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Hanesbrands cuts key retiree benefit
[December 22, 2006]

Hanesbrands cuts key retiree benefit

(Winston-Salem Journal (NC) (KRT) Via Thomson Dialog NewsEdge) Dec. 22--Hanesbrands Inc. will eliminate its subsidy for retiree medical benefits in December 2007, and it will soon reduce several other employee benefits to cut costs, the company has said in two internal memorandums.

The company said in a Dec. 15 memo that ending the subsidy "affects all current retirees and all active salaried and hourly employees who meet the plan eligibility requirements at the time of their retirement."

That includes 4,900 employees in Forsyth County and another 3,700 in North Carolina, as well as retirees from Hanesbrands, the former Sara Lee Branded Apparel division and Hanes Corp. For some retirees, the company will still offer access to a health-insurance policy, starting next fall, but the retirees will have to pay the full group-rate cost.

Copies of the memos were obtained yesterday by the Winston-Salem Journal. The company could not be reached for comment.

Hanesbrands' decision is part of a recent trend among large employers to shift more of the cost of medical benefits to retirees or eliminate contributions. Locally, US Airways Group Inc., International Textile Group, Reynolds American Inc. and Lucent Technologies Inc. have either eliminated or reduced health-care benefits for retirees.

According to the memo, Hanesbrands gave retirees six weeks' notice that they would be required to pay at least 65 percent of the premium cost of coverage from Feb. 1 next year through Nov. 30. According to local retirees, that means their share of the premium cost could be more than seven times higher during those months.

After Dec. 1, 2007, retirees will have to pay the full premium cost of coverage.

"While these changes are always difficult, we believe the best approach is to continue to provide access to medical coverage for pre-65 retirees and provide a transition period before the end of company subsidization of premiums," Kevin Oliver, the company's executive vice president of human resources, wrote in the memo.

"We believe these actions will keep Hanesbrands competitive into the future."

Current employees will also feel cost cuts.

In a Dec. 12 memo, Oliver said that Hanesbrands is reducing from 10 to five the number of sick days for employees to be "more in line with our competition, as well as actual use across the organization."

The company is discontinuing its matching-gifts program for charitable contributions, its service-awards program and its scholarship program. It also is introducing in the first quarter an employee stock-purchase plan that offers a discount to all domestic employees.

Oliver wrote that a competitiveness study Hanesbrands conducted revealed that "the vast majority of large companies do not provide subsidized retiree medical plans, and most provide no retiree medical plans at all. Additionally, very few of our peers provide this type of benefit."

A study released Dec. 13 by the Kaiser Family Foundation and Hewitt Associates found that 11 percent of 302 large, private-sector employers had eliminated paying for health benefits for future retirees in the past two years. Another 10 percent said they would consider eliminating their subsidy in 2007.

For Hanesbrands retirees under age 65, the company will begin providing next fall an access-only retiree medical coverage in which they pay the full premium cost at Hanesbrands' group rates.

Analysts said that pre-65 retirees struggle to secure a private health-insurance policy even if they can afford premiums that are up to 15 times higher than what they were paying. Medicare and a Medicare supplement typically meet most of the health-care needs of retirees age 65 and older.

The elimination of retiree medical benefits is just the latest cost-cutting move by Hanesbrands since it became an independent company carrying $2.6 billion in new debt.

In the past 3 1/2 months, Hanesbrands has announced the closings of four manufacturing plants, including two in the Carolinas, which affected 2,764 workers. It has cut 79 jobs as part of a distribution consolidation.

Hanesbrands' decision to eliminate its retiree medical subsidy is "one of the most aggressive actions taken by an employer against its retirees that I've heard of," said Bill Jones, the chairman of

"This kind of decision will force many retirees of Hanesbrands to come out of retirement to afford their health insurance, and make potential retirees stay around longer than they want or should," Jones said.

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Copyright (c) 2006, Winston-Salem Journal, N.C.
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