Supreme Court Rules Retiree Health Benefits Do Not Extend Beyond Life of CBA
On February 20, 2018 the Supreme Court issued its ruling in CNH Industrial N.V. v. Reese, holding that health care benefits granted under a collective bargaining agreement do not continue beyond the agreement’s expiration date, unless otherwise specified. This means that an employee who is provided benefits through their union’s CBA and retires during the life of that contract does not have vested rights to those benefits for any period of time after the expiration of the contract. In so holding, the Court applied its earlier, 2015 ruling in M&G Polymers USA, LLC v. Tackett. In that case, the Court had reversed a ruling by the Sixth Circuit Court of Appeals in International Union, United Auto, Aerospace & Agricultural Implement Workers of America v. Yard-Man in which the Sixth Circuit held that retiree health care benefits under a CBA were vested rights.
The CBA involved in the Reese case provided a group health care benefit plan for employees who retired under the company’s pension plan. The CBA also contained a duration clause under which the agreement expired in 2004. After expiration, a group of retirees and surviving spouses sought a ruling that the benefits constituted a vested right which would exist for the rest of their lives as well as an injunction ordering the employer not to make any changes to the plan.
After the retirees’ filed suit, and while the case was pending in the court system, the Supreme Court issued its ruling in Tackett, mentioned above. Applying that ruling to this case, the Court held that unless a CBA explicitly makes clear that benefits are vested for life, they expire along with the rest of the terms in the agreement.
This ruling provides important guidance for unions. First, any union with an existing collective bargaining agreement should seek legal review of the language to determine whether or not it makes clear if benefits provided under the contract are vested or if those benefits expire along with the rest of the contract. Second, any union currently negotiating a contract, or preparing to do so in the future, that wants to ensure its members remain covered if they retire should seriously consider proposing language making clear that benefits are vested under the agreement and continue in perpetuity. Finally, regardless of what the language says, all unions should make sure to inform their members of their status should they retire.