Opinion ID: 750718
Heading Depth: 4
Heading Rank: 1

Heading: Extra-ERISA obligations in welfare benefit plans

Text: 52 The strong weight of authority throughout the circuits indicates that, in the area of welfare benefits, which are not subject to ERISA's minimum vesting and accrual requirements, Vasseur, 950 F.2d at 1006, a general amendment provision in a welfare benefits plan is of itself sufficient to unambiguously negate any inference that the employer intends for employee welfare benefits to vest contractually, and thus become unalterable, after the employee retires. See Chiles v. Ceridian Corp., 95 F.3d 1505, 1512 n. 2 (10th Cir.1996) (We recognize that the weight of case authority supports the ... approach, that a reservation of rights clause allows the employer to retroactively change the medical benefits of retired participants, even in the face of clear language promising company-paid lifetime benefits. (emphasis added)). 53 In In re Unisys Corp. Retiree Medical Benefit ERISA Litigation, 58 F.3d 896 (3d Cir.1995), the Third Circuit concluded that the district court did not err in determining that summary plan descriptions that used the terms 'lifetime' or 'for life' to describe the duration of medical benefits, while at the same time reserving the employer's right to modify or terminate at 'any time' and 'for any reason' the plans under which these benefits were provided, were unambiguous. Id. at 898-99. Because the provisions were not internally inconsistent, the court concluded that the employer had no contractual obligation to refrain from modifying or terminating the rights of retired employees. Id. at 904-05. 54 In Gable v. Sweetheart Cup Co., 35 F.3d 851 (4th Cir.1994), the Fourth Circuit likewise concluded that a reservation of rights clause in a life and health insurance policy taken out by a company on its employees allowed modification of the rights of retirees covered under the policy. Id. at 853. The company distributed forms to retiring employees which stated that the company would continue [insurance coverage] for you during the remainder of your lifetime at company expense. Id. at 854. However, the certificates of insurance issued to employees covered under the policy stated that 55 [t]he Policy(ies) under which this certificate is issued may at any time be amended or discontinued by agreement between the Insurance Company and the Policyholder without the consent of or giving of notice to the Insured Person. 56 Id. 57 After the insurance policy's inception, the company changed hands and the new owners shifted to a self-insured plan. Id. However, the insurance policy in its new form retained the reservation of rights clause. Id. The new owners subsequently amended the policy to reduce benefits, increase deductibles, and require each participant to pay a portion of the insurance premiums. Id. 58 The plaintiff retirees, whose rights to insurance were modified by the amendment, brought suit, alleging that their rights under the policy were contractually vested and thus not subject to modification by amendment. Id. at 855. The court rejected the retirees' contention that their rights were vested on the ground that the express reservation of the company's right to modify or terminate the participants' benefits is plainly inconsistent with any alleged intent to vest those benefits. Id. at 856. 59 Similarly, in Howe v. Varity Corp., 896 F.2d 1107 (8th Cir.1990), the Eighth Circuit held that an employer unambiguously manifested an intent not to contractually vest retired employees' rights to welfare benefits where the plan contained both a provision stating that welfare benefits continue in retirement and a reservation of rights provision. Id. at 1109-10. The reservation of rights provision stated that the employer reserved the right to amend or terminate the plan at any time, but also provided that the right to amend or terminate shall not, in any way, affect an Employee's right to claim benefits, diminish, or eliminate any claims for benefits under the provisions of the Plan to which the Employee shall have become entitled prior to the exercise of the [employer's] right ... to terminate or amend. Id. at 1108. Nevertheless, the court concluded that the mere fact that employee welfare benefits continue into retirement does not indicate that the benefits become vested for life at the moment of retirement. Id. at 1110; see also Alday v. Container Corp. of Am., 906 F.2d 660, 665 (11th Cir.1990) (holding that reservation of right to terminate or amend welfare benefits in summary plan description unambiguously manifested intent on the part of employer not to contractually vest welfare benefits). But see Jensen v. SIPCO, Inc., 38 F.3d 945, 950 (8th Cir.1994) (concluding that plan provisions reserving the right to terminate or modify health benefits were not facially unambiguous--they leave at least some doubt as to whether SIPCO intended to reserve the right to change or terminate benefits to already retired pensioners, or only the right to make prospective changes for those covered by the Plan but not yet retired). 60