WASHINGTON (AP) -- The Labor Department said Thursday it was seeking an exemption for General Motors' new retiree health care plan that would carry out the automaker's plans to transfer company securities into the health care trust.
The United Auto Workers' retiree health care trust fund received a 17.5 percent ownership stake in the new GM as part of the company's government-led efforts to emerge from bankruptcy protection last summer. The health care trust, which begins Dec. 31, will cover 700,000 GM retirees and dependents.
Detroit's automakers negotiated with the UAW in 2007 to create the health care trusts to address huge labor cost disadvantages compared with Japanese auto manufacturers. GM had faced a projected $50 billion in future health care costs. It was able to unload the costs from its books by persuading the UAW to accept funding to set up the Voluntary Employees Beneficiary Association, or VEBA.
The proposed exemption would implement the GM plan developed through bankruptcy courts to transfer company securities, including common stock, preferred stock and $2.5 billion to the health care trust.
GM spokeswoman Renee Rashid-Merem said the proposed exemption "doesn't reflect any changes in our plans to fund the VEBA; rather, it is a step in implementing the agreements."
The Labor Department needs to approve an exemption because of a federal law that prevents plans from holding large percentages of plan assets in the form of employer securities. The department can grant exemptions that protect the interests of participants of the plan and beneficiaries.
Labor Department officials said a similar exemption was granted for truck and engine manufacturer Navistar International Corp. during the 1990s.
The plan includes the creation of a board to oversee the trust, set policies and select managers to make investments and oversee the health care funds.
The proposed exemption will be subject to a 30-day comment period and a potential public hearing, said Alan Lebowitz, the Labor Department's deputy assistant secretary for program operations with the Employee Benefits Security Administration.