Rockwell International Plans to Cut Back Health Benefits

Rockwell International Corp., moving to trim millions of dollars of costs, has told thousands of nonunion employees and retirees that the company is scaling back its health benefits.

A total of 28,000 Rockwell employees in the U.S. and 18,000 retirees will have to pay as much as 20% of their health premiums, the company said Friday.

The plan, which would increase health costs in two stages beginning Jan. 1, 2000, is designed to save the Costa Mesa-based company as much as $50 million a year by 2002.

Rockwell also said it expects to trim the number of health care vendors and options that it offers, which may force workers to change medical plans.

About 1,500 of the employees facing higher health benefit costs work in Rockwell’s California facilities, which are in Pomona, Thousand Oaks, Seal Beach and Costa Mesa. Of the retirees affected by the changes, Rockwell staff estimates that between 3,000 and 4,000 live in the state.

The changes in health benefits won’t affect employees at Rockwell’s semiconductor unit, which is being spun off into a separate public company, Conexant Systems Inc.

In a letter dated Sept. 21, Rockwell Chairman Don Davis said the company spends about $170 million a year on health care insurance for employees and retirees.

He also noted that retirees pay less for their health benefits than current Rockwell employees, and that the benefits program is handled through “hundreds of medical plans administered by more than 20 vendors.”

“[We] forecast that this will continue to increase as part of a nationwide trend,” Davis wrote. “Now that we’re a smaller company, this is not a cost-effective way to administer our health care benefits.”

In the last couple of years, Rockwell has shed its defense, aerospace and automotive divisions, and it is spinning off its semiconductor unit. What remains is its factory automation, avionics and electronic commerce divisions.

Retirees say they are angry because they believe Rockwell is reneging on its promises.

Sources say International Brotherhood of Electrical Workers Local 1362 in Cedar Rapids, Iowa, is considering whether to file a class-action lawsuit against Rockwell on behalf of retirees--even though the union no longer represents these workers.

Union officials declined to comment.

But Rockwell insists that the company’s contracts allow it to modify its benefits program and start charging retirees more for medical coverage, just as it does for its current staff.

“There were some people who were paying nothing or very little for their benefits,” said Ken Furuta, director of benefits planning and financing for Rockwell. “There were some people who were paying a lot. We’re evening things out.”

Under the plan, staff across the board now will all pay 20% premium contributions for their medical coverage. Previously, employees were paying between 8% and 15%, Furuta said.

Company officials said more than half of the retirees paid between zero and 10% of their benefit contributions.

The changes do not affect union employees, whose benefits packages are part of a five-year contract IBEW signed with Rockwell earlier this year.

IBEW members at Rockwell’s aircraft electrical equipment division in Iowa and its semiconductor facility in Newport Beach went on strike this spring. The dispute involved wages, benefits and scheduling, union officials said at the time.

Rockwell isn’t alone in its effort to trim costs of employee health benefits. Many large companies, such as Walt Disney Co., have sought to modify retiree medical benefits in recent years because of increases and costly changes in accounting rules.

Cuts in health benefits have become one of the more hotly litigated employment issues, said Kirk F. Maldonado, an employee benefits lawyer in Costa Mesa with Riordan & McKinzie.

“There are hundreds of these cases,” Maldonado said. “Unfortunately, the courts have not been uniform on this point.”