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Retiree Health Benefits: Examples of Employer-Reported		 
Obligations in Selected Industries (29-APR-02, GAO-02-639R).	 
                                                                 
In addition to providing an overview of a company's business	 
operations, the annual reports submitted to the Securities and	 
Exchange Commission present important information on an 	 
employer's estimated obligations for postemployment benefits,	 
including retiree health benefits. However, the assumption used  
to estimate obligations for postemployment benefits vary across  
companies and are not comparable. Financial Accounting Standards 
Board guidelines give employers latitude in calculating these	 
obligations. Moreover, changes in companies' benefit offerings or
financial stability would likely alter companies' obligations for
retiree health benefits. Most employers also reserve the right to
change or terminate retiree health benefits.			 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-02-639R					        
    ACCNO:   A03204						        
  TITLE:     Retiree Health Benefits: Examples of Employer-Reported   
Obligations in Selected Industries				 
     DATE:   04/29/2002 
  SUBJECT:   Employee medical benefits				 
	     Health insurance					 
	     Reporting requirements				 
	     Retirement benefits				 

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GAO-02-639R
     
GAO- 02- 639R Retiree Health Benefits United States General Accounting
Office

Washington, DC 20548

April 29, 2002 The Honorable Sam Johnson Chairman Subcommittee on Employer-
Employee Relations Committee on Education and the Workforce House of
Representatives

Subject: Retiree Health Benefits: Examples of Employer- Reported Obligations
in Selected Industries

Dear Mr. Chairman: As a follow- up to our November 2001 testimony before the
subcommittee on trends in retiree health benefits, 1 you requested
additional information on the obligations employers face related to retiree
health benefits. Specifically, you asked us to provide examples, based on
readily available data, of employers? estimates of their future financial
obligations for retiree health benefits, particularly in industries that
have reported high obligations for these benefits such as airlines,
automotive manufacturing, and steel/ metal. To obtain this information, we
reviewed publicly available electronic copies of the annual reports that
selected large airline, automotive, and steel/ metal companies filed with
the Securities and Exchange Commission (SEC). We performed our work in April
2002 in accordance with generally accepted government auditing standards.

The annual reports to SEC, which must be filed within 90 days after the end
of the company?s fiscal year, provide an overview of the company?s business
and include information on employers? estimated obligations for
postemployment benefits, including retiree health benefits. However, since
factors and assumptions used in estimating obligations for postemployment
benefits may vary considerably across companies, they are not comparable.
Within guidelines established by the Financial Accounting Standards Board,
employers have latitude in how they calculate their postemployment benefit
obligations. For example, companies consider factors unique to them, such as
employee demographics, retirement rates, health care cost trends, and
investment return rates to calculate their postemployment benefit liability.
Further, changes in companies? benefit offerings or financial stability
would likely alter companies? obligations for retiree health benefits.
Nearly all employers reserve the right to modify or terminate retiree health
benefits. Reasons that may

1 U. S. General Accounting Office, Retiree Health Insurance: Gaps in
Coverage and Availability, GAO02- 178T (Washington, D. C.: Nov. 1, 2001).

GAO- 02- 639R Retiree Health Benefits Page 2 influence employers to
subsequently curtail such benefits include their health care

costs rising faster than expected or their economic condition weakening.
Table 1 provides information that 14 employers in the airline, automotive,
and steel/ metal industries reported to the SEC regarding their financial
obligations for other postemployment benefits (OPEB) in 2001, 2000, and
1999. OPEB represents retirement benefits, including retiree health
benefits, but excluding pension benefits that are separately reported. As
specified for each company in the table, some companies may provide a dental
or vision benefit for retirees separate from their retiree health benefits.
In addition, some companies may offer life insurance as a benefit to
retirees. Companies include the costs of these additional benefits in their
reporting of OPEB obligations.

