I

104TH CONGRESS

2D SESSION H. R. 4237

To amend the Employee Retirement Income Security Act of 1974 with respect

to rules governing litigation contesting termination or substantial reduction of retiree health benefits, to require a preponderance of evidence

for termination or substantial reduction of retiree health benefits, and

to allow courts to use extrinsic evidence in determining the intent of

a plan.

IN THE HOUSE OF REPRESENTATIVES

SEPTEMBER 27, 1996

Mr. BARRETT of Wisconsin introduced the following bill; which was referred

to the Committee on Economic and Educational Opportunities

A BILL

To amend the Employee Retirement Income Security Act

of 1974 with respect to rules governing litigation contesting termination or substantial reduction of retiree health

benefits, to require a preponderance of evidence for termination or substantial reduction of retiree health benefits, and to allow courts to use extrinsic evidence in

determining the intent of a plan.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,
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1 SECTION 1. PROCEDURES GOVERNING RETIREE HEALTH

2 BENEFITS.

3 (a) IN GENERAL.—Part 5 of subtitle B of title I of

4 the Employee Retirement Income Security Act of 1974

5 (29 U.S.C. 1131 et seq.) is amended by adding at the end

6 the following new section:

7 ‘‘SEC. 516. PROCEDURES GOVERNING THE TERMINATION

8 OR SUBSTANTIAL REDUCTION OF RETIREE

9 HEALTH BENEFITS.

10 ‘‘(a) TERMINATION OR SUBSTANTIAL REDUCTION OF

11 RETIREE HEALTH BENEFITS.—A plan or plan sponsor

12 may terminate or substantially reduce retiree health bene13 fits under an employee welfare benefit plan, or plan or

14 plan sponsor payments in connection with such benefits

15 only in accordance with the provisions of this section.

16 ‘‘(b) PROPOSAL REQUIREMENT.—

17 ‘‘(1) Prior to terminating or substantially re18 ducing retiree health benefits or plan or plan spon19 sor payments in connection with such benefits, a

20 plan sponsor shall—

21 ‘‘(A) petition a court of competent jurisdic22 tion for the appointment of an authorized rep23 resentative for the retirees whose benefits may

24 be terminated or substantially reduced;

25 ‘‘(B) make a proposal to the authorized

26 representative of the retirees covered by the
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1 plan, based on the most complete and reliable

2 information available at the time of such pro3 posal, which assures that all of the affected par4 ties are treated fairly and equitably; and

5 ‘‘(C) provide, subject to subsection (c)(2),

6 the representative of the retirees with such rel7 evant information as is necessary to evaluate

8 the proposal.

9 ‘‘(2) During the period beginning on the date of

10 the making of a proposal provided for in paragraph

11 (1) and ending on the date of the hearing provided

12 for in subsection (c)(1), the plan sponsor shall meet,

13 at reasonable times, with the authorized representa14 tive to confer in good faith in attempting to reach

15 mutually satisfactory modifications of such plan.

16 ‘‘(3) For purposes of this section the term ‘au17 thorized representative’ means the authorized rep18 resentative designated pursuant to subparagraph (A)

19 for persons receiving any retiree benefits covered by

20 a collective bargaining agreement or subparagraph

21 (B) in the case of persons receiving retiree benefits

22 not covered by such agreement.

23 ‘‘(A) A labor organization shall be the au24 thorized representative of those persons receiv25 ing any retiree benefits covered by any collective
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1 bargaining agreement to which that labor orga2 nization is signatory, unless (i) such labor orga3 nization elects not to serve as the authorized

4 representative of such person, or (ii) the court,

5 upon a motion by any participant or bene6 ficiary, after notice and hearing, determines

7 that different representation of such persons is

8 appropriate. In cases where the labor organiza9 tion elects not to serve as the authorized rep10 resentative of those persons receiving any re11 tiree benefits covered by any collective bargain12 ing agreement to which that labor organization

13 is signatory, or in cases where the court finds

14 different representation of such persons appro15 priate, the court, upon a motion by any partici16 pant or beneficiary, and after notice and a

17 hearing, shall appoint an authorized representa18 tive of retired employees if the plan or plan

19 sponsor seeks to terminate or substantially re20 duce the retiree benefits or if the court other21 wise determines that such appointment is ap22 propriate, from among such persons.

23 ‘‘(B) The court, upon a motion by any par24 ticipant or beneficiary, and after notice and a

25 hearing, shall appoint an authorized representa-
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1 tive of retired employees if the plan or plan

2 sponsor seeks to terminate or substantially re3 duce the retiree benefits or if the court other4 wise determines that it is appropriate, to ap5 point an authorized representative of those per6 sons receiving any retiree benefits not covered

7 by a collective bargaining agreement.

