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 reduc-
tion 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 contest-
ing termination or substantial reduction of retiree health
benefits, to require a preponderance of evidence for ter-
mination or substantial reduction of retiree health bene-
fits, and to allow courts to use extrinsic evidence in
determining the intent of a plan.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. PROCEDURES GOVERNING RETIREE HEALTH
BENEFITS.
(a) IN GENERAL.—Part 5 of subtitle B of title I of
the Employee Retirement Income Security Act of 1974
(29 U.S.C. 1131 et seq.) is amended by adding at the end
the following new section:
‘‘SEC. 516. PROCEDURES GOVERNING THE TERMINATION
OR SUBSTANTIAL REDUCTION OF RETIREE
HEALTH BENEFITS.
‘‘(a) TERMINATION OR SUBSTANTIAL REDUCTION OF
RETIREE HEALTH BENEFITS.—A plan or plan sponsor
may terminate or substantially reduce retiree health bene-
fits under an employee welfare benefit plan, or plan or
plan sponsor payments in connection with such benefits
only in accordance with the provisions of this section.
‘‘(b) PROPOSAL REQUIREMENT.—
‘‘(1) Prior to terminating or substantially re-
ducing retiree health benefits or plan or plan spon-
sor payments in connection with such benefits, a
plan sponsor shall—
‘‘(A) petition a court of competent jurisdic-
tion for the appointment of an authorized rep-
resentative for the retirees whose benefits may
be terminated or substantially reduced;
‘‘(B) make a proposal to the authorized
representative of the retirees covered by the
plan, based on the most complete and reliable
information available at the time of such pro-
posal, which assures that all of the affected par-
ties are treated fairly and equitably; and
‘‘(C) provide, subject to subsection (c)(2),
the representative of the retirees with such rel-
evant information as is necessary to evaluate
the proposal.
‘‘(2) During the period beginning on the date of
the making of a proposal provided for in paragraph
(1) and ending on the date of the hearing provided
for in subsection (c)(1), the plan sponsor shall meet,
at reasonable times, with the authorized representa-
tive to confer in good faith in attempting to reach
mutually satisfactory modifications of such plan.
‘‘(3) For purposes of this section the term ‘au-
thorized representative’ means the authorized rep-
resentative designated pursuant to subparagraph (A)
for persons receiving any retiree benefits covered by
a collective bargaining agreement or subparagraph
(B) in the case of persons receiving retiree benefits
not covered by such agreement.
‘‘(A) A labor organization shall be the au-
thorized representative of those persons receiv-
ing any retiree benefits covered by any collective
bargaining agreement to which that labor orga-
nization is signatory, unless (i) such labor orga-
nization elects not to serve as the authorized
representative of such person, or (ii) the court,
upon a motion by any participant or bene-
ficiary, after notice and hearing, determines
that different representation of such persons is
appropriate. In cases where the labor organiza-
tion elects not to serve as the authorized rep-
resentative of those persons receiving any re-
tiree benefits covered by any collective bargain-
ing agreement to which that labor organization
is signatory, or in cases where the court finds
different representation of such persons appro-
priate, the court, upon a motion by any partici-
pant or beneficiary, and after notice and a
hearing, shall appoint an authorized representa-
tive of retired employees if the plan or plan
sponsor seeks to terminate or substantially re-
duce the retiree benefits or if the court other-
wise determines that such appointment is ap-
propriate, from among such persons.
‘‘(B) The court, upon a motion by any par-
ticipant or beneficiary, and after notice and a
hearing, shall appoint an authorized representa-
tive of retired employees if the plan or plan
sponsor seeks to terminate or substantially re-
duce the retiree benefits or if the court other-
wise determines that it is appropriate, to ap-
point an authorized representative of those per-
sons receiving any retiree benefits not covered
by a collective bargaining agreement.
‘‘(4) The court may order a plan sponsor to pay
reasonable expenses to the authorized representative.