GAO- 02- 639R Retiree Health Benefits Page 3 Table 1: OPEB Obligations
(Including Retiree Health Benefits) Reported by Selected

Airline, Automotive, and Steel/ Metal Companies

OPEB obligations (in millions of U. S. dollars or otherwise specified

currency) Company

December 31, 2001

December 31, 2000

December 31, 1999

Airline companies

American Airlines, Inc. a 2,759 1,708 1,306 Delta Air Lines, Inc. b 2,100
1,780 1,612 c Northwest Airlines Corporation d 647 531 391 UAL Corporation
(United) a 2,359 1,706 1,465 US Airways Group, Inc. e 1,440 f 1,241 f 1,162
f

Automotive companies

Daimler- Chrysler AG g, h 15,095 Euros 12,857 Euros 10,527 Euros Ford Motor
Company g 25,433 23,374 19,885 General Motors Corporation i 52,489 49,889
44,683

Steel/ metal companies

Alcoa, Inc. a

3,177 2,924 1,687 Bethlehem Steel Corporation a 2,047 1,955 1,820

The LTV Corporation j

Late filing- no information for

2001 k 1,524 1,500 National Steel Corporation a 993 f 817 f 751 f United
States Steel Corporation a, l 2,555 2,149 1,896 Weirton Steel Corporation a
389 321 309

Notes: Postemployment benefit obligations across companies are not
comparable because companies have wide latitude in the assumptions they use
to calculate these obligations.

GAO- 02- 639R Retiree Health Benefits Page 4 a OPEB obligations include
health and life insurance.

b OPEB obligations include dental and medical benefits. c Data are for
obligations as of June 30, 1999. d OPEB obligations include medical and
dental benefits for certain employees who retired prior to 1987, and life
insurance benefits for certain retirees. e OPEB obligations include
postretirement benefits, which were not specified by the employer in the SEC
filing. f Data are for obligations as of September 30 of the respective
year.

g OPEB obligations include health and life insurance for eligible U. S. and
Canadian retirees. h The SEC filing did not provide information about the
exchange rate between Euros and U. S. dollars used to prepare the
consolidated financial statements. i OPEB obligations include medical,
dental, life, and vision benefits.

j OPEB obligations are for health care, life insurance, and other insurance
benefits. k On December 29, 2000, the LTV Corporation filed for Chapter 11
bankruptcy. On December 7, 2001, the U. S. Bankruptcy Court issued an order
that authorized the implementation of an asset protection plan for the
shutdown and sale of all integrated steel assets.

l As of December 31, 2001, United States Steel Corporation reorganized.
United States Steel LLC, a former subsidiary of USX, became United States
Steel Corporation. USX Corporation was renamed Marathon Oil Corporation.
Prior to this time USX was comprised of two groups: U. S. Steel and
Marathon.

Sources: Reported in companies? filings with the Securities and Exchange
Commission Company available on line at www. sec. gov. (10- K and 10- K405
filings for American Airlines, U. S. Airways Group, Alcoa, and Bethlehem
Steel; 10- KT405 and 10- K filings for Delta Air Lines; 10- K and 10- K
(amended) filings for Northwest Airlines, UAL Corporation, and United States
Steel Corporation; 10- K filings for Ford Motor, General Motors, LTV
Corporation, National Steel Corporation, and Weirton- Steel Corporation; and
20- F (for foreign- based companies) filings for Daimler- Chrysler AG).

As agreed with your office, unless you publicly announce its contents
earlier, we will not distribute this correspondence until 30 days after its
date. Then we will make

GAO- 02- 639R Retiree Health Benefits Page 5 copies available upon request.
This letter will also be available on GAO?s home page

at http:// www. gao. gov. Please call me at (202) 512- 7118 or John Dicken
at (202) 512- 7043 if you have any questions. Other contributors to this
correspondence include Susan Anthony and Sari Bloom.

Sincerely yours, Kathryn G. Allen Director, Health Care- Medicaid

and Private Health Insurance Issues (290186)
*** End of document. ***
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