Retiree Health Care

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These executive summaries were compiled from EMPLOYEE BENEFITS INFOSOURCE database, a source for information on employee benefits and human resources.

Other Recent Decisions.
Benefits Magazine; v49 no4 pp 68-70 Apr 2012; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Contested withdrawal liability prompted the case of Plan Board of Sunkist Retirement Plan v. Harding & Leggett Inc. The defendant company argued the basis for the liability calculation was erroneous in three ways. The Ninth Circuit Court of Appeals found one point based on a clerical error but otherwise affirmed the plaintiff's assessment of withdrawal liability. In Trustees of the U.A. Local 125 Health and Welfare Plan et al. v. A'Hearn Plumbing & Heating Inc. et al. the District Court for the Northern District of Iowa refused to grant a company's motion for summary judgment, finding disputed issues of material fact that cloud the company's relationship with the primary defendant company. In International Union, United Automobile, Aerospace, and Agricultural Implement Works of America et al. v. Kelsey-Hayes Co. et al., the Eastern Michigan District Court ruled the plaintiff retirees, seeking determination of lifetime health benefits, were bound by a plant closing agreement that terminated the collective bargaining agreement. Whether the plant closing agreement applies to retirees must be decided through arbitration. In Boddicker v. Esurance Insurance Services Inc., the District of South Dakota awarded the plaintiff a statutory penalty of $22,700 after finding the defendant failed to send COBRA notice to the plaintiff. In Smith v. Stockwell Construction Co. Inc. et al., the plaintiff was the ex-wife of a profit sharing plan participant and the designated beneficiary. Upon the participant's death, the plan awarded benefits to the participant's father. The District Court for Western New York permitted the plaintiff's claim about producing plan documents and notifying her of her rights to move forward, while dismissing the defendants' motion to dismiss.
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Implied Vested Rights to Health Benefits Are Not Prevented by State Law.
Benefits Magazine; v49 no3 pp 53-54 Mar 2012; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : The California Supreme Court ruled that, without specific legislative prohibition, a provision implying vested retiree health benefits may bind the county to cover those benefits. Orange County provided health insurance to active and retired employees and, for over 20 years, pooled the costs for the two groups. It resolved to split the groups in 2008, leading to higher costs for retirees, but did not negotiate the change with the retirees. The plaintiff retirees asserted the longstanding pooling practice amounted to an implied contractual right to continuation. The district court ruled for the county, but the Ninth Circuit Appeals Court turned to the state Supreme Court for clarification on state law. The Supreme Court found no statutory prohibition against implied health benefit contracts. It noted that vesting can be implied under certain circumstances but depends on the two parties' intent, a matter beyond the questions it was asked to resolve.
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Defendant Amended Plan With Asset Purchase Agreement.
Benefits Magazine; v49 no2 p 56-57 Feb 2012; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : In Evans et al. v. Sterling Chemicals Inc. et al. the Fifth Circuit ruled that the defendant employer had guaranteed certain benefits that were assumed in bankruptcy. The defendant company had acquired another company's business assets and, as part of the acquisition, agreed to grant a specific benefit level to acquired employees, at a specific premium, which could be changed only by agreement with the other company. When the defendant raised premiums after a bankruptcy, the plaintiffs sued. The appeals court reversed a district court ruling that the acquisition agreement did not constitute a plan amendment and remanded the case back to the district court.
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Large Employers See Scenarios Under Which They Could Move Workers and Retirees to Exchanges.
Kramer, William E.; Health Affairs; v31 no2 pp 299-305 Feb 2012; journal article

