The Supreme Court has agreed to hear a petition that could have a big impact on employers' healthcare obligations to retired union employees.
The petitioners, M&G Polymers USA, want the court to overturn a decision by the Sixth Circuit Court of Appeals that said an employer must pay 100 percent of retiree healthcare costs indefinitely. M&G Polymers is claiming the Sixth Circuit's decision conflicts with the majority of court rulings on similar claims across the country.
The issue seems to be one of contractual sloppiness, willful or otherwise. The Sixth Circuit ruled that the absence of specific language in M&G's collective bargaining agreement regarding how long retirees are entitled to healthcare benefits establishes the "inference" that the retirees are vested for life. Basically, said the Sixth Circuit, if it is not contractually established that the benefits can be terminated, they can't be.
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Circuit court decisions on similar Labor Management Relations Act cases have been inconsistent.
The Third Circuit has said that contracts should require a clear statement that healthcare benefits are meant to survive the termination of collective bargaining agreements, according to SCOTUSblog.com.
The Second and Seventh Circuits have held that the general inference of indefinite benefits can't be assumed, and that at least some identifiable language in the contracts must exist for a reasonable interpretation of indefinite benefits.
M&G retirees say the question of inference is irrelevant, because the district court that first heard the case was convinced the language in the collective bargaining agreement intended the benefits to be vested for life.
The Sixth Circuit has ruled in favor of plaintiff-employees before.
In Moore v. Menasha Corp., the court upheld a lower court's ruling that found extrinsic evidence (statements from HR people, insurance contracts) that proved intent to vest in spite of ambiguous language in the collective bargaining agreement.
Employers in recent years have complained about massive and mounting healthcare costs for retirees. ERISA says healthcare benefits don't automatically vest unless the parties to a collective bargaining agreement contractually intended them to.
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Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
