Aetna Retirees Association,  Aetna's promise of benefits to former Aetna employees

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Aetna Chief Optimistic In Annual Address To Shareholders

By Diane Levick, The Hartford Courant
May 29, 2009

Aetna ended 2008 with "significant momentum" and is off to a good start in 2009 in a tough economy, Ronald A. Williams, the company's chairman and chief executive, told shareholders Friday at the annual meeting in Florida. "So far this year, Aetna is off to a solid start, despite the difficult economy," Williams said.

The company, he noted, met first-quarter objectives for growth of membership and revenues, expense efficiency, investment performance and capital management. Williams acknowledged, however, that Aetna had higher than projected medical costs in employer-based health plans and said the company is taking action to address that. Aetna added 850,000 members in 2008 and another 1.4 million in the first quarter, bringing the total to 19.1 million, but expects to end this year with about 19 million as employers continue to cut jobs.

"Aetna's financial outlook remains solid, and we have a winning strategy for the future," Williams said, later adding, "we believe will enable us to achieve profitable growth in 2009 and beyond."

Stockholders Friday rejected two perennial shareholder proposals. In a preliminary tally, only 2.06 percent of the shares being voted were cast in favor of requesting the board to adopt a policy to nominate a retired Aetna management employee as a director.

Aetna opposed the proposal, saying directors shouldn't represent narrow interests. But Eugene H. Carpenter, a member of the Aetna Retirees Association, said the group wants a nominee with a broad range of corporate experience who would not promote special interests.

Carpenter also asked about how well funded Aetna's pension plan is, and Williams said the company is "very capable of handling its pension obligations."

The other rejected shareholder resolution, submitted by stockholder Evelyn Y. Davis and gaining support from 39.27 percent of the shares voted, called for cumulative voting for directors. That would allow a shareholder to stack his or her shares behind one or more nominees for the board. It can make it easier to elect a dissident candidate -- one not supported by the company's management and board.

Shareholders elected all of Aetna's 13 nominees for the board Friday, and they will serve until next year's annual shareholder meeting.

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Aetna Strengthens Retiree Benefits

A Letter to the Editor of the Hartford Courant
April 2, 2005

The March 25 Other Opinion article on Aetna's retiree benefits by Robert Quinn ["Slashing Retiree Benefits Is Unprincipled Business"] is misleading in several respects. The article is selectively focused, exaggerates the changes in retiree benefits and overlooks very substantial positive aspects of Aetna's benefits package.

Far from "slashing" benefits, Aetna has taken active steps to strengthen retiree benefits and, in some instances, increased benefits. We take our responsibilities to employees and retirees seriously. That is why we have voluntarily contributed more than $1 billion to our pension plan in the past three years, and increased spending on other retiree benefits to more than $44 million in 2004. For 2005, Aetna's projected spending for retiree benefits is expected to reach $50 million.

As opposed to what the reader of Mr. Quinn's article might be led to believe, we continue to provide a retiree dental benefit, though at a somewhat higher cost, while increasing the array of benefit choices available to retirees including offering a dental discount card available at just $6 per month. Through this program, retirees may receive discounts on dental services averaging 28 percent and ranging as high as 50 percent.

In an industry where many of our competitors do not offer pension plans and subsidized retiree benefits, Aetna continues to provide a strong and comprehensive package including a pension, life insurance, subsidized medical coverage and dental coverage at discounted group rates. And we provided these benefits even in the midst of our difficult financial turnaround. In addition, a significant portion of retiree 401(k) savings originated from company matching contributions.

We are sensitive to the impact of increasing health care costs for retirees. Separate from the actions we took on the dental subsidy, we chose to absorb the full increase of medical costs between 2004 and 2005. In other words, Aetna retirees are paying the same premium in 2005 as they did in 2004. Further, 23 percent of our retirees pay no premium for medical benefits.

A strong, financially stable Aetna is the most important benefit to our employees and retirees. It was just four years ago that our company was losing $1 million a day and reducing our workforce. Since that time and through the hard work of our employees, we have solidified our balance sheet, rebuilt our management strength, become a leader in our industry in controlling medical costs, regained the confidence of our customers and restored the trust of physicians.

