For Immediate Release
Washington, DC – The ERISA Industry Committee (ERIC) in an amicus brief filed July 24 urged the U.S. Supreme Court to reverse a decision by the U.S. Court of Appeals for the Sixth Circuit holding that a company’s bargained for retiree health benefit was vested based on the Sixth Circuit’s “presumption of vesting” despite the lack of any language in an agreement providing for such. The case is M&G Polymers v. Tackett.
The brief was prepared jointly by Kirkland & Ellis LLP and Proskauer Rose LLP. The American Benefits Council joined ERIC on the brief.
The brief argues that courts should not presume that silence regarding the duration of retiree health benefits in collective bargain agreements (CBAs) means that the parties intended those benefits to vest for life. (Other circuits have adopted a variety of approaches for evaluating the vesting issue, but none has applied the Sixth Circuit approach and the Third Circuit has essentially adopted a presumption that the benefit is not vested.)
The brief specifically argues that vesting should not be held to exist unless there is clear and unambiguous language providing for such, emphasizing that no reasonable employer can be deemed by implication to have unalterably committed itself to provide such uncertain and costly benefits for life.
“If the parties wish to negotiate lifetime healthcare benefits for retirees and their families, they are free to do so. But such lifetime benefits should not be a ‘gotcha’ sprung by the judiciary on employers who never intended to assume such costly and unpredictable burdens,” the brief argues. “Thus, unless clearly stated otherwise, the terms of a collective bargaining agreement pertaining to retiree healthcare benefits should apply only to those employees who retire during the term of the agreement and only for the duration of the agreement,” the brief further states.
The brief explains that requiring parties to state their intentions clearly is all the more appropriate because Congress, in enacting the Employee Retirement Income Security Act of 1974 (ERISA), consciously imposed a vesting standard for pension benefits but not healthcare benefits. In distinguishing between the two types of benefits, Congress recognized that it is easier for employers to anticipate the costs of pension plans, but healthcare costs, by contrast, are inherently uncertain, as new treatments, technologies and drugs are always emerging.
Moreover, the brief urges the Supreme Court to expressly reject the “flawed rules” of contract interpretation applied by the Sixth Circuit in this case. In finding that retiree healthcare benefits had vested for life, as it has done in prior cases, the Sixth Circuit relied on a series of special rules of contract interpretation that it has created in this context, the brief explains.
“Applying traditional rules of contract interpretation, the judgment … must be reversed because the collective bargaining agreements at issue here do not include a clear and unambiguous statement (or, indeed, any statement at all) of an intent to vest benefits,” the brief maintains.
Finally, the brief contends that, even assuming for the sake of argument that it was appropriate for the Sixth Circuit to have relied on non-legal policy considerations to support its presumption favoring vesting based on the 1983 ruling in UAW v. Yard-Man, Inc., such policy considerations have changed dramatically since then.
Since Yard-Man was decided, a number of changes have significantly expanded the availability and affordability of healthcare benefits for both pre-65 and post-65 retirees. Expansions in Medicare coverage, as well as the enactment of the Affordable Care Act and other “pathmarking” healthcare-related legislation, have created healthcare options that did not exist in 1983. Those changes have dramatically shifted the landscape for post-employment healthcare benefits and undermined the policy considerations (if any) that the Sixth Circuit may have originally relied upon in fashioning the so-called Yard-Man presumption, the brief stresses.
“These options ensure that retirees and their families will have access to affordable, comprehensive healthcare coverage even in the absence of the Sixth Circuit’s artificial rule that unilaterally imposes lifetime healthcare obligations on employers,” despite the lack of clear agreement and intent to do so, the brief concludes.
The case will be heard and decided by the Court in its upcoming term which commences in October.
ERIC’s brief can be accessed by clicking on the link below.