Halliburton Move to Alter Benefits Shot Down by Court

December 23, 2004 (PLANSPONSOR.com) - A federal court has ruled that Halliburton cannot change retiree health benefits for a company it purchased in 1998 unless it wants to alter health care coverage for other employees.

>The ruling, issued by US District Judge Lynn Hughes of the US District Court for the Southern District of Texas, blocks a 2003 move by Halliburton to end coverage for retirees of a company it acquired in 1998, as well as to cap monthly drug contributions at $22 per person.

>When Halliburton purchased energy service firm Dresser in 1998, workers and retirees were offered better plans than those for other Halliburton employees. The company then claimed that the terms of the merger gave it the right to alter or terminate the health insurance plans and stated that it only had an obligation to provide health insurance for three years following the merger.

>Dresser employees argued that the three-year limit only applied to employees who worked after the end of this timeframe, not for those who retired before.

>Hughes agreed with this interpretation, stating that the company must only make adjustments if it makes similar changes to the benefits of similar workers throughout the company.

“The cost to Halliburton of this benefit is $93 million,” wrote Hughes in her ruling.¬†“This is about one-half of 1% of Halliburton’s revenue totaling $16.3 billion in 2003. This is a lot of money, but if Halliburton now considers it to be somehow too much, the solution is not to change the deal that it made in 1998. Halliburton agreed to this cost as part of its payment to Dresser.”

>She added: “Halliburton’s changes of November 2003 violate the merger agreement. Halliburton must maintain the Dresser Retiree Medical Program for eligible participants and may adjust the benefits in that program only if it makes identical changes to benefits for its similarly situated active employees.”

>The ruling in James Graves v. Halliburton Company Benefits Committee is available  here .