Blogging Employee Benefits

March 17, 2006

Retiree Health Benefit Rights Restricted to CBIA Term

Filed under: Collective Bargaining, Litigation, OPEBs — Fuguerre @ 4:45 pm

The distinction between lifetime benefits and vested benefits is “a legal distinction that understandably escaped” many of the retirees.

Finding no patent or latent ambiguity in collectively bargained insurance agreements (CBIA), the 7th Circuit affirmed a district court ruling that an employer was not obligated to extend retiree health benefits beyond the term of those agreements. [Cherry v. Auburn Gear, Inc.] CBIA language explicity stated that retiree health benefits expired at the end of the contract’s term. Although retirees tried to argue that reference to the singlular “program” indicated that the term limits did not apply to both retirees and active employees, the appeallate court found no merit in that argument, applying “program” to the entire agreement. Neither was the court persuaded by retirees’ reliance on CBIA terms providing lifetime survivors benefits, distinguishing the provision as referring to eligibility of individuals under the agreement, rather than to the duration of the agreement. Nor did similarity in language between the pension plan and the CBIA alter the presumption against vesting of retiree health benefits absent express language to the contrary. Finally, retirees’ claims of objective evidence were insufficient to demonstrate latent ambiguity.

As we stated in a similar case, “this story does not have a happy ending.”

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