‘‘(c) HEARINGS.—
‘‘(1) If an action is brought by any participant
or beneficiary to enjoin or otherwise modify such ter-
mination or substantial reduction, the court without
requirement of any additional showing shall order
the plan and plan sponsor to maintain the retiree
health benefits and payments at the level in effect
immediately before the termination or substantial re-
duction while the action is pending in any court. No
security or other undertaking shall be required of
any participant or beneficiary as a condition for is-
suance of such relief. In addition, the court shall
schedule a hearing to be held not later than fourteen
days after the date of the filing of such action. All
interested parties may appear and be heard at such
hearing. Adequate notice shall be provided to such
parties at least ten days before the date of such
hearings. The court may extend the time for the
commencement of such hearing for a period not ex-
ceeding seven days where the circumstances of the
case, and the interests of justice require such exten-
sion, or for additional periods of time to which the
plan sponsor and representative agree.
‘‘(2) The court may enter such protective or-
ders, consistent with the need of the authorized rep-
resentative of the retiree to evaluate the proposal of
the plan sponsor to substantially reduce or terminate
retiree health benefits or plan or plan sponsor pay-
ments in connection with such benefits.
‘‘(3) If retiree health benefits under an em-
ployee welfare benefit plan or plan or plan sponsor
payments in connection with such benefits are to be
or have been terminated or substantially reduced,
and an action is brought by any participant or bene-
ficiary to enjoin or otherwise modify such termi-
nation or substantial reduction, the court shall take
into account extrinsic evidence to determine the in-
tent of the plan.
‘‘(4) If the terms of an employee welfare benefit
plan, summary plan description, or other materials
distributed to employees at any time before a par-
ticipant’s retirement or disability, are silent or are
ambiguous, either on their face or after consider-
ation of extrinsic evidence, as to whether retiree
health benefits and payments may be terminated or
substantially reduced for a participant and his or
her beneficiaries after the participant’s retirement or
disability, then the benefits and payments shall not
be terminated or substantially reduced for the par-
ticipant and his or her beneficiaries unless the plan
or plan sponsor establishes by a preponderance of
the evidence that the summary plan description or
other materials about retiree benefits—
‘‘(A) were distributed to the participant at
least 90 days in advance of retirement or dis-
ability;
‘‘(B) did not promise retiree health bene-
fits for the lifetime of the participant and his
or her spouse; and
‘‘(C) clearly and specifically disclosed that
the plan allowed such termination or substantial
reduction as to the participant after the time of
his or her retirement or disability.
The disclosure described in subparagraph (C) must have
been made prominently and in language which can be un-
derstood by the average plan participant.
‘‘(5) The court shall approve a substantial re-
duction or termination of retiree health benefits or
plan or plan sponsor payments in connection with
such benefits only if the court finds that—
‘‘(A) the collective bargaining agreement
explicitly provides for a substantial reduction or
termination of such benefits; or
‘‘(B)(i) the plan sponsor has, prior to the
hearing, made a proposal that fulfills the re-
quirements of subsection (b)(1);
‘‘(ii) the authorized representative of the
employees has refused to accept such proposal
without good cause; and
‘‘(iii) the balance of the equities clearly fa-
vors substantially reducing or terminating re-
tiree health benefits or plan or plan sponsor
payments in connection with such benefits.
‘‘(d) RETIREE HEALTH BENEFITS.—For the pur-
poses of this section, the term ‘retiree health benefits’
means health benefits (including coverage) which are pro-
vided to—
‘‘(1) retired or disabled employees who, imme-
diately before the termination or substantial reduc-
tion, have a reasonable expectation to receive such
benefits upon retirement or becoming disabled; and
‘‘(2) their spouses or dependents.’’.
(b) CONFORMING AMENDMENT.—The table of con-
tents in section 1 of such Act is amended by inserting
after the item relating to section 515 the following new
item:
‘‘Sec. 516. Procedures governing termination and substantial reduction of retiree
health benefits.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to actions relating to terminations
or substantial reductions of retiree health benefits which
are pending or brought, on or after August 1, 1996.
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