Company Allowed to Drop Retiree Health Coverage

October 19, 2005 ( - An Oregon federal judge has ruled that a group of retirees did not prove their health benefits were vested, and therefore protected by the Employee Retirement Income Security Act (ERISA).

For that reason, US District Judge Ancer Haggerty of the US District Court for the District of Oregon ruled that their former employer, Simpson Paper Co., had not unlawfully cut off their health care plan, BNA reported.

In 2002, Simpson Paper announced it was phasing out retiree health care benefits and would terminate the retiree health plan in 2004. A group of retirees later sued the company.

Haggerty rejected the retirees’ contention that the plan’s reservation of rights clause was invalid because it failed to specifically mention the term “health insurance benefits.” According to the court, the clause “explicitly reserved the right to change welfare plan benefits, and plaintiffs’ assertion that health insurance benefits should fall outside the scope intended by the phrase ‘welfare plan benefits’ is rejected.”

In addition, the court dismissed the retirees’ claim that Simpson Paper breached its ERISA fiduciary duties by allegedly misrepresenting, at the time the retirees retired in the mid-1990s, its power to alter future benefits under the plan.

The case is Poore v. Simpson Paper Co., D. Ore., No. CV 03-525-HA, 10/14/05.