EBIA Weekly Newsletter

Sixth Circuit Heeds Supreme Court Ruling on Vesting of Retiree Health Benefits

   March 22, 2018

Cooper v. Honeywell Int’l, Inc., 2018 WL 1190385 (6th Cir. 2018)

Weeks after being reversed by the U.S. Supreme Court on this topic (see our Checkpoint article), the Sixth Circuit has ruled on yet another case involving the vesting status of retiree medical benefits in a collective bargaining agreement (“CBA”). This case centered around a CBA under which the employer agreed that early retirees’ health coverage would continue until age 65. As the CBA’s expiration date neared, the employer gave notice that it planned to terminate those benefits at the end of the calendar year following the expiration of the CBA. A group of early retirees sued, arguing that the employer was obligated to continue providing benefits until they reached age 65. The trial court found that the retirees were likely to succeed on the merits of their case and issued a preliminary injunction prohibiting the employer from terminating the coverage until the case was resolved. The employer appealed to the Sixth Circuit.

On appeal, the early retirees argued that the “until age 65” language in the CBA showed the employer’s intent to vest health care benefits until each retiree turned age 65, even if the CBA expired in the meantime. The employer argued that the “until age 65” language did not vest the benefits beyond the CBA’s expiration date, but rather only explained who was eligible for benefits while the CBA was in force. Considering the arguments in light of the recent Supreme Court ruling, the Sixth Circuit rejected any presumption of vesting, holding that unless otherwise specified, a CBA’s general durational clause dictates when benefits under the agreement expire. The court offered an example of language that might vest benefits beyond the CBA’s duration, suggesting a statement that retiree coverage would continue to age 65 “regardless whether the CBA expires” before a covered retiree reaches that age. Finding no wording in the CBA that clearly established an alternate end date applicable to retiree health benefits, the Sixth Circuit concluded that the retirees did not show a likelihood of success on the merits; thus, the trial court had erred in granting the preliminary injunction.

EBIA Comment: With this decision, the Sixth Circuit appears to have heeded the Supreme Court’s pointed rejection of the “Yard-Man presumptions,” previously established by the Sixth Circuit, that favored vesting of retiree health benefits. Employers and unions negotiating retiree health benefits should do the same, drafting CBAs that clearly and unambiguously reflect the parties’ intent. For more information, see EBIA’s ERISA Compliance manual at Section XII.E (“Certain Benefits May Be Vested and Thus Protected From Amendment”) and EBIA’s Self-Insured Health Plans manual at Section XIV.D (“Retiree Eligibility”).

Contributing Editors: EBIA Staff.