Compliance November 4, 2009

Employer Not Obligated for Lifetime Retiree Health Benefits

November 4, 2009 (PLANSPONSOR.com) - A federal appellate court has ruled that an employer was not obligated to provide unionized employees with lifetime retiree health benefits that the workers say were called for in an expired union contract.
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The 6 th U.S. Circuit Court of appeals upheld a lower-court decision throwing out a lawsuit against TRW Automotive U.S. LLC, an auto-parts manufacturer, over the company’s reduction in retiree health benefits.

The appellate panel ruled the contract withLocal 2400 of the United Automobile, Aerospace and Agricultural Implement Workers of America clearly disclaimed TRW’s obligation to provide lifetime retiree medical benefits. According to the court, the contract language stating that the retiree medical benefits clause “shall not be construed to convey any rights to those beyond the term of this agreement,” unambiguously denied the employer’s obligation to provide retiree medical benefits beyond the contract’s expiration date.

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“In this way, the operative provision functioned as a specific durational limit on retiree medical benefits,” the court said. The union contract expired in March 2002.

The contract covered employees at TRW’s engine valve plant in Cleveland. Aplant shutdown agreement between TRW and the UAW did not add to the retirees’ rights or supplement the union contract, the court decided.

Nine retirees and their dependents filed suit in federal court alleging that TRW breached the shutdown agreement and sought lifetime reinstatement of their retiree medical health coverage.

The case is Harps v. TRW Automotive U.S. LLC, 6th Cir., No. 09-3214.

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