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Crisis Mode: Rob Magovern (right) and Ginger Ikuno were told they would have to pay full price for health insurance beginning Jan. 1, putting a severe crunch on their monthly budgets.

Rewriting the Story

The Mercury News does a turnabout on retiree health benefits

By William Dean Hinton

WHEN ROB MAGOVERN decided to retire in March, he wanted to make sure he wasn't making a mistake by leaving the San Jose Mercury News before he was financially capable. Foremost on his mind was covering the cost of medical care, especially since he has a disabled adult son that he and his wife, Karen, still care for.

Magovern, 56, met with a financial planner to crunch the numbers as well as with the paper's former human resource director, who indicated, according to Magovern, that a large percentage of his health benefits would be paid for if he remained employed until 55. Though he was told he'd likely face annual increases to his premiums, Magovern was given the green light to retire after 27 years with the paper.

In June, Magovern had second thoughts about his decision. He learned through the San Jose Newspaper Guild that beginning Jan. 1, he would have to pay 100 percent of his health insurance premiums. Some retirees mistakenly thought the increase would merely double their health-insurance bill. "Like a lot of guild members, I did not realize how profound this would be," says Joy Hurst, a retail ad rep who retired in 2000 after more than 20 years at the Mercury News.

But 100 percent means they pay the entire amount of health coverage. In Magovern's case, that meant the $84 he now pays each month to visit Kaiser Permanente will jump to $840—a budget buster given that Mercury News pensions top out in the $1,200 range.

The increase leaves Magovern with difficult decisions. He probably can't return to the paper since management has encouraged employees to retire early. "At 56, despite my excellent work record, I probably would not be welcomed back," he says. Which means his family might have to leave San Jose to seek a cheaper place to live. "We're struggling to figure that out," Magovern says. "We've lived happily here for over 30 years. We don't want to move from the area."

About 80 early retirees are in the same situation as Magovern. They blame the paper for reneging on what they consider an oral commitment to keep health costs affordable, and they blame their guild for failing to ensure that newspaper management keep its commitment. "I feel the union sort of let us down," says Eileen Fahey, a former Mercury News sales assistant and shop steward who retired to Nevada City. "I've seen other instances where they haven't fought as hard as they should have."

The insurance increase was caused by what retirees call a technicality—a technicality many were unaware of until they were told about the insurance hike. The contract the San Jose Guild negotiated with the paper in 2000 has what is known as "me too" language in conjunction with the Northern California Media Workers Guild, which is the newspaper union of the San Francisco Chronicle. The "me too" clause ensures Mercury News employees will receive benefits at least as good as Chronicle employees. In years past, the language, which is a holdover from the days when Bay Area unions and papers (including the Oakland Tribune) sat together at one bargaining table, allowed San Jose newspaper employees top-level benefits because the Chronicle was a more prosperous paper than the Mercury News.

But the Chronicle has fallen on hard times lately. The Northern California Guild runs a trust fund, in conjunction with Chronicle managers, that provides funding for employee wages, pension and health care. The trust fund sets the benefits for San Francisco and San Jose newspaper employees even though Mercury News employees' wages, pension and benefits are not paid from the trust account.

According to the Northern California Guild, the trust was hemorrhaging money because of rising health-care costs (national double-digit increases in premiums the last four years), more early retirees and a decrease in the number of full-time employees at the Chronicle and Examiner. The guild projected the trust would begin running a $128,000 per month deficit unless action was taken.

Trust managers proposed a four-prong solution, including freezing wages, scaling back insurance for full-time employees and requiring early retirees to pay all of their health costs. (At 65, all retirees are expected to go on Medicare or seek privately owned insurance.) These steps are expected to save the trust at least $80,000 per month.

"The active [employee] population went down, retirees went up and the cost of insurance went up," says Doug Cuthbertson, executive officer of the Northern California Media Workers Guild. "There was no feasible way to continue subsidizing early retirees."

No Hidden Agenda

The San Jose Newspaper Guild is in negotiations with the Mercury News to try to stave off the insurance hike, which might lead to early collective-bargaining discussions. The current contract expires in 2006. "It's possible we could be going into early bargaining," says Luther Jackson, the SJ Guild executive officer since 1995. "Any of a number of scenarios is possible. The story is not over by any means."

Jackson has become a lightning rod of controversy since retirees found out in June about the insurance rates, saying he didn't warn them early enough and that he hasn't fought management to their satisfaction. "I know people felt blindsided by the guild and blamed Luther for things," says Dennis Uyeno, a Mercury News classified employee and guild representative. "But there is no hidden agenda. People were given the most current information. The guild is definitely for the members. We're doing everything we can to come up with an affordable plan. It's not like we're sacrificing someone's benefits for others."

Another target has been Mercury News publisher Chip Visci, who distributed two memos in the last several months saying, in essence, that the paper's hands were tied because of the "me too" language. The exact language in the contract says benefits provided to the two guilds should be "identical," which, according to Visci, leaves the paper little wriggle room to cover the insurance cost of San Jose retirees.

The paper is offering one slight improvement: It will pay San Jose's early-retiree insurance premiums until Jan. 1 even though San Francisco will end their payout Oct. 1. "We feel like we're doing all we can, taking extra steps by providing that extra time," says Dan Breeden, a Mercury News marketing manager and company spokesman.

But retirees feel that Knight Ridder, the $5 billion parent corporation of the Mercury News, has an ethical obligation to continue subsidizing their insurance. "It's called breach of trust," says Joyce Esposito, an advertising coordinator who retired in 1997. "We trusted them to keep their word and they broke the trust. And now, they hide behind the 'me-too' clause. Please give me a break. Knight Ridder isn't strong enough to stand up and say, No, we are not going to do this to so many people who gave their all when the valley was riding high."

Esposito is among those retirees in worst-case situations. After leaving the newspaper, she moved to Nashville to begin work as a national sales consultant. The day before she was supposed to start her new job, while working at her home office, she felt a horrific pain in her head, as if, she says, someone had dropped a computer on her head. She'd had four brain aneurysms despite never showing symptoms. Given a 5 percent chance of living, Esposito survived three brain surgeries to teach herself to read again, do math and use her home computer.

Esposito now lives in Oregon on $26,000 from Social Security and her Mercury News pension. Her insurance, at $563 per month with a $2,000 deductible, will consume 40 percent of her income, she says. "The Mercury News promised every one of us affordable, I repeat affordable, health care until 65," she says.

The feeling among retirees is that the Mercury News made oral commitments based on intense discussions with management before they left the paper. "It's not just a feeling," says Ginger Ikuno, an ad sales rep who retired in 2002. "It's a belief. When I first started investigating a year and a half before I actually retired, I talked with the human resources department on a regular basis. I talked to them over and over and over again. They said, This is what it will look like until you're 65."

Whether that's good enough for Mercury News management will be determined in the next few months as the union continues to negotiate. Guild members say it's not too naive to expect Knight Ridder to absorb some of the insurance costs. "Newspapers are corporations," says Uyeno, the classifieds employee. "They make money for stockholders. Everybody understands that. But they've made their names based on work provided them by their employees."

Besides, says Magovern, it's good business to take care of employees, especially if companies expect them to be part of the next cost-cutting purge.

"Their decision," Magovern says, "will undermine current employees approaching 55 by bringing the company's sense of fair play into question. Equity requires a better solution than simply cutting us off."


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From the September 15-21, 2004 issue of Metro, Silicon Valley's Weekly Newspaper.

Copyright © Metro Publishing Inc. Metroactive is affiliated with the Boulevards Network.

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