If finalized, a tentative labor agreement hammered out between the United Auto Workers (UAW) and Mack Trucks transfers responsibility for providing worker retiree health benefits from the OEM to the union.

The new 40-month master agreement covering some 1,700 workers at seven Mack facilities in three states creates a UAW-managed independent trust known as a Voluntary Employee Beneficiary Association (VEBA), according to Mack.

The VEBA would permanently assume the sole obligation for providing retiree health benefits to roughly 9,000 current Mack-UAW retirees, surviving spouses and dependents, as well as for future UAW retirees, while eliminating Mack's health care liabilities for this group, the company said.

The new collective bargaining agreement and VEBA are conditional on ratification by the UAW membership.  If approved by the union members, the VEBA would be subject to an approval order from the U.S. District Court for the Eastern District of Pennsylvania, which could take up to 12 months, Mack said.

Mack's parent company, Sweden-based AB Volvo, has agreed to fund the VEBA with $525 million in cash, which would be paid in equal installments over a five-year period, with the first payment made no earlier than July 1, 2010.