More than 1,000 United Mine Workers of America (UMWA) members from six states were joined Feb. 26 by hundreds of supporters from labor and community organizations in the St. Louis area in a rally in front of the building that houses the U.S. Bankruptcy Court for the Eastern District of Missouri.
Pending at that court is the Chapter 11 reorganization case of Patriot Coal, which has a number of unionized operations.
Miners and supporters then marched to Peabody Energy’s (NYSE: BTU) headquarters where ten of them were arrested in a non-violent action, the UMWA said in a Feb. 26 statement. Workers are protesting a “scheme” by Peabody, which several years ago spun off Patriot Coal with insufficient assets to meet the company’s health care obligations to retired workers, the union said. It also claims that Arch Coal (NYSE: ACI) did much the same thing when it took part in the creation of West Virginia coal producer Magnum Coal in 2005. Patriot bought Magnum in 2008.
Peabody has said it spun off Patriot (and certain UMWA-related liabilities) at a time when Patriot was solvent and that it is not responsible for the subsequent business decisions that led the company into bankruptcy. Arch has said much the same thing about putting assets (and union liabilities) into Magnum Coal.
The Feb. 26 rally is part of an all-fronts campaign by the UMWA, which includes: legal action; federal legislation to be introduced by Sen. Jay Rockefeller, D-W.Va.; broadcast, print, outdoor and online advertising; and continued protests in St. Louis and other cities.
UMWA International Secretary-Treasurer Dan Kane said that while union members were rallying outside the courthouse, Patriot lawyers were inside, asking the bankruptcy court to approve a proposal to strip health care benefits from retired managers and foremen, who are not eligible for union membership. “Those are the same lawyers who will be in that courthouse before long wanting to strip your health care,” Kane said. “But we’ll be fighting them every step of the way.”
The union noted other recent news in this area, including that Rockefeller recently announced that he will propose legislation. The proposed bill, The Coalfield Accountability and Retired Employee Act, would aid miners retired from Peabody, Arch and other coal companies by transferring money from the federal Abandoned Mine Land fund to the UMWA 1974 Pension Plan.
Rockefeller plans another bailout for UMWA program
“In West Virginia, a promise made is a promise kept,” said Rockefeller in a Feb. 22 statement about the new bill. “And when it comes to our coal miners – who put their lives, limbs and lungs on the line under the promise of a secure future for them and their families – there should never be any backing away from that pledge. I’ve heard from retirees and their loved ones who are deeply fearful and rightfully angry. This legislation is about human decency, it’s about doing what’s right, and it’s about having the backs of those who have ours deep underground.”
These retirees are facing uncertainty because the UMWA’s 1974 pension plan, which covers more than 100,000 mine workers, including more than 35,000 West Virginians, is severely underfunded and on the road to insolvency – a result of the recent financial crisis and fewer contributions to the plan, the senator said.
“In addition, Patriot Coal, a spin-off from Peabody Energy and Arch Coal, is facing bankruptcy and could shed its obligations to retirees,” said Rockefeller’s press release. “This means more than 12,000 retired miners, including nearly 7,000 West Virginians – the vast majority of whom actually worked for Peabody and Arch – and their dependents would lose health benefits, and the 1974 pension plan would be further crippled.”
To address this two-fold crisis, Rockefeller plans to offer The Coalfield Accountability and Retired Employee Act, which would hold employers accountable for the commitments they make to their workers and also would:
- Amend the 1977 Surface Mining Control and Reclamation Act to transfer funds in excess of the amounts needed to meet existing obligations under the Abandoned Mine Land fund to the UMWA 1974 Pension Plan to prevent its insolvency;
- Make any retiree who loses benefits following the bankruptcy or insolvency of his or her employer eligible for the 1992 Benefit Plan, which was established by Congress under the Coal Act and provides health benefits to retired or disabled miners and their families; and,
- Provide that employer contributions are not unfairly penalized by the tax code and receive the same tax-exempt treatment as contributions to other pension plans, allowing the full value of employer cash contributions to go to the retirees who earned them.
Rockefeller engineered passage of the 1992 Coal Act, which preserved health benefits for 200,000 retired miners and their widows who had been promised these benefits by both the federal government and their companies. Rockefeller said he again led the charge in 2006 to protect these health care plans from insolvency.
Patriot asks court to let it terminate 401(k) plan
Notable on the labor and benefits front for Patriot is a Feb. 25 motion by the company filed with the court to let it terminate an employee benefit plan effective March 31.
“Both prior to and since the Debtors’ chapter 11 filings on July 9, 2012 (the ‘Petition Date’), the Debtors have worked diligently to improve their cash position in the face of coal markets that continue to weaken,” the motion said. “Over the last several months, the Debtors have sought cost savings and reduced expenses in every area of their businesses. Among many other initiatives, the Debtors have decreased capital expenditures, eliminated unprofitable contracts, reduced non-union wages and eliminated certain nonunion employee benefits. Moreover, since November 2012, the Debtors have been engaged in negotiations with the United Mine Workers of America regarding modifications to wages and retiree healthcare benefits for union employees and retirees.”
Furthermore, the Patriot companies are also contemplating major modifications to the retiree benefits that they provide to nonunion retirees. Each of these initiatives is critical to Patriot’s ability to survive and preserve thousands of jobs, the company told the court.
“Against this backdrop, and in order to preserve liquidity and further the Debtors’ goal of equitably spreading the burdens of their efforts to reorganize among the Debtors’ various stakeholders, on December 28, 2012 Patriot amended the Patriot Coal Corporation Supplemental 401(k) Retirement Plan (the ‘Plan’), which had theretofore allowed certain members of the Plan Debtors’ management to defer compensation earned by them, and required the applicable Plan Debtor to match a specified percentage of such deferrals. That amendment precluded any compensation deferrals (or matches) for 2013 or any period thereafter.”
Under the Feb. 25 motion, Patriot is seeking authority to terminate and liquidate that plan, which will result in about $2.5m in respect of pre-petition compensation deferrals being treated as pre-petition claims against the applicable plan debtor’s estate, rather than being paid in cash, and the payment to the participants of approximately $295,000 in post-petition administrative expense claims accrued since the July 2012 bankruptcy petition date by the applicable plan debtor.