In general, the bankruptcy proceedings are progressing at a
deliberate pace. When Solutia filed for
bankruptcy it cited “legacy liabilities” from the original Monsanto as
significant impediments to profitability.
These liabilities were lawsuits, environmental cleanup costs and retiree
health benefits.
Most court activity to date has been on items other than retiree health benefits. A substantial number of lawsuits have been transferred from Solutia to Monsanto II because Monsanto II could have to pay any judgements against Solutia due to the indemnification agreements in place among Solutia, Monsanto II and Pharmacia. Recently a deal was struck between Solutia and Monsanto II regarding payment of ongoing environmental cleanup costs. To date (October 14, 2004) there is no formal proposal before the bankruptcy court for changing retiree health benefits.
In August, Solutia announced a new Custom Choice Plan to
replace its 2004 employee medical benefits coverage. The Custom Choice Plan would modify benefits and require
participants to make a selection from three choices; each choice has trade-offs
related to premiums, co-pays and deductibles.
The notice conveying this information stated that the Custom Choice Plan
would apply if you are under age 65.
One of the provisions of the Pensacola settlement (which
resulted in the 2002 Medical Plan) was that those retirees, included in the
plan and under age 65, would receive the same health benefits as Solutia
employees under the active plan. So
when Solutia announced a drastically different plan for 2005, the Custom Choice
Plan, the Retirees Bankruptcy Committee recognized its impact on pre-65
retirees included in the Pensacola settlement.
An additional provision of the Pensacola settlement also prohibits any
modifications that will materially and adversely affect benefits or costs or
would be unfair to the plan participants.
The committee believes that the Custom Choice Plan violates this
provision.
Of additional concern was the committee’s opinion that
Solutia was attempting to modify health benefits without authorization from the
bankruptcy court. Our position is that,
having filed for bankruptcy, Solutia is obligated to adhere to the Bankruptcy
Code. Section 1114 of that code states that the debtor, Solutia, cannot make
any modifications to retiree health benefits until such time that they are
brought before the bankruptcy court and authorized by same.
Lawyers for the Retirees Bankruptcy Committee filed a motion
to address this situation and the court orally ruled in favor of our
motion. This favorable ruling has
caused Solutia to delay enrollment for 2005 until such time that it determines
how to proceed in accordance with the court order when issued. The lawyers have prepared an informational
memorandum summarizing this item and related matters of interest. A copy has been sent to all retirees and
beneficiaries represented by the committee.
The bankruptcy court recently issued another court order setting
a final date for entering claims against Solutia. This is known as the Bar Date and it has been set as November 30,
2004. This order is directed at those
parties who have not as yet filed a legitimate claim and it will bring this
activity to a close. Parties which have
previously asserted claims are excluded, this includes retirees’ and our health
benefits. If you receive a copy of the
court order, or a notice for filing a claim, please note the item which refers
to the exclusions.
Additional information will follow as it becomes available.