Compliance March 24, 2009

Alcoa Retiree Health Benefit Cutback Suit Will Go To Trial

March 24, 2009 (PLANSPONSOR.com) - U.S. District Judge Thomas W. Phillips of the U.S. District Court for the Eastern District of Tennessee has refused to grant summary judgment in a case against Alcoa saying there are still "material issues of fact" concerning whether employee unions had an agreement with the company that health benefit caps would ever be enforced.
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Effective June 1, 1993, the unions and Alcoa agreed to a side letter (cap letter), which set a cap on the companies’ expenditures for retiree health care costs with an implementation date of January 1, 1998, according to the court opinion. The unions contend that in negotiating this cap letter, Alcoa assured them that any cap language included in the letter would not be enforced and was merely for accounting purposes due to a new requirement issued by the Federal Accounting Standards Board, FAS-106.

Phillips said the retirees presented evidence to support this contention; however, Alcoa also presented its own evidence in support of its position that the cap agreements were enforceable and were not merely a paper transaction. Phillips ordered the parties to prepare for trial.

The suit, filed in April 2006, seeks damages for affected retirees and their families over the company’s plan to implement a retiree benefit cap in January that would limit its spending on retirees’ medical benefits at 2006 expenditures and divide any additional costs among the retirees (see Steelworkers Sue Alcoa over Retiree Health Coverage Cutbacks ).

The case is Curtis v. Alcoa Inc.,E.D. Tenn., No. 3:06-cv-448, 3/19/09.

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