ST. LOUIS -- A group of McDonnell Douglas Corp. retirees has filed charges that the company has been raiding its employee health care trust fund to pay for continuing costs of administering the retirees' health care insurance program.
In a motion filed in federal court in Missouri last month, the retirees -- salaried employees who left the company before December 1992 -- asked the court to order McDonnell Douglas and its parent company, Boeing Co., Seattle, to refund $4.2 million in insurance program startup costs and administrative charges they claim the company improperly levied against the trust.
The motion is the latest chapter in a legal battle between the retirees and McDonnell Douglas that began in November 1992 when the company announced it no longer would pay for the costs of retirees' medical insurance.
After three years of litigation and extensive settlement negotiations, McDonnell Douglas agreed in 1996 to offer a health insurance program to the retirees and to supplement their pension income if the retirees would agree to pay their own insurance premiums.
To help retirees fund their health care premiums, McDonnell Douglas increased monthly cash pension benefits, giving each worker $100 more a month than they had been receiving under a plan announced in 1992.
That change shifted retiree health care funding from McDonnell Douglas to the retirees and was designed to save the company around $900 million. A health care trust was set up at the time to pay medical claims. The company promised to use its clout in the health care industry to keep retirees' health care costs down.
At the last settlement hearing in February 1996, class members expressed concern that the company would use excess funds from the trust for corporate purposes instead of returning them to the retirees or using them for the retirees' benefit.
McDonnell Douglas' attorneys assured the court the funds would not be used thus, and even stipulated to it in legal documents.
The retirees' current motion accuses McDonnell Douglas of violating that agreement, and misappropriating hundreds of thousands of dollars of retirees' money by taking funds from the health care trust to pay corporate expenses.
Henry H. Rossbacher, a Los Angeles attorney representing 20,000 retirees in the class-action suit, said they were speechless when the company took more than $600,000 out of the trust for administrative costs. "They (McDonnell Douglas) don't make any of their other retirees pay for administration of their health care programs," he argued.
The administration expenses were outrageous, Mr. Rossbacher added, noting they included more than $73,205 in airfare expenses for McDonnell Douglas executives and other "startup expenses."
McDonnell Douglas also assessed each retiree around $7.75 a month to pay its administrator, Towers Perrin, for negotiating insurance contracts and other administrative details. "The company never told us that they would be assessing the retirees," said Mr. Rossbacher. "That assessment has been steadily rising from $6 a month in 1996. It's now going to $8.50 a month." The retirees are asking for that money back, as well.
Pete Conti, a spokesman at Boeing, said Boeing believes it has abided by all of the statutes made in the last ruling. "We are putting together our response to the retirees' recent motion. The response is due by Dec. 17," Mr. Conti said.
