The House passed legislation to prevent companies seeking to reorganize under bankruptcy law from abrogating health and life insurance benefits promised to retirees.
Unlike a similar, Senate-passed bill, the House legislation is generic and is not directed exclusively against LTV Corp., which has threatened to drop health insurance benefits for retirees as part of its reorganization in bankruptcy.The House bill passed by voice vote on Monday amends the federal bankruptcy code to clarify that retiree benefits are included in collective bargaining agreements that may not be unilaterally rejected by the employer when he files for reorganization.
The House Judiciary Committee chairman, Peter Rodino, D-N.J., emphasized when he introduced his version of the legislation on Sept. 9 that there is absolutely no basis for some current interpretations of bankruptcy law that argue that retired workers are not protected by language already in the law.
LTV Corp. spurred the legislation when it filed for bankruptcy reorganization on July 17. After a strike by United Steel Workers, the company asked the bankruptcy court on July 30 for permission to continue retiree health and life insurance benefits, but only for six months.
The Senate-passed bill is directed only against LTV, but Sen. Howard Metzenbaum, D-Ohio, has introduced legislation that is similar to the generic approach of the House.
The senator has promised retiree groups he will attempt to push the House- passed bill through the Senate on any convenient vehicle.
LTV argued before the House Judiciary Committee that retiree health benefits are pre-bankruptcy petition debt and as such are only obligations of the company if they are essential to ensure operation of the business.
The company sees retiree health and life insurance benefits as $115 million in non-essential payments. That is not hard-hearted, attorney Michael J. Crames told the committee, since if reorganization fails, not only retirees but current workers will be without benefits.
But Rep. Rodino argues that retirees are particularly vulnerable because they do not have alternative resources to such company-supplied health insurance benefits.
Retirees, he said, are not able to wait for the results of reorganization, like other creditors, to see if they have any benefits remaining.
The legislation passed by the House does not create new law, but is written to clarify that wages and benefits in labor-management contracts that were protected in 1984 amendments to the bankruptcy code include benefits for retirees.