Employer Reserved Right to Terminate Retiree Benefits

October 5, 2012 (PLANSPONSOR.com) – A federal appellate court has decided retirees of Acument Global Technologies are not due lifetime health benefits because Acument reserved the right to terminate them.

The 6th U.S. Circuit Court of Appeals noted that although the plaintiffs bring their claim under the Employee Retirement Income Security Act (ERISA) and the Labor Management Relations Act (LMRA), their entitlement to health benefits is a matter of contract. The court found the governing collective bargaining agreement (CBA) between Acument and the employees did not create unalterable lifetime—“vested”—health care and life-insurance benefits, because the CBA reserved Acument’s right to modify or terminate future benefits.  

The appellate court pointed to language in an appendix to the CBA that said: “The Company reserves the right to amend, modify, suspend or terminate the Plan.”   

The court also rejected the retirees’ argument that since the health care benefits were tied to the retirement-income provisions of the CBA, that meant they were intended to be provided for life. The 6th Circuit agreed that in previous opinions it found language tying health care benefits to retirement-income benefits demonstrated the parties’ intent to create vested health care benefits, but said if that is true, so too is the opposite. “When retirement-income benefits have not vested due to a reservation of rights, language tying health care benefits to retirement-income benefits demonstrates that the employer did not promise lifetime, unchangeable benefits,” the court opinion said.  

According to the opinion, prior to 2008, the company paid health care and life-insurance benefits to qualified retirees. When Acument ended these benefits in 2008, a class of 64 retirees claimed that the company had violated the CBA in violation of ERISA and the LMRA. A district court granted Acument’s motion for summary judgment, and the plaintiffs appealed. The 6th Circuit affirmed the district court’s ruling.  

The opinion in Witmer v. Acument Global Technologies, Inc. is at http://www.ca6.uscourts.gov/opinions.pdf/12a0338p-06.pdf.