed to reduce their payments, Peabody would reap a huge new profit.

• Peabody Energy then said that if Patriot was successful in reducing its health care benefits to save money, Peabody then wants to cut the benefit payments it makes to Patriot for several thousand of Peabody’s retirees that were shunted off to Patriot but for whom Peabody still pays Patriot for their health care.

As part of the scheme where Peabody sloughed off its health care and pension benefits to Patriot, Peabody Energy had agreed to pay the cost of benefits for some 3,000 retired miners and dependents Patriot became responsible for. The 3,000 were part of more than 10,000 retired miners and another 10,000 dependents that Peabody Energy pushed off to a newly formed Patriot Coal several years ago, and now Patriot wants to shove into an underfunded VEBA.

The UMWA has charged that all of this is a deliberate clever scheme by Peabody to rid itself of obligations negotiated with the union over the years.

Patriot, a spinoff of Peabody Energy, is also seeking to change wages, benefits and work rules for existing workers.

Patriot says the actions are necessary to preserve more than 4,000 current jobs.

The UMWA hosted a press conference March 18 to discuss the proposed cuts and voice the union’s objection to Patriot’s request for bankruptcy court authorization to simultaneously provide $7 million in bonuses to executives as part of a “Critical Employee Retention Plan”.

Patriot filed for bankruptcy protection in July, citing weak coal markets, increasing costs and “unsustainable legacy liabilities.”

Calling the proposed health care cuts “totally unacceptable” and unnecessary, UMWA International President Cecil E. Roberts said the loss of benefits would cause financial ruin and threaten the health of thousands of retired coal miners, their dependents and their widows.

“This is the path we have been saying Patriot would take from the very beginning of this bankruptcy,” Roberts said. “They’re demanding massive changes to the collective bargaining agreement, and they want to scrap the health care benefits our retirees earned through decades
of blood and toil.”

Patriot is seeking to substitute a Voluntary Employee Beneficiary Association (VEBA) for the current retiree health care system, but the funding it proposes to provide for the VEBA covers only a tiny fraction of current costs.

Patriot said its payments for UMWA-related retiree health care amounts to about $1.6 billion. Patriot said it would make an initial contribution of $15 million to the trust.

Patriot also filed suit last week against former parent company Peabody, seeking a declaration from the bankruptcy court that any relief Patriot is able to obtain through its motion would not relieve Peabody of its own obligations to retirees.

Patriot was spun off from Peabody in 2007 as part of what the union says was a long-term scheme by Peabody and Arch Coal to strip thousands of active and retired coal miners, their dependents and widows of critically needed health care and other earned benefits.

Peabody assigned Patriot some 40 percent of its health care and pension liabilities but gave the new company only about 10 percent of its revenue-producing assets. Arch Coal did much the same thing when it took part in the creation of Magnum Coal in 2005. Patriot bought Magnum in 2008.

“Patriot Coal is following through on the script Peabody and Arch wrote years ago, with these new demands to eliminate retiree health care and gut our contract,” Roberts said. “At the same time the company seeks to get approval for nearly $7 million in bonuses. I don’t know that I’ve ever seen a clearer demonstration of the 1 percent versus the rest of us.”

The UMWA and Patriot have been meeting for the past several months to attempt to reach a compromise. Roberts said the union would continue to talk with the company.