Although it's true that Aetna's earnings increased by 41 percent in 2004, this improvement certainly wasn't driven by elimination of the dental subsidy.

Aetna operates in a dynamic and highly competitive environment, and we need the flexibility to make changes to assure that our cost structure is competitive. We have been clear about that since the earliest days of our turnaround.

Focusing on a change to control costs for one program misses the many larger actions that we are taking to ensure a sound future for our employees and retirees.

Elease Wright
Senior Vice President Human Resources
Aetna
Hartford

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Slashing Retiree Benefits Is Unprincipled Business

An Opinion Piece, Hartford Courant, by Robert Quinn
March 25, 2005

Corporate business ethics have eroded dramatically over the past 20 years. Nowhere is this more evident than in the treatment of retirees.

Companies are slashing retiree benefits to increase shareholder value. A 1991 accounting rule requires companies to estimate the cost of future retiree benefits, which then becomes a liability on the balance sheet. By eliminating benefits, companies can turn those liabilities into profits. This bolsters their stock price, which heavily influences executive compensation.

In response to this growing trend, the National Retiree Legislative Network was created. It represents more than 2 million retirees from corporations including GE, Boeing, SNET, IBM and Aetna. It seeks federal legislation prohibiting changes to benefit plans after retirement and requiring restoration of benefits already reduced or eliminated. There are more than 25 million retirees affected by post-retirement cuts in pension and health benefits.

The federal government has been of little help so far. The Wall Street Journal quoted a spokeswoman from the U.S. Labor Department as saying in November that "retired workers aren't our constituents anymore." The courts have generally been unsympathetic, allowing companies to reduce benefits, ignore labor contracts and abandon pension plans. Fortunately, a bipartisan group of Connecticut legislators recently proposed legislation that would revoke any state-funded grants, loans, guarantees or abatements to any Connecticut company that unfairly reduced retiree benefits.

Retirees have few good options for coping with the loss. Some try to live more frugally or are forced to spend down their retirement savings more rapidly to make up for lost benefits, increased premiums, higher deductibles and other out-of-pocket costs. Those who can do so search for jobs, hopefully with health benefits, to supplement their retirement incomes. Still others avoid getting treatment for health problems and don't have prescriptions filled to save money.

Aetna, despite its reputation as an enlightened employer and good corporate citizen, is one of the companies breaking its promises to retirees to enrich its bottom line. Aetna set a spending limit of $4,235 on how much it would contribute yearly for employees retiring after March 1994; any amount above that is the responsibility of the retiree. It also increased out-of-pocket expenses for those already retired, and it eliminated the dental subsidy for current retirees and medical and dental subsidies for future retirees. Eliminating the dental subsidy produced $32 million in savings for the company in the first quarter of 2004, contributing to a 41 percent increase in that year's total earnings.

Aetna's decision is especially harmful to retirees living on small pensions. The extra costs they must absorb can approach 15 percent or more of their pensions. Retirees' faith in Aetna has been shaken. They fear other benefits may also be lost to the relentless desire for profits at any price.

Meanwhile, Aetna's executives are making millions. Aetna Chairman and CEO John W. Rowe recently pocketed $18.2 million from the exercise of stock options. This money is in addition to Rowe's total compensation of $4 million for 2004 and $3 million in 2003.

A former Aetna executive recently testified before the state's Labor and Public Employees Committee that he and other company representatives gave assurances to employees facing job elimination and early retirement that their benefits were safe - representations that influenced many to leave. Former Aetna chairman and current SEC Chairman William Donaldson made a similar promise at the 2000 shareholders' meeting, where he reassured attendees that "Aetna will stand behind its obligations. You have the commitment of this corporation that retiree benefits will not change."

Federal Reserve Chairman Alan Greenspan, testifying before Congress in February 2004, asserted that "we have an obligation to those in and near retirement to honor what has been promised to them. If changes need to be made, they should be made soon enough so that future retirees have time to adjust their plans for retirement spending."

