Wal-Mart Stores Inc. could limit health and benefits costs by hiring fewer unhealthy workers, reducing subsidies for spouses and cutting payments to retirement accounts, a senior executive of the company said in a memo.
The retailer’s employees are getting “sicker than the national population” and aging faster, causing benefits costs to grow faster than sales, M. Susan Chambers, executive vice president for benefits, said in the memo to Wal-Mart’s board.
Wal-Mart posted the 27-page document on its website after The New York Times wrote a story about it Wednesday.
Wal-Mart employs about 24,000 people in Colorado.
“Striving to hold benefit costs as a percentage of sales constant is critical for Wal-Mart’s long- term economic success,” Chambers wrote. Any changes to the company’s health care and benefits plans must be weighed against the company’s public reputation, which is under scrutiny by “well-organized and well-funded critics” who have selected health care as their main avenue of attack, she said.
Wal-Mart spokesman Dan Fogleman declined to comment beyond what was posted on the website. Five lawmakers, including U.S. Sen. Edward Kennedy, D-Mass., criticized the company for the memo.
Savings from the initiatives outlined could total more than $1 billion, according to the document, which was prepared with the assistance of management consulting firm McKinsey & Co.
Labor groups, U.S. lawmakers and advocacy organizations such as Wal-Mart Watch have criticized the company’s pay and benefits, saying the offering is so poor that many Wal-Mart workers are on public assistance programs such as Medicaid.
According to the memo, 5 percent of Wal-Mart’s employees are on Medicaid and 19 percent are uninsured. In the overall retail industry, 6 percent get Medicaid and 18 percent are uninsured. Among national workers, 4 percent get Medicaid and 18 percent are uninsured.
Wake-Up Wal-Mart, funded by the United Food and Commercial Workers union, and Democracy for America, the progressive political action committee founded by former Vermont Gov. Howard Dean, are leading an effort to introduce “fair- share” health care legislation that would require the biggest employers to pay more for worker-health benefits in all 50 states.
To bolster the company’s reputation, Wal-Mart could offer “limited funding” to workers until they become eligible for its health plan, the memo said. That would cost of up to $350 million by fiscal 2011.
The memo was “the culmination of about six months of effort to really thoughtfully look at our entire benefits offering,” Chambers told CNBC on Wednesday.
