SUPREME COURT ALLOWS EMPLOYER TO REDUCE RETIREE HEALTHCARE BENEFITS

Written on .

Many employers provide healthcare benefits not only for active employees, but also for retirees.  While pension benefits are normally thought of as vested, by and large employers have a great degree of leeway to design health and welfare plans according to their own wishes.  However, once the welfare plan is written, courts will enforce the terms of the plan.

As healthcare costs have significantly increased, many employers have required employees to begin contributing to the cost of their healthcare benefits.  Some retirees, in turn, have argued that their healthcare costs cannot be increased but are instead "vested" at the time of their retirement.  It appears that the resolution of this issue largely depends on the terms of the particular plan.

The Supreme Court addressed this issue in a case involving free healthcare benefits for retirees under an expired labor contract.  M&G Polymers USA, LLC v. Tackett, 202 LRRM 3201 (Jan. 26, 2015).  The lower court seemed to indicate that in the absence of intrinsic evidence to the contrary, provisions of the labor contract indicated an intent to vest retirees with lifetime benefits that could not be changed.  The lower court noted the absence of a termination provision specifically addressing retiree benefits, and inferred from this situation an intent to vest those retiree benefits for life.

The Supreme Court reversed, finding that traditional principles of contract law applied to retiree plans, also applied to collective bargaining agreements.  One of those traditional principles are that courts should not construe ambiguous writings to create lifetime promises.  The Court cited the principle favorably that because vesting of welfare benefits is not required by law, an employer's commitment to vest such benefits is not to be inferred lightly; the intent to vest must be found in the plan documents and must be stated in clear and express language.

Editor's Note - The Supreme Court ruling will give employers more leeway to modify or reduce healthcare benefits provided to retired workers.  However, this issue remains one of the interpretation of a contract, and the primary result of the case is that the courts must apply ordinary contract principles, without presumptions, to determine whether retiree healthcare benefits are vested.

Get Email Updates

Receive newsletters and alerts directly in your email inbox. Sign up below.

Recent Content

supreme court building, outdoors, blue sky

Supreme Court Reinstates Stay of OSHA Vaccine Mandate

In a 6-to-3 decision published January 13, 2022 the U.S. Supreme Court has stayed implementation of an Emergency Temporary Standard (ETS)...
viles of vaccines indoors

The Supreme Court Stays the OSHA ETS; CMS Vaccine Mandate for Healthcare Workers Goes Forward

Yesterday, we received decisions from the US Supreme Court on the status of the OSHA COVID-19 ETS and the CMS vaccine mandate for healthc...
number 15 on a brick wall

Federal Contractor Minimum Wage Final Rule Requires $15.00 Minimum Wage

On November 22, 2021, the Department of Labor's (DOL) Wage and Hour Division issued a final rule implementing President Biden's Executive...
covid vaccine viles

Appeals Court Lifts Stay to OSHA Vaccination ETS (Updated)

On Friday night, December 17, 2021, the Sixth Circuit Court of Appeals in Cincinnati lifted the stay of OSHA's Emergency Temporary Standa...
walkout, outdoors, red hats

Workplace Walk-outs and Strikes This Year Have More than Doubled

Unions have engaged in over 240 major strikes this year, doubling the number from last year. Some have labeled the situation "strike-tobe...
Federal business building, indoors

Federal Contractors Soon to Be Required to Verify They Have Affirmative Action Plans

In general, companies that do business with the federal government are required to have affirmative action plans. Such plans address how ...

Wimberly, Lawson, Steckel, Schneider & Stine

3400 Peachtree Road, Ste 400 / Lenox Towers / Atlanta, GA 30326 /404.365.0900

Where Experience Counts


Thank you for visiting the firm's website. Please note that this website is intended for general information purposes only and does not constitute an offer of representation or create an attorney-client relationship with the firm. The firm welcomes receipt of electronic mail but the act of sending electronic mail alone does not create an attorney-client relationship. You may reproduce materials available at this site for your own personal use and for non-commercial distribution. All copies must include the firm's copyright notice.

© 2020 Wimberly, Lawson, Steckel, Schneider & Stine P.C. | Site By JSM