Corporate leaders should stop focusing only on what they can legally get away with and instead do what's right. They need to honor their obligations and provide to those who are already retired the benefits they were promised.

Robert Quinn is a retired Aetna employee and vice chairman of the Aetna Retirees Association, a nonprofit group that lobbies for the protection of retirement health and pension benefits.

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A Mission To Uphold His Old Promises

By Dan Haar, Staff Writer, Hartford Courant
October 3, 2004

John Dwyer, oldest of nine children of a carpenter, rose to the level of executive vice president at Aetna, and later drew the task of combining the company's property-casualty claims units in the hellish year of mass layoffs, 1992.

In those 12 months, the man known to some as "Boomer" cut loose 2,500 working souls from the mother company.

"I died a thousand deaths with every one of those things. There were people that I joined the company with the same day, in the same office and I said goodbye to them," Dwyer recalled last week. "There were sobering, somber moments."

And some solace, as well.

Through Dwyer, Aetna offered juked-up deals to the ousted employees, on top of an already decent retirement setup of pensions and medical and dental coverage.

"We needed to have a very good benefits package to induce these people to leave without a fight, and they did," Dwyer said.

Dwyer retired early from Aetna in 1994 and went on to head an insurance holding company in Bermuda before retiring for good in 2000. Now 67, living in West Simsbury and Duxbury, Mass., he's fighting for his former Aetna colleagues.

He was more than happy as a self-described "boat bum," spending summer days in his sailboat and tooling up and down the East Coast in his motorboat, doting on his three grandchildren along with his wife.

Then last winter, Aetna - the new, revived Aetna - announced it was cutting its dental subsidy for retirees. The company said it would save $3 million a year, and booked an immediate $32 million profit gain as it freed up money set aside to pay for the benefit for years to come.

The cut was a small part of Aetna's dramatic march from multibillion-dollar losses to a profit juggernaut.

Financially, it's hardly a blip for Dwyer. But to say it has set him off is like saying politics charged up Lyndon B. Johnson. This isn't just another policy battle over a competing set of ideas. It's personal to his core.

"They've made a promise, and they're not keeping it," Dwyer said. "When I told a guy, 'Your job is eliminated next June and we'd like you to retire,' and he signed a form, that in my judgment was a commitment."

A commitment by Aetna, that is.

Looking back, he's neither ashamed nor regretful that he capped a 34-year Aetna tenure by playing a key role in what was probably the company's most painful restructuring. But, Dwyer said, "I feel like someone has broken the word that I gave, and I am ashamed about that."

Ashamed, and doing something about it. As the man who spoke in protest at the company's annual meeting April 30, then became chairman of the newly formed Aetna Retirees Association, Dwyer is the voice - the booming voice - of a movement.

The voice is marked by passion in an industry known for excitement over expense ratios and net investment income. It means little to Dwyer that Aetna is one of many old-line companies cutting retiree benefits as they vie against competitors with lower "legacy" costs.

Set aside for a moment the irony that Aetna is paring back a subsidy for a product that it sells - a subsidy Aetna profits from when its corporate customers offer it to their retirees. For now, the issue inside the Hartford-based company's Georgian colonial headquarters is cost.

Aetna, in fact, offers more and larger retirement benefits than its major competitors, spokesman Fred Laberge said. For example, Aetna offers a traditional pension, a 401(k) retirement plan that featured a 100 percent match up to $6,000 in each of the last two years, and a health coverage subsidy of nearly 80 percent for employees and retirees alike.

Medical and dental subsidies for the 11,600 employees who get them cost Aetna about $43 million a year.

"We understand and respect our retirees' point of view. These are not easy decisions that were made without giving it a lot of thought," Laberge said.

More cuts are happening. As announced last year, newly retiring employees will have no health coverage subsidy at all after 2006, although they will still be able to buy into the company's group plans for that and dental.

Even after paring back, Laberge said, "We have higher operating costs than our competitors."

Then the kicker: "It's a different environment. This is not the old Aetna," Laberge said.

