Dofasco pension reform

March 12, 2012

Today in the Hamilton spectator it was announced that changes are dcoming to the pension and benefits plan at ArcelorMittal Dofasco (AMD).

Workers and retirees are being hit with a heavy package of pension and benefits changes.

Workers have been told they will all be forced out of the defined benefit pension plan for future service while retirees will be forced to pay more of the costs of their health care

The changes affect almost 12,000 retirees and active workers and are part of a wider program called AMD 100 that seeks to squeeze $200 million of costs out of the company as it struggles to survive wrenching changes in the global steel industry.

Like all private sector companies facing huge legacy costs, Dofasco has to make changes to remain financially solvent and competitive. The changes made show how reforms can be made to these packages. It is not just enough to change benefits for future employees but changes need to be made for existing employees as well. This is structured in a way that legally comfomrs with these changes. Pension reform technicalities were discussed in a podcast with Ron Skolrood, a lawyer specializing in pension and benefits law.

Skolrood on changing retirement and pension benefits.

The company announced the changes:

Most workers will get a defined benefit (DB) pension payment for service to the last day of 2012 while their pension for future service will be based on a defined contribution (DC) model. Workers with less than two years of service and any new hires go into a DB plan.

Most longer-serving workers will get a pension based partly on the DB plan plus payment from the new DC plan.

Current retirees won’t see pension changes, but they are being hit with the same changes in health and dental benefits as active workers, including end of coverage for pharmacy dispensing fees, stricter rules about prior authorization of some specialty drugs, and a 15 per cent cut to dental coverage from preventative services to orthodontia.

Bill Tufts

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