August 2, 2002
Tax credit to benefit retirees, unemployed
By PAUL M. KRAWZAK
Copley Washington correspondent
WASHINGTON ó Thousands of retirees from bankrupt steel companies and workers who lost their jobs because of increased imports will qualify for a tax credit that will help them pay for health-care insurance.
The unprecedented benefit is part of a trade bill that the Senate passed Thursday and sent to President Bush for his signature.
The tax credit will cover 65 percent of the cost of premiums for qualified health insurance plans. Typically, recipients will be able to
use the credit to pay for coverage under a state-certified group plan. They also can use it to pay for temporary continuation of
benefits through the Consolidated Omnibus Budget Reconciliation Act of 1985, better known as COBRA.
In most cases, the tax credit cannot be used to purchase individual health insurance plans.
The benefit is aimed at retirees from steel companies and other firms who lost their health benefits when their former employers
went out of business. It also will assist workers bumped from their jobs as a result of foreign competition.
More than 130,000 Americans are expected to take advantage of the tax credit, which should be available within three months,
Senate staff said.
Robert Helms, an economist at the American Enterprise Institute, called the benefit significant. But he added that the number who
will be eligible for it is still ďa small population compared to the 25 million working Americans who donít have insurance.Ē
The program will cost taxpayers an estimated $4.8 billion over 10 years, the Joint Committee on Taxation said.
Retirees who are collecting benefits from the Pension Benefit Guaranty Corp. (PBGC) are eligible if they are 55 to 65 years old. The pension board insures private pensions and then pays them, often at reduced levels, when companies such as Cleveland-based LTV Steel go under. The agency does not replace retiree health insurance lost when companies shut down.
The tax credit also will help workers who the U.S. Labor Department certified lost their jobs because of increased imports. The
federal government offers trade adjustment assistance, including training and income support, to help these workers find another
In Ohio, for example, there are more than 60 companies, including Ansell Perry in Massillon, whose laid-off workers have been
certified for trade adjustment benefits.
Recipients of trade adjustment assistance can be any age up to 65 to qualify for the tax credit for health insurance.
In general, the benefit is for retirees or workers who lack access to company-paid health insurance. The tax credit ends when a
recipient turns 65 and becomes eligible for Medicare, the federal health insurance program.
Legislative staff estimated that 83,000 of the 195,000 who are eligible for trade adjustment assistance will use the tax credit each
year. Another 55,000 of PBGC recipients will use the benefit each year, staff estimated.
Many of the retirees from LTV could qualify. The PBGC is paying benefits to 53,000 LTV retirees but it is not known how many are 55
to 65 years of age.
Also eligible are retirees from two other steel companies, CSC Ltd. in Warren, and Northwestern Steel & Wire in Sterling, Ill. After
those companies shut down last year, the PBGC took over their pension plans. The agency owes benefits to 1,000 who have retired
or will retire at CSC and 4,600 current or eventual retirees at Northwestern.
Retirees of another bankrupt steel maker, Republic Technologies International in Fairlawn, are not yet eligible for the tax credit but
probably will get it eventually. At RTI, 2,000 are drawing pensions from the company.
The PBGC asked for court approval in June to take over Republicís pension plan but ran into opposition from the United Steelworkers
Union. The union wants a federal court to require the PBGC to pay shutdown benefits to workers who lose their jobs.
In Ohio, more than 23,000 were drawing benefits from PBGC at the end of 2000, the agency said. Ohio was providing federal trade
adjustment assistance to at least 2,000 other workers, said Dennis Evans, spokesman for the state Department of Job and Family
Unlike many tax credits, this one is payable in advance. The government most likely will create a certificate that will be sent to those who are eligible, who in turn can use it pay for health insurance, legislative staff said.