Not the old Aetna? That's fine when it comes to business going forward. It's not OK when the New Aetna clashes with implied promises made by the Old Aetna.

"People relied on those commitments and made life-directing decisions based on what they were told," Dwyer said.

Laberge and others at Aetna say, correctly, that there was always a clause in the retirement deals saying the terms could change. The courts may eventually decide whether there was a binding contract under common law.

But officers of the retirees' association - every one of whom is a former executive or ranking manager - say the idea of future cutbacks was waved off at a company that hadn't done anything of the sort in its 150-year history.

"Not one of those employees ever got a warning from me," Dwyer said. "If there was a warning, I don't remember it and I was a fairly astute claims guy."

"They signed the forms, went away quietly and went away feeling pretty much as good about the company as they did on the day they came to work," said Bob Quinn, vice president of the retirees association and a former human resources executive.

When the retirees association board met for the first time Sept. 20, no one noted that exactly 10 years earlier, on a somber Tuesday, Aetna was remembering its longtime former chairman, John H. Filer, who had died that weekend. Quinn and Dwyer said Filer would join their cause if he were alive today.

"He might even be leading it," Dwyer said.

Dwyer is right to make this an emotional, personal issue on behalf of retirees. The cutback is messing with the lives of retirees who, he says, collect a company pension averaging $6,000 a year. The cliché is true; these are the people who built the company.

As an economic issue, the retirees' group is also on target. Aetna is cutting an expense it doesn't need to cut, at least not now. Income from continuing operations, minus $291 million in 2001, has climbed steadily and will easily exceed $1 billion this year. After shrinking its customer base to boost margins, Aetna this year is not just profitable but adding back heft. And the share prices reflect all this, jumping from $32 two years ago to $100.40 at Friday's close.

The benefit cut is a transfer of wealth from retirees to shareholders - not a survival move for Aetna. For John Dwyer, whose father once headed a local union, it's a noble recall to action, a reason to come back ashore.

"I spent my entire career, 40-plus years trying to always remember where I came from," he said.

Copyright © The Hartford Courant

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Aetna Retirees Mobilize Over Cuts In Dental Care

By Dianne Levick, Staff Writer, Hartford Courant
September 21, 2004

Aetna retirees, distraught that the company is yanking subsidies of dental insurance, have launched a new association to prod Aetna into reversing its decision and to protect remaining benefits.

The Aetna Retirees Association Inc., saying the company has broken promises, claims 450 dues-paying members already and has launched a website to recruit more. The site's slogan is "Helping Aetna Keep Its Promises."

"We want to get Aetna to recognize the commitments it has made and honor them," said John Dwyer, a retired executive vice president of Aetna's former casualty division. "Companies that don't keep their corporate commitments get into trouble, and I don't want to see the company get in trouble."

Aetna, saying it needs to cut expenses, confirmed in February that it would stop paying for current retirees' dental insurance as of Jan. 1, 2005. This year, Aetna discontinued dental subsidies for employees who retired Jan. 1, 2003, or later.

Aetna said the end of dental subsidies would affect most of its 11,600 retirees with medical benefits.

The company is aware of the new association, but shows no signs of reversing its decision.

"We recognize and respect their point of view," but Aetna still needs to trim expenses, company spokesman Fred Laberge said Monday.

Information was not available Monday about exactly how much retirees will have to pay to keep the group dental insurance after Jan. 1, but the cost could top $400 a year for some.

Aetna says its own share of retiree dental premiums this year ranges from $23 to $34 a month per retiree household. Retirees' share of premiums varies by date of retirement and the number of people covered.

The Aetna Retirees Association, which has a small East Hartford office and is run by unpaid volunteers, plans to affiliate soon with the National Retiree Legislative Network.

The network describes itself as a Washington, D.C., nonprofit organization composed of groups that represent more than 1.5 million retirees. The network, whose members include IBM and Lucent Technologies retirees, seeks federal legislation to protect and improve retiree benefits.

