History and Purpose of asrTrust

History and Purpose of asrTrust

The negotiations to establish these new health care trust funds were complex and challenging. There was no legal precedent for this type of funding vehicle in Canada, so the federal government agreed to change its tax regulations to allow the creation of the trusts. Actuaries were hired to study the liabilities and likely future costs of benefits for current and future retirees. Their estimates depended on unknowable factors (such as future life expectancy, health costs, investment returns, and interest rates). The CAW and the companies negotiated over the amount of funding that the companies would pay into the trusts to meet their obligations.

In GM's case, the negotiations were complicated by an additional government demand - that the total obligation of the company to the trust fund be reduced by $500 million. This saving was attained partly through negotiated reductions in the level of benefits (agreed to in spring 2009), and partly through the transfer of an outstanding funding gap onto the new trust fund. Despite this additional challenge, the funds contributed by GM to the trust fund under its eventual agreement with the CAW(over $2 billion, paid in over several years) were deemed to be sufficient to cover most of the costs of future retiree health benefits.

After the initial agreements were reached between the companies, the CAW, and the governments to form the trusts in the spring of 2009, a lengthy and complicated legal process then commenced. In this process, retirees were represented by an independent steering committee of representative retirees at each company, who in turn retained independent legal counsel. This independent status for retirees in the negotiations was necessary, because legally the CAW cannot represent retirees in these proceedings.