In what some may see as an effort to preempt U.S. Supreme Court review of the topic in next year's term, the Senate is considering amendments to federal benefits and labor laws that would make any retiree group health benefits vest upon retirement or the completion of 20 years of service.
The Bankruptcy Fairness and Employee Benefits Protection Act, sponsored by Sens. Jay Rockefeller (D-W.Va.) and Elizabeth Warren (D-Mass.), would amend Section 502 of the Employee Retirement Income Security Act to require that courts hearing cases involving the vesting of retiree health benefits apply a rebuttable presumption that the benefits vest in the absence of clear and convincing language to the contrary in the plan documents themselves.
The bill, which was referred to the Senate Judiciary Committee on June 3, would also amend the National Labor Relations Act to make it an unfair labor practice for either a labor union or an employer to modify a previous agreement to reduce or terminate retiree health insurance benefits after the affected employees have already retired.
These amendments directly address an issue that has been granted certiorari and will likely be heard by the Supreme Court in next year's term, reviewing a decision by the U.S. Court of Appeals for the Sixth Circuit in Tackett v. M& G Polymers USA, LLC, 733 F.3d 589, 56 EBC 1829 (6th Cir. 2013).
ERISA and NLRA Amendments
Title I of the bill, entitled “Fairness for Employees and Retirees in Corporate Bankruptcies,” would protect employee benefits from being modified or terminated as a result of a corporate bankruptcy proceeding.
Title II of the bill, which is labeled “Protection of Employee and Retiree Health Benefits” amends both ERISA and the NLRA to make employee welfare benefits more like pension benefits in the way that they vest.
The bill would require that any summary plan description prepared for a group health plan under Section 102(b) of ERISA include clear language that will inform plan participants if the plan sponsor has the right to unilaterally modify or terminate benefits under the plan and to what extent any benefits are vested.
The legislation also would add a section to the civil enforcement provisions of ERISA Section 502, requiring that a court reviewing whether retiree health benefits are vested apply a rebuttable presumption in favor of vesting at retirement or after 20 years of service that can only be defeated by clear and convincing evidence that the terms of the plan allowed modification or termination of benefits and that the retiree was made aware in “clear and unambiguous terms” of plan sponsor's ability to modify or terminate benefits.
Under the terms of the Senate bill, these benefits would be vested for the life of the retiree or the life of the retiree's spouse, whichever is longer.
The bill would also amend the NLRA to make it an unfair labor practice for a union and an employer to enter into any agreement that would result in the reduction or termination of retiree health benefits granted by a previous agreement, provided that the reduction occurred after the effected individual had already retired.
Finally, the bill requires that the U.S. comptroller general provide Congress a report detailing “strategies that corporations use to avoid obligations to pay promised employee and retiree benefits.”
Excerpted from a story that ran in Pension & Benefits Daily (06/13/2014).
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