U.S. Court In Oregon
Says Plan�s Elimination Of Retiree Health Benefits Did Not Violate ERISA
decision to phase-out retiree health benefits after it decided to close the
facility where the retirees had worked did not violate the Employee Retirement
Income Security Act (ERISA), a federal district court in Oregon found. The court concluded that the
retirees had no vested rights in the health benefits.
are former employees, or spouses of former employees, of Evergreen Mill, which
was purchased by defendant Simpson Paper Company in 1990. The Association of
Western Pulp and Paper Workers (AWPPW) negotiated a collective bargaining
agreement (CBA) involving an early retirement incentive plan. The initial plan
provided health insurance for early retirees until they reached age sixty-five.
Spouses were covered until age sixty-five or for a total of fifteen years,
whichever occurred first. Two additional CBAs were
subsequently executed, all with similar retiree health insurance benefits. In 1996,
defendant decided to close the Mill. Defendant announced in 2002 that it was
phasing-out retiree health coverage by 2004.
sued defendant, arguing that the company wrongfully terminated their health
insurance benefits in violation of the CBA and plaintiffs� vested rights. Plaintiffs
contended that defendant had violated ERISA and � 301 of the Labor-Management
Relations Act because once their health insurance benefits vested, they could
not be terminated lawfully and that plan fiduciaries had misrepresented that
their health benefits would vest upon retirement. Both parties moved for
District Court for the District of Oregon granted summary judgment in favor of
defendant. Unlike pension plans, welfare plans are not subject to vesting
requirements, although employers and employees can specify by agreement
specific terms on this issue. Here, plaintiffs failed to bear the burden of
showing the contract provisions so provided, the court said. In so holding, the
court noted two aspects of the plan that refuted plaintiffs� contention that
the benefits had vested--namely, that the benefits would be flexible to the same
extent they were for active employees and that the CBA contained a reservation
clause specifying defendant could alter or cancel welfare plan benefits at any
time subject to negotiation with the AWPPW.
respect to the reservations clause, the court rejected plaintiffs� contention
that its reference to "welfare plan benefits" did not include health insurance
benefits. The court also found unavailing plaintiffs� argument that defendant�s
failure to negotiate with AWPPW before changing the benefit was relevant to
determining whether the rights at issue vested. "[T]he true significance of the
reservation clause is that it serves as further evidence that both defendant
and plaintiffs� union recognized that retirement health benefits were subject
to periodic modification," the court noted. The court further rejected
plaintiffs� argument that the reservation clause only applied to active
employees, noting that plaintiffs had already acknowledged that retiree medical
benefit coverage was to be treated on the same basis as active employees. Thus,
the court concluded that summary judgment must be granted to defendants related
to the vesting issue, including their � 301 claims.
next found defendant was entitled to summary judgment on plaintiffs� claims
that defendant breached its fiduciary duty by misrepresenting its power to
alter future benefits under the plan. Plaintiffs contended that one of
defendant�s agents failed to alert employees about the potential loss of
benefits when discussing the retirement option. But the court found otherwise,
concluding that plaintiffs were given sufficient information to alert them to
the possibility that the benefits at issue would be changed or terminated. While
the statement provided by defendant did not directly address the explicit
possibility of the benefits terminating, it did "provide plaintiffs a degree of
warning regarding the non-vested nature of the benefits."
the court refused to allow plaintiffs to amend their complaint and add an
equitable estoppel claim under ERISA. The court found
allowing plaintiffs to do this would be unfairly prejudicial to defendant and,
in any event, futile given that plaintiffs failed to show any material
misrepresentations or that reasonable minds could disagree about the non-vested
nature of the retiree health benefits.
Poore v. Simpson Paper Co., No. CV
03-535-HA, 2005 WL 2620533 (D. Or. Oct. 14, 205).