Court Finds Employer Must Continue Lifetime Health Coverage for Retirees

July 19, 2010 (PLANSPONSOR.com) – The U.S. District Court for the Western District of Michigan has ruled that Menasha Corp. must continue providing medical coverage for retirees as promised in two collective bargaining agreements (CBA).

The court admitted that the two collective bargaining agreements were ambiguous, with some provisions referring to “employees” and others referring to “persons retiring.” However, the court said the extrinsic evidence “overwhelmingly” indicates that the parties intended the agreement extend coverage to employees throughout retirement.  

The court noted that the summary plan description relating to Menasha’s 1994 CBA was intended to extend health insurance benefits to retirees throughout retirement, not just active employees, by stating that “[a] retiree medical plan was agreed to by Menasha Corporation for . . . employees . . who were at least age 62 at the time of retirement and who retired on and after January 1, 1985 but prior to July 1, 1997.” In addition, a Menasha representative informed a plaintiff covered under the 1994 CBA prior to her retirement that employee healthcare coverage would continue during her retirement.  

“This uncontradicted statement is not barred from consideration by the rule against hearsay because it fits within the exception for party admissions contained in Rule 801(d)(2)(D) of the Federal Rules of Evidence, and it is not barred from consideration by the parol evidence rule because parol evidence may be considered to clarify ambiguous contractual terms,” the court noted.  

The court also said further evidence that Menasha intended to offer benefits throughout retirement is that it actually paid the insurance premiums in accordance with the CBA.  

As for the second CBA, according to the opinion, it explicitly indicates that it extends coverage to “retiring persons.” Menasha argued that the agreement does not extend 100% lifetime benefits to retirees because it only obligates the company to provide an undefined amount of “coverage;” it does not obligate the company to provide “100% coverage for life.” But the court said Menasha’s argument is meritless, and if the company had meant to include a durational or percentage limitation on its obligation to provide coverage, it would have done so, as it did in other sections of the CBA.  

While the court granted summary judgment to the retirees on the claims for their lifetime benefits, it granted summary judgment to Menasha on the claims for spousal benefits. The court noted the CBAs make no mention of spouses and cannot be reasonably interpreted to cover spouses.  

The 1994 CBA provided that: “Employees reaching the age of 62 during the term of this agreement shall be provided coverage under the Blue Cross/ Blue Shield of Michigan Plan. These employees will pay 20% of the premium for this coverage until they reach age 65. At that time, company will pay 100% of premium for this coverage.” The 1997 CBA was similar except that it required the company to pay 95% of employee health coverage rather than 100%, with the employee paying the remaining 5%.  

In October 2006, Menasha informed retirees that, beginning January 1, 2007, it would gradually decrease its contribution to retiree health insurance.  

The case is Moore v. Menasha Corp., W.D. Mich., No. 1:08-CV-1167.

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