Court Orders MI Retiree Health Plan Reinstated

August 30, 2006 (PLANSPONSOR.com) - A federal judge has ordered that a Michigan auto parts manufacturer reinstate its retiree health benefit plan that covers 2,900 retirees, spouses and dependents.

US District Judge Nancy Edmunds of the US District Court for the Eastern District of Michigan rebuffed ArvinMeritor’s contention that its retiree health benefit plans were durational instead of lifetime.

ArvinMeritor argued that the plans were meant to last during the life of each three-year collective bargaining agreement between Rockwell and the United Auto Workers (UAW). According to the court opinion, Rockwell spun off its automotive division in October 1997 to form Meritor Automotive Inc., which then merged with Arvin Industries in 2000 to form ArvinMeritor. Employees of ArvinMeritor were covered by the Rockwell-UAW contracts.

Edmunds pointed out that the bargaining agreements had been in place for at least five decades and, according to the court, provided that retiree benefits would begin “at the time of retirement” and “shall be continued thereafter.” She said the evidence showed the contracts had given the retirees vested rights to lifetime health benefits that could not be altered by ArvinMeritor and Rockwell.

The court noted¬†the bargaining agreements differentiated between active employees, inactive employees, and retirees with regard to the “continuance” of health benefits. While the agreements contained specific durational limitations on the benefits to be paid to active employees, laid-off employees, and employees on leaves of absence, retiree benefits were not subject to any durational limits, the court said.

According to the opinion, Rockwell and ArvinMeritor made several changes to the retiree health plan in 1991, 2000, 2001, and 2003. In 2005, ArvinMeritor announced plans to eliminate remaining health benefits on January 1, 2006, for all retirees, dependents, and surviving spouses age 65 or over. The retirees sought a permanent injunction barring ArvinMeritor from cutting their benefits.

Last year, Edmunds issued a preliminary injunction barring ArvinMeritor from going through with its plans to cut retiree health benefits. In her most recent decision, Edmunds ruled for the retirees who alleged ArvinMeritor’s decision to slash retiree health benefits violated the Employee Retirement Income Security Act (ERISA) and the Labor Management Relations Act.

The case is Cole v. ArvinMeritor Inc., Eastern District Mich., No. 03-73872, 8/17/06.

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