Deere & Co. Wins Suit over Retiree Health Benefits Reduction

October 21, 2009 (PLANSPONSOR.com) - The U.S. District Court for the Southern District of Iowa has ruled that Deere & Co. did not violate the Employee Retirement Income Security Act (ERISA) when it changed its health benefit offering to retirees.

Judge Charles R. Wolle said in his opinion that Deere was unambiguous when it reserved its right to amend the retirees’ health benefits.

Wolle rejected the retirees’ argument that their benefits were vested and could not be altered by Deere because summary plan descriptions said their health benefits “will continue” during retirement. “Instead, Deere repeatedly and plainly stated in plan documents, including SPDs, that it retained the right to amend, modify or terminate the benefit plans,” the opinion said.

In addition, Wolle said “language that medical benefit coverage ‘continues’ in retirement is not synonymous with being ‘vested.’ Where language stating that retiree medical benefits ‘will continue’ is accompanied by a reservation-of-rights provision, the plan sponsor retains the unqualified right to change the plans as a matter of law.”

The suit filed in September 2008 alleged that Deere broke longtime promises to its employees when the company on January 1 “eliminated, reduced and dramatically altered” benefits pledged under retiree health plans (see Deere Retirees File Lawsuit over Reduced Benefits ). The changes are described in court papers as “significantly higher deductibles,” the elimination of a maximum on the amount of out-of-pocket expenses, increased co-payments for prescription drugs, and the elimination of any coverage for chiropractors.

The case isBrubaker v. Deere & Co.,S.D. Iowa, No. 3:08-CV-00113-CRW-TJS, 10/16/09.

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