Sears to cut retirees’ $37 monthly health care subsidy

Aug. 29--About 14,000 Sears retirees will lose a monthly health insurance subsidy as the languishing department store titan looks for ways to shave costs.

Hoffman Estates-based Sears Holdings Corp. plans to send letters Friday to the 14,000 Sears, Roebuck & Co. retirees and dependent spouses who have been receiving the $37 monthly health care subsidy, informing them that the subsidy will be eliminated in 2015.

Only employees who retired before 2000 were eligible to receive the subsidy, which was reduced in 2006 and is applied to the monthly cost of health care coverage through Sears-sponsored group benefit plans. Anyone who retired after 2000 had their subsidy eliminated in 2006.

The move will save Sears Holdings, which owns Sears and Kmart, about $6.2 million annually. The decision has been in the works for months and was not related to last week's earnings release, when Sears reported its ninth consecutive quarter of losses and 30th consecutive quarter of revenue declines, spokesman Chris Brathwaite said.

There will be no change to pensions or life insurance, he added.

Ron Olbrysh, chairman of the National Association of Retired Sears Employees, said "it came as a shock" when Sears told him the news during a call Thursday afternoon. While his group was expecting that the subsidy eventually would get hit, given Sears' financial performance, he didn't expect it to come so soon.

"While $37 per month doesn't sound like a horrendous amount, for some it will be significant," Olbrysh said. Most of the group's members are in their upper 70s and live on pensions and Social Security. It is the biggest change Sears has made to retiree benefits in many years, he added.

The average age of the retirees in this group, which represents one-tenth of all 140,000 Sears Holdings retirees, is 83, said Stanley Aldis, director of benefits for Sears.

To soften the blow, Sears has negotiated with its insurance carrier, Aetna, to expand to eight, from four, the number of group medical coverage plans it offers to retirees, and its prescription drug plan to seven, from four, so that they have the option of choosing ones with lower premiums.

It also is setting up a dedicated call center staffed by Medicare experts to help this group of retirees determine if a less expensive plan could suit their needs and potentially not increase their out-of-pocket cost.

"In many cases we think they may be over-covered or have coverage they don't need," said Mike O'Malley, vice president of compensation and benefits for Sears Holdings.

All retirees would have the option to stay with the current plan but would be paying $37 more out of pocket every month. Under all the new plans, they could keep their same doctors. The expanded offerings include dental and vision coverage for the first time.

Sears has been losing money and revenue as it tries to transform itself from a traditional department store into a members-based shopping service.

The decision to eliminate the subsidy was, in part, because "we are looking at opportunities to do the right thing in terms of expenses," said Dean Carter, chief human resources officer at Sears Holdings. "As we move through our transformation, we are looking at ways to invest more on members and services to members and increase our bottom line and improve our transformation. This is one way we could do that."

High health care costs and a competitive retail environment, where many other companies don't offer such a benefit, also drove the decision, Brathwaite said.

Olbrysh questions whether the $6.2 million annual cost savings for a company with annual revenue of $36 billion was worth the negative reaction it would likely receive.

"It would have been a small cost for Sears not to do that," he said.

aelejalderuiz@tribune.com

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