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Abstract : Some large employers are contemplating using the health insurance exchanges created by the Patient Protection and Affordable Care Act. From 2014 to 2016, they are considering covering part-time workers and those not yet eligible for Medicare through the exchanges. From 2017 on, states may open the exchanges to all employees of large employers. The viability of the exchanges, economic circumstances and the fate of the Act itself are causing most employers to wait before fully embracing the exchanges. If the Act survives legal challenges relatively unchanged, the exchanges are shown to be a viable alternative to employer-sponsored insurance and if there are more qualified applicants than available jobs, then large employers are likely to use the exchanges heavily.
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Other Recent Decisions.
Benefits Magazine; v49 no2 pp 67-69 Feb 2012; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : In Mitchell-White v. Northwest Airlines Inc. et al. the Second Circuit Court of Appeals affirmed the dismissal of the plaintiff's age discrimination claim, saying there was no evidence that the defendant employer's reduction of an early retirement pension by the amount of workers compensation benefits was actually motivated by age. In Greater St. Louis Construction Laborers Welfare Fund et al. v. Park-Mark Inc. the District Court for the Eastern District of Missouri allowed the plaintiffs to pursue recovery of delinquent contributions despite a previous settlement, and no repayment of alleged overpayments was required. The District Court for the Southern District of Indiana granted a jury trial to the plaintiffs in Cogswell et al. v. Remy International Inc. because their ERISA claims of wrongful termination of benefits were accompanied by claims under the Labor-Management Relations Act. The case Central States, Southeast and Southwest Areas Pension Fund et al. v. Mills Investments LLC et al. involved a motion for transfer of venue.
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Courts Approve Retiree Settlement Providing for Participation in the First Prefunded HealthCare Trust in Canada.
Harnum, James; Plans & Trusts; v30 no1 pp 18-19 Jan-Feb 2012; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : In the wake of the automotive sector's financial crisis of 2008-2009 and the establishment of a voluntary employees beneficiary association to cover health care benefits for retired U.S. autoworkers, the Superior Courts for Ontario and Quebec approved settlements permitting a similar arrangement for retirees of General Motors of Canada Ltd. (GMCL). The decision will permit General Motors retirees to participate in the first prefunded employee life and health trust in Canada, the asrTrust, established following a 2010 agreement for Chrysler retirees. It will cover about 30,000 retirees and dependents and be funded by over $2 billion in cash and promissory notes from GMCL. Though some experts hired by the retirees suggest the amount is insufficient to cover obligations and benefit reductions may result, the courts agreed that the settlement and asrTrust arrangement was preferable to protracted litigation with uncertain results and possible insolvency and liquidation of the company.
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Funding HRAs With Vacation and Sick Leave.
LeTourneau, Janet; Broker World; v32 no1 pp 86-87, 89 Jan 2012; journal article

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Abstract : IRS Revenue Ruling 2005-24 makes it clear that health reimbursement account (HRA) funds can never be provided as cash without being subject to income tax. However, it does present a scenario in which banked sick and vacation time is converted to an HRA on retirement. The funds would then be available for future health expenses, providing enhanced retiree health benefits at no cost to the employer. Designs like this could lead to employees hoarding vacation and sick time throughout their careers.
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Early Retiree Reinsurance Program: Notice.
Federal Register; v76 no239 pp 77537-77538 Dec 13, 2011; journal article

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Abstract : The Centers for Medicare & Medicaid Services (CMS) announced that claims under the Early Retiree Reinsurance Program (ERRP) incurred after December 31, 2011 will be denied. The ERRP was established as a temporary program under the Patient Protection and Affordable Care Act to reimburse eligible health insurance plan sponsors for some health care costs incurred by early retirees and their dependents. Projected available funding for such reimbursement is insufficient to cover future costs. Therefore the CMS is exercising its authority under the regulation at 45 CFR 149.45(a) to deny further reimbursement requests. Plan sponsors should not submit claims incurred after 2011. If a claim is incurred before the end of 2011 but not paid until 2012, the claim may be submitted.
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Conversion of Sick Leave Balances Valid.
Benefits Magazine; v48 no12 p 53 Dec 2011; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : An employer has the right to change the way it treats unused sick leave credits, as demonstrated in Sullivan et al. v. CUNA Mutual Insurance Society et al., heard by the Seventh Circuit Court of Appeals. The defendant employer had allowed executives who left before retirement age to apply unused sick leave as credit toward retirement health benefits, but a 2008 amendment ended that practice. Four retired executives sued as a class action, but the district court granted summary judgment for the defendants. On appeal, they claimed their unused sick leave credits were health plan assets amounting to over $120 million. The appeals court determined the funds are not plan assets that changed hands but were liabilities that were removed from the financial statements, with no violation of ERISA. The court further noted no stated or implied intent in plan documents to vest the participants with postretirement health benefits.
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Retiree Benefits: Vested Right to Retiree Health Benefits May Be Implied Contract, State Court Says.
Daily Labor Report; no225 p A2 Nov 22, 2011; journal article

