The U.S. District Court for the Eastern District of Pennsylvania ruled, and the 3rd U.S. Circuit Court of Appeals affirmed, that Unisys had a duty to convey complete information that was relevant to the employees’ retirement decisions, including whether the company had the right to change benefits provisions, even if summary plan descriptions (SPD) provided to the retirees contained reservation of rights clauses giving Unisys the right to terminate or modify their benefits (see Unisys Loses Benefits Reduction Fight). The courts found the SPDs were confusing in that it was unclear whether the reservation of rights clause applied only to active employees’ benefits or whether it also applied to retired employees’ benefits.
Unisys was ordered to restore the free or low-cost benefits to the retirees (see Unisys Made Misrepresentations about Health Insurance Coverage).
According to court documents, Sperry Corp. and Burroughs Corp. merged in 1986 to form Unisys. Before the deal, Sperry and Burroughs provided their active employees and retired employees with medical benefits. After the merger, Unisys continued to provide the pre-merger benefits under the separately established plans.
In 1988, Unisys created a new medical benefit plan for active employees. The same year, Unisys implemented a new medical plan for employees who retired after April 1, 1989.
Unisys announced in October 2002 that the retirees’ benefit plan would be replaced with a new plan effective January 1, 1993. Under the new Unisys plan, retirees were responsible for increasing levels of contributions until January 1, 1996, after which the retirees were forced to pay the full cost of their coverage under the plan.
Under the old medical plans, Unisys and its predecessors had subsidized most or all of the cost of premiums for retirees. The former employees argued they relied on explanations from Unisys agents about these free or low-cost benefits.