The Aetna Retirees Association says it will seek to inform directors and shareholders about Aetna's obligations. If that does not work, the association says it will, "with great reluctance, engage legislators and regulators" and, "if necessary, initiate legal action."

Dwyer says the association does not yet know whether a lawsuit is warranted.

Dwyer protested the dental insurance curtailment at Aetna's annual meeting in April, and said that nothing in his company documents warned that his benefits could be cut 10 years after his retirement. Dwyer says Aetna has been unresponsive on the issue.

Aetna's Laberge, though, said Monday, "We very much appreciate our retirees for their years of dedicated service to Aetna" and that "changing benefits is always a difficult decision."

But Aetna's expenses, despite cutbacks, are still higher than its key competitors and need to be reduced, Laberge said. Aetna spent $43.7 million on retiree benefits in 2003, up from $37.3 million in 2002, he said.

The company will save $3 million a year by ending dental subsidies. Aetna got a $31.8 million boost to earnings in this year's first quarter because the company won't be spending the money booked to cover dental insurance over time.

Cutting expenses will make Aetna more competitive, and "We believe that the more competitive and stronger the company is, the better off retirees and employees will be in the years to come," Laberge said.

Dwyer says that response is nearly the same as Aetna chief executive John W. Rowe's comments at the annual meeting, and is "just puff."

"In a desperate rush to meet Wall Street's expectation, people [at Aetna] are doing things that are inappropriate," Dwyer said.

In addition to Dwyer, the new association's leadership includes other retired Aetna executives. The group's president is Bob Gilligan, who was a vice president in Aetna's old Employee Benefits Division. Two former vice presidents from Aetna's corporate human resources are also on the board.

The association is only seeking members who have already retired from Aetna, although some current workers are very angry that Aetna is phasing out medical benefits for future retirees. The $20-a-year dues will be used to cover such expenses as office, website, newsletters, postage and other supplies, Dwyer says.

The association's leadership includes some affluent people who could afford their own dental insurance or bills, but Dwyer says they are advocating for the thousands of Aetna retirees who aren't so fortunate.

The average pension for a retired Aetna employee is roughly $6,000, Dwyer says, adding "it's that employee I'm fighting for."

More information on the association is available at its website at www.aetnaretirees.com. The mailing address is Aetna Retirees Association Inc. P.O. Box 280165, East Hartford, Ct. 06128.

Copyright © The Hartford Courant

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Aetna Retirees Announce New Association

Volume 1  Issue 1  9-22-04

Bob Gilligan, formerly a Vice President in Aetna’s Employee Benefits Division announced the creation of a new retirees association focused on helping retirees address benefit and pension issues when Aetna seeks to make changes. He said, “The immediate cause for creating this organization is Aetna’s announcement that they plan to eliminate the subsidy for the retiree dental plan.

After efforts by John Dwyer, our new Board Chairman, as well as by Bob Quinn and Emmett McTeague, who met with Aetna Human Resources; and then a letter writing campaign by many retirees, it became clear we needed to better organize our efforts if we were to be successful. We found tremendous support for the concept of a collective effort. A few of us got together and decided to get it started”.

Bob goes on to tell us some of the steps that have been necessary in forming the organization. A leadership team needed to be pulled together and officers decided upon. Then a board of people with diverse skills and representing the various divisions Aetna retirees come from had to be identified and engaged in supporting AR’s efforts. John Dwyer indicated, “I couldn’t be more pleased with the people who have come forward to serve in this effort. We have people with Government Relation, legal, Human Resources, technology and leadership skills. Divisions from Employee Benefits to Property Casualty, to International, as well as Corporate are all represented. And they all believe firmly in the cause”.

"What we all seem to have in common is a combination of disappointment and anger at Aetna’s decision to break its promises”, said Gilligan. “While it is nice to once again experience the camaraderie among these former “Aetnoids,” There is a certain sadness in all of us that we find this new organization necessary”. “Nevertheless, we are ready to do whatever proves necessary to change Aetna’s decision" adds Dwyer.

For the mission, strategy and critical success factors that were in the announcement letter see ARA Mission.

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