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May
2014
15

Circuit Indecision Leads SCOTUS to Tackle Lifetime Vesting of Collectively Bargained Health Benefits

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The Supreme Court has granted a petition of certiorari in a case from the Sixth circuit court which looks to set a nationalized standard concerning vested health benefits. The case aims to determine whether courts should assume such benefits were meant ‘for life’ if a collective bargaining agreement does not specifically say so.  

The case, Tackett vs. M&G Polymers USA, could set the precedent for the future of the Employee Retirement Income Security Act (ERISA). The Sixth circuit relied heavily on its previous ruling in the 1983 case United Auto Workers v. Yard-Man, Inc., which has been used to affirm the position that courts can “presume” retiree health benefits are vested for life.

However, judgements in the Second and Seventh circuit courts have adopted a rule of “middle ground” in which there must be some language in a CBA that can be interpreted to signify an agreement to pay health benefits indefinitely.  The Third circuit court actually requires the opposite assumption: that benefits were not meant to be vested for life if not so stated in a CBA.  The Third circuit court’s decision has been referenced in the M&G appeal.

With a split in the circuit courts, the Supreme Court has decided to consider the first question asked in the M&G appeal,which asks:

Whether, when construing collective bargaining agreements in Labor Management Relations Act (LMRA) cases, courts should presume that silence concerning the duration of retiree health-care benefits means the parties intended those benefits to vest (and therefore continue indefinitely), as the Sixth Circuit holds; or should require a clear statement that health-care benefits are intended to survive the termination of the collective bargaining agreement, as the Third Circuit holds; or should require at least some language in the agreement that can reasonably support an interpretation that health-care benefits should continue indefinitely, as the Second and Seventh Circuits hold.

Some specifics of Tackett vs. M&G Polymers USA are supplied by the ERISALawyerBlog:

In Tackett v. M & G Polymers USA, LLC, Nos. 12-3329/3407 (6th Cir. 2013), the defendants were appealing the judgment of the district court. The plaintiffs had brought this suit, in the form of a class action, against the defendants after their former employer, M & G Polymers USA, LLC (” M&G”), had announced that plaintiffs would be required to make health care contributions towards the cost of their retiree health benefits. After a bench trial, the district court found M&G liable for violating a labor agreement and an employee welfare benefit plan (the “Plan”) under which the retiree health benefits were paid.

The district court issued a permanent injunction, ordering the defendants to reinstate the plaintiffs to the version of the Plan in effect in 2007, under which they are to receive health care for life without contributions. In so ruling, the district court concluded that the plaintiffs’ right to lifetime healthcare vested upon retirement, since an agreement, proffered by the defendants, between the union and the employer to “cap” health benefits and several “side” letters were not a part of the applicable labor agreements.

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