Rules Governing Vesting of Retiree Health Benefits Under Collective Bargaining Agreements Under Review

The United States Supreme Court will review the Sixth Circuit’s decision in the case of M&G Polymers USA, LLC v. Tackett which involves the question of how to interpret retirees’ vesting rights to health benefits under collective bargaining agreements.  

The employer M&G Polymers (M&G”) operated a chemical plant and was a party to collective bargaining agreements that covered plant employees. The agreement at issue promised a “full Company contribution toward the cost of benefits” to employees meeting certain age and service requirements, but was silent on how long the company had to pay for retiree health benefits.  Agreements between M&G and the union set forth limits or “caps” on M&G’s contribution toward the cost of retiree health care premiums.

When M&G announced that it would start requiring retirees to contribute to their health care costs, the retirees and their union filed a class action lawsuit claiming that the collective bargaining agreements gave them a right to retiree health benefits for life without any retiree contributions. 

The Supreme Court will look at whether, when construing collective bargaining agreements in Labor Management Relations Act cases, courts (1) should presume that silence concerning the duration of retiree health care benefits means the parties intended those benefits to vest, and therefore continue indefinitely;  or (2) should require a clear statement that health care benefits are intended to survive the termination of the collective bargaining agreement;  or (3) should require at least some language in the agreement that can reasonably support an interpretation that health care benefits should continue indefinitely. 

The Supreme Court’s decision in this case will likely have a significant impact on retiree health and welfare benefits and will resolve what is currently a split among the Third, Sixth and Seventh Circuits. 

Please contact your Trust Fund counsel for more information on this subject.

By  Patricia Davis | June 12, 2014

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