Last week I received a booklet which communicates the changes to the retiree medical program which will go into effect on January 1, 2010. Essentially the domestic salaried retirees will bear the entire cost of their medical coverage. The booklet leads off with a statement regarding why the change is being made. Since this will likely be the subject of some discussion at the annual meeting take a close look at the company's reasons for reneging on the promise previously made to you.

The company indicates that "Our health care costs continue to rise at double-digit rates each year, much faster than most other costs in our business" First of all Note 20 to the financial statements sets out the actual cash costs for retiree medical and its assumptions regarding future costs. The note indicates that the cash paid by the company (before any tax benefit) to support all of its retiree medical plans was $18 million in 2009; $19 million in 2008; and $19 million in 2007. Secondly the company indicates that the long term rate of inflation in retiree health care costs is 5%. Neither the actual cost of the plans or the company's assumptions on future cost increases supports the "double digit" claim.

If you want to see the costs that are increasing take a look at the compensation table in the proxy. Ms. Barnes annual compensation has increased 62% while Mr. Fraleigh's compensation is up 42%. Then we have the $4.6 million paid to the inept CFO and General Counsel who were fired during the year and the $18 million of derivative hedging losses in 2009. Of course the granddaddy of them all is the purchase of 110 million shares at an average price of $16.54 under the assumption that the transformation would meet its goals - a quick half billion dollars lost versus the current market price.

Then the company goes on to say that "We're not alone. Many organizations have taken even more drastic steps to curb retiree health care costs by not offering access to any benefits" If we look at the 15 domestic peer companies that management indicates that it uses to set compensation we see that the average postretirement medical expense was $58 million for thye most recent year while Sara Lee had income of $3 million from these plans. More importantly we see that of the 15 companies only 2 have eliminated company subsidies for retiree medical and this was done on a going forward basis - that is only individuals retiring after a certain date lost the benefit. The company may have found a few outliers that screwed its retirees retroactively but not among the peer group that its uses to justify Brendas compensation package.

Fellow retirees - get the facts and be ready for Thursday.