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Since 1991, the number of retirees offered health benefits by the nation’s largest companies plummeted from 80% in 1991 to 56% by 2003, and some union retirees promised lifetime medical benefits have learned that lifetime only means “until revoked.” Across the country in contract disputes and bankruptcy filings, federal courts have been pulled into the wrangling over how promises of lifetime benefits can be broken, or whether they existed at all. And the courts have not been uniform in their answers. Some predict that the U.S. Supreme Court will eventually have to step in to smooth out the wrinkles. For the steel industry, 2000 to 2003 “was about the lowest period in the industry when 250,000 retirees and their spouses lost benefits during Chapter 11″ bankruptcies, said David Jury, assistant general counsel for the United Steelworkers of America. In Michigan, 2,900 retired union autoworkers for ArvinMeritor Inc., a parts supplier, have challenged the company’s unilateral cancellation of lifetime retiree health benefits first negotiated in 1962. Cole v. ArvinMeritor Inc., No. 03-73872 (E.D. Mich.). A federal judge temporarily restored the benefits but further proceedings are set for August. A recent report by Standard & Poor’s found that post-retirement benefits, mostly medical costs, were underfunded by nearly $300 billion among the firms in the S&P 500 stock index. “The trend in industry after industry is to eliminate retiree benefits,” Jury said. Currently, it is the fate of the auto industry and its workers that has garnered the most concern. In June, the annual judicial conferences of both the 6th and 7th U.S. circuit courts of appeals met in Detroit and Chicago and focused on the growing number of bankruptcies in the auto industry. Late last year, the United Auto Workers union agreed to cut $1 billion annually from General Motors Corp. retiree health care expenses, but have the former workers pick up more of the tab, saving the company potentially $15 billion on a projected obligation of more than $70 billion, according to a GM estimate. Earlier this year, much healthier companies have cut or frozen contributions to pension and medical benefit programs for current and retired workers, among them IBM, Verizon Communications Inc., Hewlett-Packard Co. and Motorola Inc. A ‘complete restructuring’ For the auto industry the retiree medical issue is looming, said G. Christopher Meyer, a bankruptcy specialist in the Cleveland office of Squire, Sanders & Dempsey who lectured at the 6th Circuit’s conference. An estimated $1,500 per car goes for retiree medical care. That is not sustainable, he said. “We have a complete restructuring of an industry going on,” said Charles Dyke, who specializes in benefits litigation in the bankruptcy context in Thelen, Reid & Priest’s San Francisco office. Three legal battlegrounds have opened up over post-retirement health benefits. They are:

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