Employers and their advisors will want to keep an eye on some legislation that has been introduced and referred to Committee called the “Emergency Retiree Health Benefits Protection Act of 2009″ (H.R. 1322). The bill would effectively prevent employers from terminating or reducing retiree medical after participants retire, or even passing additional costs of the coverage along to retired participants. In other words, the legislation would attempt to “vest” retirees in their retiree medical benefits upon retirement, regardless of any provisions in the Plan documents to the contrary.
Here is a portion of the language in the legislation:
Notwithstanding that a group health plan described in subsection (b) may contain a provision reserving the general power to amend or terminate the plan or a provision specifically authorizing the plan to make post-retirement reductions in retiree health benefits, it shall be prohibited for any group health plan, whether through amendment or otherwise, to reduce the benefits provided to a retired participant or his or her beneficiary under the terms of the plan if such reduction of benefits occurs after the date the participant retired for purposes of the plan and reduces benefits that were provided to the participant, or his or her beneficiary, as of the date the participant retired. Any group health plan provision which purports to authorize the reduction of benefits in a manner inconsistent with the foregoing prohibition shall be void as against public policy.
The American Benefits Council, SHRM, and ERIC and others have expressed their concern over the legislation in a letter.
The concern, of course, is that employers will jettison these programs if the legislation is passed (retirees would be vested under the legislation, but employers would likely be able prevent future vesting for active employees by terminating the programs.)