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Abstract : The Ninth Circuit Appeals Court turned to the California Supreme Court as the most appropriate to answer a question of vested health benefit rights for county retirees. The state court ruled the right may be implied even if not explicitly stated by a county ordinance or resolution. Although compensation terms must be explicit, state law does not prohibit a contract for other implied benefits clearly supported by legislative intent. The case came up when Orange County changed its health benefit provisions, prompting the Retired Employees Association of Orange County to file suit. The court rejected the county's arguments against conferring benefits through an implied contract but determined that addressing the specific question about how those arguments apply in this case was beyond what the Appeals Court had asked.
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The Future of Multiemployer Retirement Benefits.
Ruschau, William J.; Benefits Magazine; v48 no11 pp 14-19 Nov 2011; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : In the coming years, challenges to multiemployer benefit plans will come from a number of sources. Social Security and Medicare funds are dwindling, while the federal deficit grows. Increasing longevity means savings must stretch further and investment returns last longer. Economic globalization means stronger pressure to compete in international markets and control costs. For multiemployer plans, these facts point to rising retirement ages, greater need to control risk coming from investments and benefit strategies, possibly adding defined contribution pension plans to supplement shrinking defined benefit (DB) plans, offering 401(k) plan features for their tax favored status and recognizing the remaining DB plan as a financial security blanket. Plan members will likely need financial advice and have to shoulder some costs for retiree medical care, while many opt for partial retirement or a second career. While many aspects of multiemployer plans will be the same in 2030 as in 2011, elements will change, requiring adaptation.
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Unilateral Benefit Changes Not Permitted Even After Expiration of CBA.
Benefits Magazine; v48 no11 pp 60, 62 Nov 2011; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : In Quesenberry et al. v. Volvo Trucks North America Retiree Healthcare Benefit Plan et al. the Fourth Circuit Court of Appeals ruled that a collective bargaining agreement (CBA) did not allow the defendant employer to make unilateral health plan changes after its expiration. The CBA included a coverage provision with clear durational language and a health care cost provision with durational language that was removed in negotiations. The defendant argued that the durational limit on coverage allowed it to reduce or eliminate benefits after the CBA period, but the court found that the cost provision made no sense if it's not meant to limit the defendant's ability to reduce existing coverage after the duration of the CBA.
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VEBA Cuts Retiree Health Costs.
Geisel, Jerry; Business Insurance; v45 no41 pp 1, 28 Oct 24, 2011; journal article

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Abstract : The 2009 American Recovery and Reinvestment Act included a provision that permitted the formation of the Auto Retiree VEBA Trust, through which thousands of auto industry retirees will get affordable health care coverage. The voluntary employees beneficiary association (VEBA) will be open to retirees who worked at the bankrupt Metaldyne Corp., Delphi Corp., Collins & Aikman and other firms based in Michigan, Ohio and Wisconsin whose plans were taken over by the PBGC. The economic stimulus law broadened eligibility for the Health Coverage Tax Credit, a federal health insurance premium subsidy. The tax credit will cover most of the retirees' premiums, huge savings especially for early retirees who are not yet eligible for Medicare.
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Retiree Benefits: Increasing Retiree Benefit Premiums Violated Asset Purchase Agreement, Court Rules.
Maresca, Meredith Z.; BNA's Pension & Benefits Reporter; v38 p 1921 Oct 18, 2011; journal article

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Abstract : When Sterling Chemicals acquired Cytec Industries Inc., it was bound to an asset purchase agreement that specified certain postretirement benefits to former Cytec workers. The Fifth Circuit Appeals Court ruled in Evans v. Sterling Chemicals Inc. that Sterling violated the agreement by increasing the retirees' health insurance premiums without prior written consent from Cytec. The district court had ruled the asset purchase agreement was not a valid plan amendment and the agreement's limitation on change was undone during Sterling's bankruptcy process. The appeals court reversed, finding the provision to be a valid plan amendment assumed in bankruptcy.
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Court Reverses Order Compelling Arbitration.
Benefits Magazine; v48 no10 p 60 Oct 2011; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : The parties in Newspaper Guild of St. Louis, Local 36047, TNG-CWA v. St. Louis Post Dispatch LLC were bound by collective bargaining agreements (CBAs) addressing retiree health benefits and arbitration over disputes. The CBA expired in 2003. In 2008 the employer changed retiree health benefits, prompting a call for arbitration, but the employer refused. The district court granted summary judgment to the union, compelling arbitration. The court recognized that the expired CBA arbitration clause applies only if the retirees' rights to health benefits were vested but declined to judge on the vesting issue, leaving that question to an arbitrator. The Eighth Circuit Appeals Court noted a decision on whether the grievance is arbitrable depends on whether benefits were vested, an unavoidable issue central to the case. The court ruled the district court erred by forcing arbitration but deferring the question of vesting. The Appeals Court remanded the case to district court for further consideration.
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FASB Issues Accounting Standard on Disclosures for Employers That Contribute to Multiemployer Plans.
Segal Company: Bulletin; 2 pp Oct 2011; journal article

