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How Bob Naftaly, within the Face of Automaker Bankruptcies, Helped Save Well being Advantages for 872,000 UAW Retirees

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By Staff , in Investments , at September 30, 2021

Bob Naftaly is the founding chair of the UAW Retiree Medical Benefits Trust.
Bob Naftaly is the founding chair of the UAW Retiree Medical Advantages Belief. (Glenn Triest)

Bob Naftaly continues to function chair for what now is named the UAW Retiree Medical Advantages Belief, which pays out roughly $3.5 billion yearly in well being care advantages to almost 600,000 former auto employees and their dependents.

The way forward for Detroit and the U.S.-based automakers through the summer time of 2007 had by no means seemed so dreadful. Normal Motors, negotiating with the United Auto Employees union towards a brand new labor contract, had misplaced greater than $12 billion through the earlier two years. Bankruptcies for a number of of the Huge Three automakers had been rising extra doubtless.

Determined to stave off collapse, the Huge Three proposed shrinking massive liabilities for future medical and different post-retirement advantages to which hourly employees had been promised. If chapter occurred, little or no cash can be accessible for well being care. 

The UAW and the business, nonetheless, discovered an answer: Entitlements can be secured by a separate, unbiased belief. The automakers agreed to fund the Voluntary Worker Profit Affiliation (VEBA), which was empowered to pay retirees’ medical advantages. In return, the three automakers had been capable of take away the large liabilities from their steadiness sheets.

However who had the talent, expertise and the credibility to prepare and oversee the VEBA belief? With automakers and the union so typically at odds, who may the union and automakers appoint to make sure the VEBA remained true to its mission, competent and, importantly, sufficiently funded to cowl greater than $50 billion of future medical payments for tons of of hundreds of retired autoworkers?

The UAW and auto business agreed that Bob Naftaly was the proper individual to prepare the VEBA’s creation and lead its board. A longtime monetary govt who had served the Jewish Federation of Metropolitan Detroit in addition to Democratic governors Jim Blanchard and Jennifer Granholm, Naftaly had retired a number of years earlier as Govt Vice President of Blue Cross Blue Protect of Michigan. Finance was his talent, public service his ardour — and problem-solving a useful attribute.

Naftaly, 83, continues to function chair for what now is named the UAW Retiree Medical Advantages Belief, which pays out roughly $3.5 billion yearly in well being care advantages to almost 600,000 former auto employees and their dependents. Along with different outstanding monetary roles, the UAW knew him as chair of an earlier, a lot smaller VEBA belief that administered dental advantages to union retirees.

Vehicle Stoop Imperiled Retirees

Well being advantages — with the specter of chapter looming — was a complete totally different, bigger and extra advanced enterprise.

“The auto business and the union had a standard downside” in 2007, Naftaly recalled. “They had been apprehensive about who would pay for the well being care of their employees, they usually had been additionally apprehensive concerning the future viability of the businesses” if the automakers turned bancrupt.

“Employees wanted safety, and everybody wanted to get the liabilities off the automakers’ books.”

The VEBA belief choice had existed within the U.S. tax code for many years — although no firm or business had ever tried one as massive. Following federal judicial approval, the UAW and the auto business had been handed an 18-month deadline to construction the group, which as we speak employs 127 individuals. It was an enormous activity at a second when the automakers’ monetary prospects had been rising dimmer by the day. GM and Chrysler did file for chapter in 2009 and had been reorganized by the U.S. Treasury; Ford narrowly prevented it.

“This was an enormous mission, taking up the well being care accountability for tons of of hundreds of individuals,” Naftaly mentioned. “Nearly like organising a brand new insurance coverage firm from a clean piece of paper. We would have liked a number of particular experience.”

Dan Sherrick
Dan Sherrick

Naftaly apportions nice credit score to Dan Sherrick, then the UAW’s Normal Counsel, for writing the settlement between the UAW and the auto corporations, and to Fran Parker, who had lately retired from HAP and have become the Belief’s first rent and CEO. 

“Dan knew the authorized facets. I knew finance and governance. Fran tackled the job of placing collectively the operations crew,” Naftaly mentioned. 

“From a employees perspective, the chaos within the financial system, the recession, labored in our favor. It was an excellent time to rent good individuals with experience in well being care. We employed actuarial specialists, constructed a governance construction for the board. We had been juggling loads on the identical time. We had been being watched. We needed to be able to serve the retirees and their households. Lots of people had been relying on us to do that proper. We couldn’t afford to overlook the launch date of Jan. 1, 2010.”

Fran Parker
Fran Parker

Many retired auto employees, some not but sufficiently old for Medicare protection, had been terrified that they and their households can be disadvantaged of well being care. Skeptics puzzled if the VEBA would fly, given the automakers’ depressing monetary situation and the abundance of collectors.

