Compliance

Coal Union Sues for Former Patriot Workers' Benefits

By Kristen Heinzinger editors@plansponsor.com | October 26, 2012

October 26, 2012 (PLANSPONSOR.com) – A coal union is suing an employer for failing to fulfill benefits obligations and violating the Employee Retirement Income Security Act (ERISA). 

The United Mine Workers of America (UMWA) Union is suing West Virginia Peabody Energy Corp. and Arch Coal Inc. for withholding benefits owed under the terms of benefit plans with bankrupt Patriot Coal Corp.’s employees and retirees. The lawsuit was filed under Sections 510 and 502(a)(3) of ERISA on behalf of themselves and 10,000 similarly situated employees and retirees. They seek to have the court declare that the employers maintain the benefits plans at their current levels.

The lawsuit says Arch and Peabody set up spinoff companies to eliminate their benefits obligation, but argues that they are still responsible for those benefits under ERISA. As part of the spinoff, Peabody and Patriot reached the agreements “Coal Act Liabilities Assumption Agreement” and  “NBCWA Individual Employer Plan Liabilities Assumption Agreement.” The agreements stated that Peabody would still remain liable for the provision of health care benefits and would assume Patriot’s liabilities for the provision of retiree health care for certain retirees and dependents of Peabody Coal Co. who had retired and had the right to receive benefits under agreements prior to the spinoff. Peabody Holding guaranteed payment of this obligation and indemnified Patriot against any failure by Peabody Holding to meet its obligations under the agreement.

As of January 1, 2011, Patriot provided health care benefits to 1,010 active employees; 518 employees whose employment had terminated but whose right to benefits vested; 2,243 retirees; 167 surviving spouses; 1,852 dependent spouses; and 246 dependent children. As of January 2012, the estimated value of post-retirement benefit obligations for UMWA represented employees covered by Patriot who were associated with former Peabody subsidiaries was approximately $898,680,000, comprised of $534,020,000 for retirees and $364,660,000 for active employees. Approximately 91.3% of the beneficiaries associated with former Peabody subsidiaries who now receive post-retirement benefits from Patriot never worked for Patriot but were former employees of Peabody.

Patriot, an employer of about 2,000 union workers at West Virginia and Kentucky mines, filed for bankruptcy in July 2012. Patriot’s former senior vice president and CFO referred to the pension and health care programs as “unsustainable labor-related legacy liabilities.”

The complaint filed with the U.S. District Court for the Southern District of West Virginia is available here.