8 ‘‘(4) The court may order a plan sponsor to pay

9 reasonable expenses to the authorized representative.

10 ‘‘(c) HEARINGS.—

11 ‘‘(1) If an action is brought by any participant

12 or beneficiary to enjoin or otherwise modify such ter13 mination or substantial reduction, the court without

14 requirement of any additional showing shall order

15 the plan and plan sponsor to maintain the retiree

16 health benefits and payments at the level in effect

17 immediately before the termination or substantial re18 duction while the action is pending in any court. No

19 security or other undertaking shall be required of

20 any participant or beneficiary as a condition for is21 suance of such relief. In addition, the court shall

22 schedule a hearing to be held not later than fourteen

23 days after the date of the filing of such action. All

24 interested parties may appear and be heard at such

25 hearing. Adequate notice shall be provided to such
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1 parties at least ten days before the date of such

2 hearings. The court may extend the time for the

3 commencement of such hearing for a period not ex4 ceeding seven days where the circumstances of the

5 case, and the interests of justice require such exten6 sion, or for additional periods of time to which the

7 plan sponsor and representative agree.

8 ‘‘(2) The court may enter such protective or9 ders, consistent with the need of the authorized rep10 resentative of the retiree to evaluate the proposal of

11 the plan sponsor to substantially reduce or terminate

12 retiree health benefits or plan or plan sponsor pay13 ments in connection with such benefits.

14 ‘‘(3) If retiree health benefits under an em15 ployee welfare benefit plan or plan or plan sponsor

16 payments in connection with such benefits are to be

17 or have been terminated or substantially reduced,

18 and an action is brought by any participant or bene19 ficiary to enjoin or otherwise modify such termi20 nation or substantial reduction, the court shall take

21 into account extrinsic evidence to determine the in22 tent of the plan.

23 ‘‘(4) If the terms of an employee welfare benefit

24 plan, summary plan description, or other materials

25 distributed to employees at any time before a par-
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1 ticipant’s retirement or disability, are silent or are

2 ambiguous, either on their face or after consider3 ation of extrinsic evidence, as to whether retiree

4 health benefits and payments may be terminated or

5 substantially reduced for a participant and his or

6 her beneficiaries after the participant’s retirement or

7 disability, then the benefits and payments shall not

8 be terminated or substantially reduced for the par9 ticipant and his or her beneficiaries unless the plan

10 or plan sponsor establishes by a preponderance of

11 the evidence that the summary plan description or

12 other materials about retiree benefits—

13 ‘‘(A) were distributed to the participant at

14 least 90 days in advance of retirement or dis15 ability;

16 ‘‘(B) did not promise retiree health bene17 fits for the lifetime of the participant and his

18 or her spouse; and

19 ‘‘(C) clearly and specifically disclosed that

20 the plan allowed such termination or substantial

21 reduction as to the participant after the time of

22 his or her retirement or disability.

23 The disclosure described in subparagraph (C) must have

24 been made prominently and in language which can be un25 derstood by the average plan participant.
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1 ‘‘(5) The court shall approve a substantial re2 duction or termination of retiree health benefits or

3 plan or plan sponsor payments in connection with

4 such benefits only if the court finds that—

5 ‘‘(A) the collective bargaining agreement

6 explicitly provides for a substantial reduction or

7 termination of such benefits; or

8 ‘‘(B)(i) the plan sponsor has, prior to the

9 hearing, made a proposal that fulfills the re10 quirements of subsection (b)(1);

11 ‘‘(ii) the authorized representative of the

12 employees has refused to accept such proposal

13 without good cause; and

14 ‘‘(iii) the balance of the equities clearly fa15 vors substantially reducing or terminating re16 tiree health benefits or plan or plan sponsor

17 payments in connection with such benefits.

18 ‘‘(d) RETIREE HEALTH BENEFITS.—For the pur19 poses of this section, the term ‘retiree health benefits’

20 means health benefits (including coverage) which are pro21 vided to—

22 ‘‘(1) retired or disabled employees who, imme23 diately before the termination or substantial reduc24 tion, have a reasonable expectation to receive such

25 benefits upon retirement or becoming disabled; and
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1 ‘‘(2) their spouses or dependents.’’.

2 (b) CONFORMING AMENDMENT.—The table of con3 tents in section 1 of such Act is amended by inserting

4 after the item relating to section 515 the following new

5 item:

‘‘Sec. 516. Procedures governing termination and substantial reduction of retiree

health benefits.’’

6 (c) EFFECTIVE DATE.—The amendments made by

7 this section shall apply to actions relating to terminations

8 or substantial reductions of retiree health benefits which

9 are pending or brought, on or after August 1, 1996.

Æ