In an age of escalating healthcare costs, collectively bargained retiree medical coverage presents special problems for employers. Has the retirees' right to medical benefits "vested," so that the employer cannot restructure deductibles, co-payments, and premiums? Ultimately this is a question of interpreting the collective bargaining agreement (CBA) and the ERISA benefit plan. A recent case from the Fourth Circuit Court of Appeals illustrates some of the legal principles – and legal maneuvering – involved.
In Quesenberry v. Volvo Trucks North America Retiree Healthcare Benefit Plan, No. 10-1491, 2011 U.S. App. LEXIS 14161 (4th Cir. July 11, 2011), the court held that the CBA permitted the employer to modify retiree medical benefits only if the employer first pursued a process that limited the employer's ability to make unilateral changes in benefits.
Coverage "For the Duration of this Agreement."
In 2005, the employer and UAW Local 2069 negotiated a CBA with a 2008 expiration date. The CBA provided that the employer would pay the full cost of health plan coverage for retirees "for the duration of this Agreement."
Notice and negotiations where VEBA underfunded.
The 2005 CBA also provided for a voluntary employees' beneficiary association trust (VEBA), funded by the employer, to be used if the cost of the health plan exceeded negotiated limits. If the employer determined that assets in the VEBA would be exhausted within a 12-month period, the employer and the union would negotiate benefit reductions. If no agreement was reached, the employer could unilaterally impose premiums on the retirees pursuant to a formula.
Employer unilaterally restructures benefits, sues, and loses after a jury trial.
At the end of the 2005 CBA, the employer refused to negotiate further retiree health benefits, insisting that bargaining for retired employees is a permissive, rather than a mandatory, subject of...
