GE Sued for Moving to DC Model for Retiree Health Care

One current and one former General Electric employee have sued the company for moving to a defined contribution (DC) model for retiree health care benefits.

According to a lawsuit filed in the U.S. District Court for the Eastern District of Wisconsin, “By terminating the Plans for plaintiffs and tens of thousands of other current or retired salaried employees, GE is in breach of a promise to participants in the summary plan description (SPD), restated and reaffirmed in July 2012, that GE ‘expects’ and ‘intends’ to continue the GE Medicare Plans ‘indefinitely.’” The lawsuit says GE terminated the GE Medicare Plans for participants younger than age 65 as of January 1, 2015, just two months after the plan restatement in July 2012.

In addition, the lawsuit challenges a subsequent GE decision on September 8, 2014, to cancel the plans for participants older than age 65. Instead, GE will give participants who are older than 65 an account or subsidy of $1,000 a year to assist them in paying for supplemental health insurance on the open market. 

According to the complaint, the GE Medicare Benefit Plans include the GE Medical Care Plan for Pensioners (MCPP), the GE Pensioners Hospital Indemnity Plan (PHIP), the GE Pension Prescription Drug Plan (PPDP), and the GE Medicare Insurance Plan for Retirees (GEMIP). In the summary plan description (SPD) for the plans, GE reserves the right to terminate, amend or replace the plans, but the SPD also says, “A decision to terminate, amend or replace a plan may be due to changes in federal law or state laws governing qualified retirement or welfare benefits, the requirements of the Internal Revenue Service, ERISA [Employee Retirement Income Security Act] or any other reason.” 

The lawsuit claims GE assumed a fiduciary duty not to exercise or abuse its discretion to terminate the plans except for a serious and good faith reason of the kind set forth in the SPD. 

The lawsuit asks the court to preliminarily enjoin GE from terminating the plans, unless and until GE can demonstrate some serious and good faith reason to justify its action. 

The complaint in Kauffman v. General Electric Co. is here.