Opinion ID: 3011431
Heading Depth: 2
Heading Rank: 1

Heading: The Parties and the Proposed Change in the Plan

Text: The plaintiffs are retired employees, and surviving spouses of employees, of the Burnham, Pennsylvania facility of Freedom Forge Corporation's Standard Steel Division. Since 1975, Freedom Forge has provided health benefits to retirees and their spouses through a self-insured plan--the Freedom Forge Corporation Welfare Benefit Plan for Salaried Employees and Retirees of the Standard Steel Division (the Plan). The Plan, administered by Metropolitan Life Insurance Company until 1988, is now administered by a third-party administrator, Blue Cross and Blue Shield. It is a self-insured plan, as Freedom Forge pays for the cost of retiree health coverage, and pays the administrator to process claims. Although the Plan beneficiaries are responsible for paying a yearly deductible and copayments if necessary, they do not have to pay premiums. Early in 1999, Freedom Forge announced that it intended to switch from the Plan to a system of coverage through managed care programs. Under the proposal, retirees under age 65 would be switched to Keystone Health Plan Central coverage, and would be required to pay a portion of their premiums, ranging from $30 to $90. Those older than 65 would be able to choose between two different plans: (1) a plan with no premium payments required, but a $10 copayment per prescription and limited annual benefits of drug prescriptions ($1250); and (2) a plan with $20 to $40 monthly premiums, $10 to $20 co-payment per 30-day supply of prescription drugs, and drug benefits limited to $2500 a year. The retirees immediately protested. Approximately 130 retirees and spouses thereupon joined in this ERISA-based suit. They allege that Freedom Forge 5 owed them a duty, as their fiduciary, not to mislead them about their benefits under the Plan; that Freedom Forge breached that duty by misleading them into thinking they would never have to pay premiums; and that this breach harmed them by inducing them to retire early and otherwise rely on the assurances. The plaintiffs moved for a preliminary injunction to require Freedom Forge to maintain the preexisting plan pending suit.1 At the hearing, two Freedom Forge administrators (Robert Robinson, Manager of Compensation and Benefits since 1979, and Thomas McGuigan, Vice President of Human Resources and Administration) testified, and the plaintiffs introduced deposition testimony of Gerald Sieber, who had been in charge of pension administration at the Burnham facility from 1978 to 1993. Eleven of the plaintiffs also testified. Plaintiffs' counsel explained: We're not going to call 130 witnesses. We are going to, because of the time limitations, call what we believe is a representative sample of the plaintiffs. However, he adduced no evidence that the eleven witnesses were representative of the other retirees and surviving spouses. The evidence presented at the preliminary injunction hearing established that in 1982 and 1991, Freedom Forge developed voluntary job elimination programs (VJEPs) to encourage voluntary retirement.2 The controversy centers around the terms and tenor of the formal and informal communications made to potential retirees about these programs. _________________________________________________________________ 1. The plaintiffs also moved for class certification, and the court requested briefing on the issue. The defendants objected. As of the date of the appeal, no class certification determination had been made. 2. There is some dispute about the motive for instituting the VJEPs. Freedom Forge claims that the VJEPs were attempts to help potential retirees because they allowed them to retire with benefits, instead of firing them outright, which Freedom Forge retained the right to do. The plaintiffs contend that Freedom Forge intended to eliminate the older workers and could not otherwise do so without incurring potential liability for age discrimination. The motive, whatever it may have been, does not affect our analysis of the parties' rights and duties. 6