“As soon as chapter hit, there was a reluctance by some to assist us full the job,” Naftaly mentioned. “Only one instance, the corporate we had employed to find out the eligibility of Belief members instantly dropped us earlier than ending its work.”

Naftaly had navigated many monetary predicaments over time; he knew indecision wasn’t an choice. 

The Belief, inaugurated initially of 2010, was instantly accountable for offering well being care to 872,000 eligible retiree members in all 50 states. The unique funding needed to be adjusted as a result of chapter and seemed far much less sure than the quantities initially agreed upon. 

Throughout Naftaly’s 12-year tenure, the Belief’s investments have prospered thanks partially to a flourishing inventory market — as of 2019, property had been $60.3 billion — and due to the prudent buying of advantages. 

The Belief, which operates completely independently from the union and automakers, covers members from retirement by means of the tip of their lives. Present membership of eligible retirees and dependents, as anticipated, has declined to 594,277. An extra 67,000 energetic employees and their eligible dependents could have entry to Belief protection after they retire.

Car Welding
Monetary Savior Within the Making

For Naftaly, who grew up in Detroit and attended Central Excessive Faculty, his UAW Retiree Medical Advantages Belief function represents the most recent highpoint throughout an extended and distinguished profession in monetary administration, well being care and public service. He can’t say he at all times was aimed on this route: As a teenager, he’d by no means imagined such a life. At Central Excessive, astonishingly, he had no inkling as to a future profession. Fortuitously, a relative stepped in.

“My Uncle Sam Geller inspired me to turn out to be a licensed public accountant,” he mentioned. “He informed me to take bookkeeping in highschool after which come to work for his accounting agency whereas taking school programs at night time and on the weekends.” 

Naftaly graduated from Walsh School in 1959 with a level in accountancy and monetary administration. Later he would function the varsity’s alumni affiliation president and a trustee; he additionally obtained Walsh’s distinguished alumnus award and an honorary doctorate.

Now primarily based in Troy, Walsh in these days was situated in Downtown Detroit. Attending night time college meant snagging an honest parking spot and avoiding the meter maid. Evening college students “had been all in the identical boat — working at an accounting workplace or enterprise through the day,” he mentioned in a profile revealed by Walsh. 

“Going to highschool was tiring, particularly throughout tax season, however I at all times preferred it. All of the lecturers had been skilled individuals, so we received a sensible schooling in addition to guide studying.”

He labored and co-managed the Detroit-based accounting agency of Geller, Naftaly, Herbach & Shapero for greater than 20 years. Following Jim Blanchard’s election as Michigan governor in 1982, Naftaly volunteered to serve on a “disaster committee” probing the state’s monetary situation, which turned out to be extra precarious than was usually understood.

“The state was bancrupt,” he mentioned. “The earlier administration had been accounting for earnings on an accrual foundation and expense on a money foundation.” In different phrases, kicking monetary obligations down the street. Michigan’s monetary situation appeared a lot better than it was as a result of the state was reserving bills and obligations solely after they had been paid, as a substitute of after they had been incurred — an accounting no-no. A money disaster was inevitable.

“We needed to institute correct accounting and monetary processes,” Naftaly mentioned. “In any other case, we had been going to expire of money and never be capable of make payroll.” 

Six months after volunteering his service to the committee, Blanchard appointed Naftaly as Director of the state’s Workplace of Administration and Funds. He served in that put up from 1983 to 1987. “By the point I left, the state was solvent once more.”

Firms took notice of his judgment and experience and sought him. After a 12 months as Vice President and Auditor of Detroit Edison, Blue Cross Blue Protect of Michigan recruited him as Govt Vice President and Chief Monetary Officer. As soon as once more, Naftaly was confronted with the duty of straightening out an enormous group beset by cash woes.

Like Michigan a number of years earlier, Blue Cross Blue Protect within the late Eighties was roughly broke and in want of economic overhaul. Richard Whitmer — father of present Gov. Gretchen Whitmer — was the health-care insurer’s CEO. Naftaly received a inexperienced gentle to scrub home, hiring a brand new finance employees, actuary and controller. He then dove into the minutia of the group’s monetary and actuarial practices, the nuts and bolts of every day operations.

“The employees puzzled what I used to be doing,” he mentioned. Insurance coverage charges needed to be elevated. The state handed a “solvency tax” to shore up funds. “We additionally had to enhance our relationships with the attorney-general’s workplace.” 

Then-Lawyer Normal Frank Kelley had been hostile to Blue Cross Blue Protect, on one event submitting lawsuits accusing misuse of the nonprofit group’s tax-free standing. However the two knew each other from Naftaly’s days in state authorities. By the point Naftaly retired 15 years later, the health-care insurer boasted a surplus of $1 billion.

