Opinion ID: 174862
Heading Depth: 2
Heading Rank: 3

Heading: Right to Terminate

Text: The 1990-1999 CBAs each contained a general provision stating that [a]ll benefits of employees [and] retired employees... are subject in every respect to the terms of the applicable Plan documents under which payment is claimed. Raytheon contends that this provision subordinates the CBAs to Raytheon's subsequent ERISA Plans, which purportedly give Raytheon the right to unilaterally revoke its agreement to pay the medical insurance premiums. We disagree. First, while the CBAs contain a general subordination provision, the Plans are likewise restricted by the CBAs. In the 1994 and 1997 Plans, the employer reserves the right to alter, amend, modify, revoke or terminate in whole or in part the Plan, except as provided in an agreement with a Collective Bargaining Agent. Thus, because the CBAs specifically provide for company-paid insurance to retirees from age 55 to age 65, the Plans may not be altered to deprive retirees of their company-paid health insurance. The Plans further state in disclaimers regarding the potential future of the Plans that amendment or termination will not diminish any rights established prior to such amendment or termination. Raytheon tightened the language in its favor in the 1999 and 2003 Plans, expressly reserving the absolute and unconditional right to terminate the Plan and any and all Benefit Programs, in whole or in part, with respect to some or all of the Employees. However, employee is defined in the 1999 and 2003 Plans as a person performing compensated services for the Employer who meets the definition of `employee' for income tax withholding purposes under [Treasury Regulation] 31.3401(c)-1. Treasury Regulation 31.3401(c)-1 includes a list of factors to use in distinguishing between employees and independent contractors, not between current and retired employees. See Vizcaino v. Microsoft Corp., 120 F.3d 1006, 1009 (9th Cir.1997). Retirees do not reasonably fall within the definition of employee used in the Plans. Thus, Raytheon's leeway to amend the Plans does not allow it to alter the terms of the CBAs under which it agreed to provide company-paid health insurance to retirees. Second, Raytheon's 1999 and 2003 Plans provide that, while amendments can take retroactive effect, no amendment can reduce benefits accrued as of the date the amendment is approved. Thus, even on the terms of the 1999 and 2003 Plans, Raytheon may not amend the Plans to deprive plaintiffs of premium-free medical insurance coverage. Third, the so-called subordination provision applies to benefits. It does not apply to contributions or medical insurance coverage. Cf. Poore, 566 F.3d at 924 (holding that retiree medical insurance coverage was subject to Plan termination rights where the CBA provided that the coverages agreed to in [the] labor agreement were [s]ubject to all the provisions of the Benefit Plan Booklet). [4] That premiums or coverages are not benefits of a Plan is clear from the CBAs' language. Under the CBAs, the company agrees to continue to provide the ... coverages for which [retirees] were covered while active employees, until the retired employee attains age 65. ... The company also agrees to pay the premiums for ... coverages for eligible employees. Coverage does not include, however, the specific benefits provided under a plan. Although coverage is not specifically defined in the CBA, one CBA provision describes levels of benefit coverage as those for an employee, employee and spouse, or employee and child(ren). These examples suggest that coverage refers to how and for whom benefits in general become available, not the specific benefits themselves. [5] Thus, while Raytheon could establish the specific benefits of medical insurance coverage in the Plans, and could terminate those benefits to the extent the Plans permit it to do so, it cannot terminate its agreement to pay the medical insurance premiums it had obligated itself to pay. Whatever termination rights Raytheon reserved for itself in the Plans with respect to benefits do not apply to Raytheon's existing obligation to provide premium-free medical insurance coverage. Cf. Brushy Creek Coal, 505 F.3d at 767 (holding that the Plan terms controlled where the CBA provided that the specific provisions of the plans will govern in the event of any inconsistencies between the CBA and the Plans). Other provisions in the CBAs that incorporate the Plans do not give Raytheon the right to alter its agreement to pay retiree medical insurance premiums. For example, the CBAs provide that [t]he Retired Employees Medical Benefits will be administered by the Employer in accordance with the provisions of the Comprehensive Medical Plan Document prepared by the Employer. This provision enables Raytheon to administer medical benefits according to the Plans, not terminate or modify its agreement to pay the insurance premiums. Raytheon nevertheless contends that all provisions of the CBAs are subject ... to the Plans. And because the Plans allegedly give Raytheon an unfettered right to modify or terminate benefits, Raytheon contends it can revoke any plan-related obligation it agreed to in a CBA even, apparently, an obligation to active employees during the CBA's term. Raytheon's interpretation, however, renders the CBAs illusory. Nothing in the CBAs at issue here enables Raytheon to modify or terminate its obligation to pay medical insurance premiums at any time it pleases simply by saying it can do so in Plan documents governing benefits. We therefore hold that Raytheon breached the CBAs and violated the Plans, and so affirm the district court's grant of summary judgment on this basis.