Ashland Inc. is dropping employer-sponsored medical and dental coverage for its retirees age 65 and older.
In letters sent to Ashland retirees recently, the company told employees that any financial subsidy for medical and/or dental coverage they receive from Ashland will end at the close of 2016.
Ashland has about 10,500 employees globally (including 4,100 employees at Valvoline, which is being spun off), according to Ashland spokesman Gary Rhodes. The company has several thousand retirees, he said.
Ashland’s letter said that the company has lagged the market in modifying its retirement plans “as we attempted to balance the inevitable disruption such changes cause with the need to maintain market competitiveness.”
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Changes such as increasing costs and pension funding requirements “have resulted in most companies determining that many forms of retiree benefits are unsustainable,” Ashland said in the letter.
“Because of the recent availability of guaranteed issue medical and dental coverage through the Affordable Care Act, it is now easy to choose from a wide variety of health care options with no pre-existing condition limitations,” the letter said.
The company is also planning to limit all retiree life insurance to a maximum of $5,000. The coverage will still be paid by Ashland.
Ashland said in the letter to retirees that unlike pension and 401(k) plans, retiree health and welfare benefits are not vested benefits. Employers often reserve the right to amend or discontinue such benefits depending on factors such as cost.
Ashland retiree Larry Carver of Boyd County, Ashland Oil’s former state tax counsel who retired in 1992 at 57, said that the company is reneging on the deal it offered retirees.
“It was a lot of money and a lot of promises that all your benefits would remain,” Carver said of the deals offered to those who retired from the company.
The company also said that it will be changing future retirement benefits for active employees. Ashland will institute a pension freeze to its Ashland Hercules Pension Plan on Sept. 30; plan participants will retain benefits already earned, but there will be no additional accruals to the plan.
Of the 10,500 Ashland employees globally, 650 are currently earning pension benefits. They would be affected by the upcoming pension freeze.
The company also is dropping retiree life insurance for future retirees.