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Compliance May 20, 2003
Tire Workers Roll In Retiree Benefits Battle
May 20, 2003 (PLANSPONSOR.com) - A group of tire
company workers has emerged victorious in its long legal
battle over whether their employer lied about their future
medical benefit coverage in an effort to get them to
retire.
Reported by Fred Schneyer
>The US Supreme Court refused to accept an appeal from the 6 th US Circuit Court of Appeals, which found that Pirelli Armstrong Tire Corp. had breached its ERISA fiduciary duty by giving employees “materially misleading and inaccurate information” about their health-plan benefits, according to Washington-based legal publisher BNA (See Pirelli Retirees Roll on in Benefits Fight).
>The plaintiffs became Pirelli employees when it bought a tire plant from Armstrong Rubber Co. in 1988. In 1990, Pirelli put into effect an Optional Pension/Severance plan to encourage early retirement. Pirelli corporate headquarters provided written materials and a script for the plant manager to read. The plant manager testified that he told employees their medical benefits would not change during their retirement. In addition, employees received the Optional Pension/Severance plan and a letter from Pirelli’s president, which said they would receive reduced deductibles during retirement and that they would not be affected by the upcoming changes in retirement insurance.
>Employees with questions were directed to the assistant employee relations manager, who, when employees asked her how long their benefits would last, told them that their benefits would be available “during retirement,” meaning their lifetimes and the lives of their spouses unless the spouses remarried. Employees who asked about the SPD language, which allowed Pirelli to alter the plan were told that such language permitted Pirelli to change insurance carriers, the court said.
>In 1993, Pirelli adopted a new insurance plan, which reduced health benefits to employees and retirees. Twenty-three retirees brought a lawsuit claiming Pirelli breached its fiduciary duty by providing inaccurate and misleading information regarding retirement benefits.
>The appeals court found that Pirelli breached its fiduciary duty to all the plaintiff retirees, regardless of whether the company had deliberately misled the retirees or whether the employees had asked specific questions regarding the continuation of health benefits after retirement. “Under these circumstances, it is not necessary that employees ask specific questions about the plan to trigger the fiduciary duty,” the appeals court said.
>The case is Pirelli Armstrong Tire Corp. v. James, US, No. 02-1327, cert. denied 5/19/03.