Larry Elliott spent 30 years working at Eastman Kodak Co., and he retired from the finance division in 1991, confident in the company's promises of health insurance for life and a survivor income benefit that could help support his wife when he dies.
But 21 years later, Elliott is now 75, and Kodak filed for bankruptcy protection in January. As part of the company's restructuring, U.S. Bankruptcy Judge Alan Gropper recently approved ending those two benefits as of Dec 31, 2012 for some 56,000 retirees. Pensions are not affected by this ruling.
The move, described by Kodak as necessary for its successful restructuring, took Elliott and other retirees by surprise.
"The idea the company would go into bankruptcy was a huge psychological hit - something I never believed would ever happen," says Elliott, who now lives in Brighton, New York, not far from Kodak's Rochester headquarters.
Nevertheless, it was not unusual, says Greg Charleston, Atlanta-based senior managing director of the turnaround and restructuring firm Conway MacKenzie.
"Bankruptcy allows companies to get out of some very expensive promises that were made many years ago," he says.
Some older companies are changing course without going through bankruptcy reorganization.
General Motors and Chrysler changed their healthcare benefits from providing coverage under a company-sponsored plan to giving retirees $1,500 to $1,650 per year to buy their own healthcare insurance.
"Those dollars don't provide much coverage in the open market," says Ed Beltram, vice president of the National Retiree Legislative Network, which advocates for protection of retiree benefits.
The reversal on benefits is an ironic turn of events for a company whose founder, George Eastman, was known for both his generosity to the community and his employees, says Art Roberts, 66, who heads the Eastman Kodak Retirees Association.
About four years ago, retirees started to feel the pressure of Kodak's money troubles through the loss of benefits such as life insurance and dental insurance, says Roberts, who worked at Kodak for nearly 40 years as a human resources director before retiring in 2008.
The benefits that remained cost Kodak $10 million a month and are listed as a $1.2 billion liability on its books.
Pre-1996 retirees are the only ones affected by the loss of the survivor benefit, which would have paid surviving spouses 30 percent of a pension upon the death of the retiree. A different joint and survivor annuity plan, which some retirees chose in later years, was unaffected.
"I don't think anyone recognized the benefit structure could totally disappear. When you come down the line, virtually all the benefits that retirees felt they could depend on were eliminated," Roberts says.
WHAT TO DO
Starting in 2013, Kodak's retirees will face a variety of choices on their healthcare coverage, depending on their age.
Those 65 and over have Medicare as an option, while those younger must either pay the cost of so-called COBRA benefits - the company's full cost for the insurance, plus an administrative fee - or buy insurance on their own.
Insurance companies and financial advisers are holding seminars around Rochester to try to sell services to the mass of retirees who will be affected.
Frank Armstrong, president of Miami-based wealth management firm Investor Solutions says it's time to sit down and re-evaluate. And even though the year end is closing in, he urges retirees to take their time and avoid a rash decision.
"It's an emotional moment and you may feel a time pressure to get something done," Armstrong says. "There are going to be sales seminars. You know there are. The important thing to realize is you don't want to make a decision there at the seminar.
He recommends that retirees find a credentialed independent fiduciary adviser, not a broker or dealer.
"You need to vet the advisers pretty carefully," Armstrong says. "You don't want a rookie to sort through this with you. You should take more time to wade through it than you do to select a large-screen TV."
It's important to sit down and determine your current expenses, assets and income, says Daniel Keady, director of financial planning for the retirement plan advisory firm TIAA-CREF. "Understand the costs you will incur replacing benefits you may have lost, such as retiree health care."
Retirees shouldn't decide the best way to handle the situation on their own. They can also consider checking with the Certified Financial Planner board or the Financial Planning Association to find a qualified adviser to help.
Tone Kelly, 63, who started at Kodak in 1973 and retired in 2007, is sifting through his options now.
"I always knew something was going to happen," says Kelly, who has since begun a second career as a wine consultant.
He is relieved that an entire year will pass from the time Kodak filed for bankruptcy to when the benefits end. He'll be eligible for Medicare in 13 months and plans to switch to COBRA to cover the time gap.
Kelly currently pays $430 a month to cover himself and his wife, and expects his costs to go up $250 a month after January 1.
Kelly doesn't expect to suffer from the added expense, because he still has his pension, savings and investments.
But others without as much of a buffer, he says, will feel the pinch, especially if they're still under 65.
"It's going to impact a lot of these people very hard."
(Editing by Beth Pinsker Gladstone, Linda Stern and Bernadette Baum)