UAW Buy-Outs

[Snaggletoof]

Guys and Gals, this is going to be a big one, covering thousands and thousands of people.

Client is a GM worker (and I heard Ford is going to do the same thing). He is being offered a "buy-out" so that GM can eliminate his job. Lump Sum payment in 2006 of $140,000, or $1300 per month when he reaches age 65. Since he won't be 65 for 20 more years, he's going to take the $140,000 lump sum. Fully taxable of course.

Do these folks get any tax break at all on this?

Thanks, Snag

[Bees Knees]

No they don't. They should be happy they get a nice financial cushion to give them plenty of time to find a new career. If they don’t like paying tax on the lump sum money, they have the option of deferring the tax until they are age 65 by taking the $1,300 per month payment instead.

[Snaggletoof]

Not Happy

Yes, they SHOULD be happy because if they were laid off by typical companies, there would be no such severance package, maybe a couple of weeks by industries here in the South.

These people are not happy, however. They know they are a part of our reindustrialization where bargained increased pay and decent health insurance are no longer the standard. They're making $30+ and hour and with a benefit package that practically pays their medical coverage anywhere. The price of all this goes into a vehicle for an automotive company trying to sell cars to a general public making $13/hour and lucky to have any medical coverage at all. So this reindustrialization is really not that hard to figure out.

The real shame is that instead of manufacturing jobs with decent pay and decent benefits, the norm has now become Wal-Mart pay and No benefits. Companies bailing out of health coverage and suppressing pay have become the darlings of Wall Street. More than one million people annually are losing hospitalization insurance.

As most of you know, some $40,000 of the $140,000 will be gone to taxes this year. The rest will provide a differential lasting about 3 years if you compare his new $30,000 job with the one he used to have at the GM plant. No, he's obviously not happy, but maybe he should be. Depends on point of view I suppose.

Regardless if you are Union/Non-union, Republican/Democrat, rich or poor, or where you stand on the issue of pay & benefits, you will live to see the day where this largely ignored crisis finds its way into your refrigerator and home.