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Abstract : The Financial Accounting Standards Board (FASB) released a long awaited update on disclosures that will affect multiemployer plans. Disclosures must be provided separately for plans offering only pension benefits and those offering other postemployment benefits. The pension benefit disclosure must include plan identifying information, employer contributions for each plan separately and collectively, collective bargaining expiration dates, details on plans' financial health and changes affecting comparability of data across time periods. Previously only the total employer contributions had to be disclosed. For plans with other benefits, the nature of the benefits, employer contributions and important changes must be disclosed. The disclosures apply to publicly held firms with fiscal years ending after December 15, 2011, and one year later for privately held companies.
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Other Recent Decisions.
Benefits Magazine; v48 no10 pp 66-67 Oct 2011; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : The District Court for the Southern District of Mississippi summarily ruled in favor of the defendant in Serton v. Lockheed Martin Corp., finding the plaintiff did not exhaust administrative remedies and the remedies available were not unavailable or wholly inappropriate to the relief sought. In Automotive Industries Pension Trust Fund et al. v. Fitzpatrick Chevrolet Inc. et al. the District Court for the Northern District of Illinois found the plaintiff sufficiently argued the defendant companies to be a single employer and dismissed the second company's motion to dismiss withdrawal liability claims against it. The plaintiff plan participants and union in Oakley et al. v. Remy International Inc. alleged they were entitled to lifetime benefits from the defendant employer's retiree health care plan. While the District Court for the Southern District of Indiana noted that it is established in that circuit that benefits terminate on the cessation of a collective bargaining agreement (CBA) unless the CBA provides otherwise, it found that trial was necessary to determine the defendant's intent because there was evidence suggesting the defendant treated the benefits as vested.
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Exit Strategy.
Sammer, Joanne; HR Magazine; v56 no9 pp 57-58, 60,62 Sep 2011; journal article

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Abstract : Since firms started having to account for retiree health benefit costs in the early 1990s, many have been rethinking the benefit, and the Patient Protection and Affordable Care Act (PPACA) is renewing the urge to reconsider for 60 percent of employers polled by Towers Watson. Employers must review retiree coverage from a long-term perspective, especially considering the PPACA's impact on the prescription drug subsidy, the retiree reinsurance provision, the excise tax on high-value plans and the state health insurance exchanges. Medicare exchanges are already operational, such as Extend Health Inc. which Houghton Mifflin Harcourt uses to provide coverage for its retirees. State exchanges may be viable for retirees under age 65. Like Medicare in its infancy, health care reform is a work in progress with much to be worked out, but defined contribution approaches are expected to prevail.
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Maximizing Employee Benefit Plan Value: Risk Management & HR Working Together.
Mijer, Hanno; Benefits & Compensation International; v41 no2 pp 3-4, 6-7 Sep 2011; journal article

