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Last updated on Monday, August 13, 2012
(BLOOMINGTON) - Former RCA/Thomson workers who thought that at least their “final expenses” would be paid without burdening family are finding that the insurance they thought would do that will not be there when they die.
Bill Strother of the Herald Times reports that IU Prof. Emeritus Joseph Belth, an insurance expert at the Kelly School of Business, said it is unfortunate that many retirees thought continued coverage of a group life insurance benefit was guaranteed when, apparently, it was not. Just as an individual owner of a policy can terminate a policy at any time, so can a company holding a group policy, he said. The entity that pays the bills retains ownership of the plan, and without a contractual agreement that spells out different terms, the company can cancel - and in this case, has.
"A group life master contract is between an employer and an insurance company," Belth said, with the only legal requirement being a "conversion" privilege. "The bottom line is that group life insurance should not be looked upon as permanent coverage."
Many retirees thought the benefit was negotiated as part of a labor or closure agreement when the plant closed in 1998. But no evidence of a contractual obligation has surfaced, and such an arrangement would be highly unusual, according to Belth.
The workers, some of whom left the Bloomington plant when it closed, and many others who retired years before that, got letters from Technicolor, RCA's most recent successor company, that the company would no longer carry the group policy as of the end of last month. MetLife, a large national insurer, would be offering a conversion option for those enrolled in the group plan, the letter said. Technicolor cited the difficult economy and the need to minimize expenses among the reasons for dropping the plan.
That news caught many former Bloomington area employees by surprise. The plant here, once the largest color television plant in the world, closed after several ownership changes when U.S. production was moved to Mexico and other overseas locations.
"This is gonna hurt," said former plant worker Leo Haganman, who retired in 1995. "I don't have any money. I was depending on this for my funeral." Haganman's benefit, based on length of employment and wage, would have been $12,600. Benefit amounts vary widely and can range from less than $10,000 up.
One former employee, John Mann, estimated the change might affect as many as 3,500 former employees here and several thousand more at other Thomson plants that were closed across the country, including locations in Indianapolis and Marion in Indiana.
The wording of the original Technicolor letter confused many, advising employees they could choose a conversion or portability option to retain coverage, but with individual premiums depending on current age and health status. The letter said MetLife would notify each affected person by mail after the first of this month for individual quotes.
As it turns out, and as the law requires, MetLife's offering is strictly a conversion plan that takes age but not current health status into account, according to one former Thomson salaried employee, John Davenport. He was connected to a MetLife representative after calling the MetLife advice line at 877-275-6387. He said the representative, who when contacted by the media said he could not talk to the press, told him the group policy could be converted to an individual whole-life policy that would grow in value over time.
The premium for the conversion policy for someone 72 years old would be $107 a month for a benefit of $10,000, which would grow to $13,000 in 10 years, Davenport said he was told. That monthly rate would vary based on current age at sign-up but remaining constant after that.
He said he still is considering whether to convert, but added that he also has shopped online for similar age-based, fixed premium policies and has found several with competitive premiums and benefits.
Davenport's wife Sara, who retired from Thomson when it closed up shop in 1998, lost her first husband, also a Thomson retiree, in 2004. At that time, she collected a death benefit of $14,000 from the Thomson insurance.
"It was enough to bury him," she said. "That's how much funerals are any more."
She never planned on her own small policy covering final costs for herself, she said, but knows many former Thomson workers were. And she doubts that a lot, who are "probably struggling to stay alive," will be able to pay the new monthly premium.
She understands that companies fall on hard times, especially in recent years, but this latest trouble is hard to swallow.
"It was a sad day when they closed the doors, but to do this to them now -- it's even sadder. It's not right, just not right."
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