Bob Naftaly was highly trusted by both the UAW and the automakers.
Bob Naftaly was extremely trusted by each the UAW and the automakers. Glenn Triest
Saving Nursing Residence Choices for the Jewish Group

Mark Davidoff, a longtime Detroit accounting and monetary govt who considers himself a Naftaly protégé, says, “Bob brings imaginative and prescient and coronary heart to the options that have to be discovered for seemingly intractable monetary issues.”

Mark Davidoff
Mark Davidoff

Their relationship finally led to Davidoff’s tenure as an govt of the Jewish Federation of Metropolitan Detroit, and later as a Companion with Deloitte’s accounting and consulting practices.

Within the early Nineteen Nineties, Davidoff had been working because the Chief Monetary Officer for the long-term care subsidiary of what’s now Trinity Well being Care. 

“I get a name from Bob — at the moment serving on the Jewish Federation’s board — who says, ‘I hear you’re a Jewish boy who is aware of one thing about nursing properties. We may use your assist.’”

Two nursing properties operated by Federation, Borman Corridor in Detroit and Prentis Manor in Southfield, had been “draining the Federation’s sources and likewise elevating questions concerning the stage of care” for the greater than 300 aged Jewish residents, Davidoff mentioned. The 2 properties stood to lose their federal certification from Medicare and Medicaid. 

“The enterprise method for fixing the issue was to close them down. The humane method was to acknowledge the ethical obligation for delivering care to individuals in want. Bob discovered the candy spot between the 2.”

Beneath Naftaly’s steerage, a nationwide request for proposal was despatched to nursing residence operators. The Federation chosen HCR ManorCare, a Toledo-based operator, which helped to switch residents and open a state-of-the-art expert nursing facility because the Marvin and Betty Danto Household Well being Care Heart on the Eugene and Marcia Applebaum Jewish Group Campus in West Bloomfield.

The migration from a nonprofit nursing residence mannequin to a for-profit mannequin didn’t simply avert a monetary catastrophe, it led to a number of new aged providers, similar to specialised look after Alzheimer and dementia sufferers, that hadn’t beforehand been provided.

A number of years later, Naftaly “casually” launched Davidoff to Deloitte’s then-managing accomplice, who had requested to study extra concerning the Detroit Jewish neighborhood. Naftaly’s function because the “nice connector” led to Davidoff becoming a member of Deloitte and finally led to his promotion as Michigan managing accomplice.

Davidoff, who retired from Deloitte in 2019, at present serves as President and CEO of The Fisher Group, the household workplace for the household of Max and Marjorie Fisher. He additionally serves as senior advisor to the board of the Detroit Jewish Information Basis, writer of the Detroit Jewish Information.

Stethoscope with clipboard and Laptop on desk,Doctor working in hospital writing a prescription, Healthcare and medical concept,test results in background,vintage color,selective focus
Nonetheless Concerned in Serving to Others

Nowadays, Naftaly refers to himself as “retired,” although the checklist of his actions and philanthropic endeavors — together with conferences and actions related to chairing the UAW Retiree Medical Advantages Belief — counsel a schedule that continues to be pretty demanding.

“I’m nonetheless energetic with our Federation right here in Detroit, as effectively the Jewish Federation in Palm Seashore, Florida, the place we spend the winter,” he mentioned. He has in the reduction of on company board memberships.

Naftaly and his spouse, Anita, have been married for 30 years, with 4 grownup youngsters and 6 grandchildren to indicate for it. Anita Naftaly previously instituted Opening the Doorways, which offered particular education schemes on behalf of Detroit’s Jewish Federation. 

She can be concerned with inSIGHT by means of Schooling, a nonprofit in Florida that gives studying sources for Holocaust and genocide schooling in public colleges.

His profession by no means afforded Bob Naftaly a lot spare time for sporting pursuits. “I lastly have taken up golf,” mentioned the 40-year member of Franklin Hills Nation Membership in Farmington Hills, including with rueful wit: “That was a mistake.”

He has no real interest in membership golf tournaments at Franklin Hills or in Palm Seashore. “My associates and I play, then go to lunch,” he mentioned. 

“It’s a recreation of low expectations” — a pleasurable respite from an extended and pressure-packed profession placing out fiscal and monetary fires.

From Walsh School night time programs to company govt suites to the state capital to UAW headquarters, Naftaly has received the arrogance of executives, assembled disaster groups to resolve harrowing monetary dilemmas, assisted the unwell and the aged within the title of Jewish welfare — constantly exceeding the expectations of him that had been already fairly excessive. 

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