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Abstract : Risk management personnel can get a better view of their company's human capital situation by working with human resources personnel to apply their disciplined approach to human capital risks. With benefits a tenth of overall payroll expenses, benefits risks should be managed at the same level as accident, death and disability risks. Two approaches to managing benefit costs are multinational pooling of benefits and fully transferring benefit risks to a captive insurer. By spending the savings on health and wellness, productivity increases and insurance costs are further lowered.
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Other Recent Decisions.
Benefits Magazine; v48 no9 pp 66-68 Sep 2011; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : In Adkins v. Local 705 International Brotherhood of Teamsters Pension Fund the District Court for the Northern District of Illinois denied a plaintiff's claim for benefits for years worked before she joined a union covered by a collective bargaining agreement (CBA), saying the denial of earlier benefits was supported by the CBA. In Witmer et al. v. Acument Global Technologies Inc. et al. the District Court for the Eastern District of Michigan dismissed the plaintiff retirees' claim for dropped benefits, saying their CBA's reservation of rights clause was inconsistent with an intent to vest the benefits. The District Court for the Middle District of Tennessee denied the plaintiffs' claims in Crawford et al. v. Pace Industry Union-Management Pension Fund because the terms of the defendant plan do not entitle them to the benefits they were initially granted. In Lamb v. Nextel Communications of the Mid-Atlantic Inc. et al., the Fourth Circuit Court of Appeals upheld a ruling finding the defendant plan's denial of severance plan benefits reasonable. The District Court for the Eastern District of Missouri found a company to be an alter ego of a company undisputedly liable for multiemployer plan contributions in Trustees of the Sheet Metal, Local 36 Welfare Fund et al. v. Central Air Heating & Air Conditioning Inc. et al. and ruled the two companies jointly liable for the delinquent contributions, damages, costs and attorney fees.
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Plaintiff May Proceed With State Law Claim Against Union Regarding Retiree Health Benefits.
Benefits Magazine; v48 no9 pp 57, 60 Sep 2011; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : The Sixth Circuit Court of Appeals partially overturned a district court decision in CNH America LLC v. International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW). The plaintiff employer had been sued by the defendant union to prevent termination of retirement benefits for union members. The plaintiff alleged that a collective bargaining agreement (CBA) prevented the suit and that the defendant violated several state laws. A district court dismissed the claims, ruling there was no CBA breach and that the Labor-Management Relations Act (LMRA) preempted the state torts. The Sixth Circuit agreed that the union is not barred from suing, but said that the LMRA did not preempt the state claims because none of them require interpretation of the CBA. The court dismissed some of the state law claims because they had been inadequately plead.
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Plaintiff Not Entitled to Arbitrate Claims.
Benefits Magazine; v48 no9 p 59 Sep 2011; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : The Eighth Circuit Court of Appeals found in Local 38N Graphic Communications Conference/IBT v. St. Louis Post-Dispatch LLC that the plaintiff's claims were not entitled to arbitration. The defendant company unilaterally modified retiree health care coverage for members of the plaintiff union who had worked while collective bargaining agreements (CBAs) were in effect. The modification happened after the terms of the CBAs expired. Appealing a district court dismissal of claims, the plaintiff contended that the issues of whether the CBAs had expired and whether the limit on the arbitration provisions was valid are questions subject to arbitration. The Eighth Circuit found that the language of the CBAs expressly excludes arbitration for grievances based on events outside the terms of the CBAs.
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Pensions: Shift to 401(k) Plans Results in Later Average Retirement Age, Report Says.
Olsen, Florence; Daily Labor Report; no165 p A4 Aug 25, 2011; journal article

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Abstract : An August 2011 issue brief from the Center for Retirement Research at Boston College reports that the average retirement age has increased since 1990, from 62 to 64 for men and from 60 to 62 for women. The average retirement age increased among men due to the shift from defined benefit to defined contribution pension plans, which encourage workers to stay longer. Other factors include higher education levels, improved health and longevity, an increase in coordinated spousal retirement and a reduction in the number of employers offering retiree health coverage. The report said that retirement as a distinct stage of life is a 20th century innovation and has changed fundamentally since its introduction.
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Public Plans: Georgia, South Carolina Increase State Workers' Health Care Premiums.
Tumey, Barney; BNA's Pension & Benefits Reporter; v38 p 1540 Aug 23, 2011; journal article

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Abstract : The Georgia Department of Community Health (DCH) boosted health insurance premiums for state employees and retirees and cut some benefits, effective January 1, 2012. For families on a health maintenance organization wellness plan, the premium increase will be 11 percent to $316.86 monthly, while those in a standard health benefits plan will see a 17 percent jump to $333.96. The HMO plan will not cover bariatric surgery and eyeglasses but will cover drugs for smoking cessation and mail order drugs. The Georgia DCH reported six percent of the increases rise from eliminating payment caps, coverage preventive care and including children up to age 26, as required by the Patient Protection and Affordable Care Act, and noted the decreasing ratio of active employees to retirees. South Carolina also approved a 4.5 percent jump in premiums for its 410,000 employees and retirees.
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Employers Adjust Retiree Drug Plans as Tax Break Ends.
Kertesz, Louise; Business Insurance; v45 no32 pp 21-22 Aug 15, 2011; journal article

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Abstract : A March 2011 survey by Buck Consultants found that 25 percent of employers receiving a tax subsidy on retiree prescription drug coverage are planning to adjust their benefits before losing that subsidy in 2013. The Patient Protection and Affordable Care Act changed the tax treatment of prescription drug coverage equivalent to Medicare Part D. Some employers are forming an Employer Group Waiver Plan, a difficult-to-administer Medicare Part D plan that contracts directly with pharmacy benefit managers or insurers. Others are creating a defined contribution approach to prescription drug coverage.
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