There are some really great lessons for all from the District Court and the Circuit Court opinions in the Orth v. Wisconsin State Employees Union Council 24, et al. case discussed in this previous post here (in case you missed…
There are some really great lessons for all from the District Court and the Circuit Court opinions in the Orth v. Wisconsin State Employees Union Council 24, et al. case discussed in this previous post here (in case you missed it):
(1) Statements in collective bargaining agreements can give rise to unintended ERISA plans. The district court opinion includes a discussion of this issue:
An ERISA “plan” is not an entity or a piece of paper, but a more inchoate group of rights, benefits and procedures (literally, a “plan”) set up by an employer to create pension or welfare benefits. See Pegram v. Herdrich, 530 U.S. 211, 223, 120 S.Ct. 2143, 147 L.Ed.2d 164 (2000) (noting that a plan is merely a “scheme decided upon in advance” for the provision of benefits). The plan may be evidenced by a summary plan description (SPD) and any other documents, such as a CBA, that describe the rights of beneficiaries or such things as how the plan is administered, how premiums are collected, etc. In other words, the fact that the plaintiff’s dispute may arise solely from a clause in a collective bargaining agreement does not mean that the dispute does not also implicate the terms of an ERISA plan. In fact, hybrid ERISA/LMRA claims are commonly asserted, even when the dispute is resolved by reference to a CBA rather than merely a plan–specific document.
(Read about another interesting case here which held that a merger agreement acted as a plan amendment to an ERISA retiree medical plan.)
(2) The clause that states “[p]ayment of premiums will be on the same basis as the benefit is currently paid for employees” or similar language occurs often in retiree medical plan language and should be promptly reviewed and revised, if necessary. Many times this language occurs in benefits booklets or SPDs prepared by insurance providers. Normally, such language is meant to portray exactly what the defendant’s lawyers tried to argue in the case:
The defendant also suggests patent ambiguity because the clause refers to both benefits and premiums: “Payment of premiums will be on the same basis as the benefit is currently paid for employees.” In the defendant’s reading, this means only that retirees will receive the same level of benefits as active employees–not that they will have their premiums paid at the same level.
However, with judges reading such language to mean that the employer, by making that statement, is committing to the same level of premiums for retirees as it has for active employees, employers should make sure that they review such language and clarify it to say exactly what they mean. Such language can be revised to make it more clear, but if the language is in a benefits booklet or SPD prepared by an insurance company, you may have more of a challenge getting it revised.
(3) These types of programs should be clearly communicated to active employees and retirees. When changes are made, those changes should also be communicated. One of the things that was sadly absent from the facts of the case, from an employer’s standpoint as well as the employee’s standpoint, was the communication aspect. Excerpt from the district court opinion:
WSEU is a small organization with little experience providing retirement benefits, and thus the issue only emerged from under the radar after Orth, who had no doubt thought he was set for life, found himself with no benefits. Rather than establishing some sort of clear understanding between the employees’ union and the WSEU, the evidence only shows that the parties were not fully cognizant of what the CBA actually provided.
(Judge Posner authored the Orth opinion. You can access a number of links here at Benefitsblog which reference Judge Posner’s court opinions impacting the benefits world.)