Opinion ID: 2997119
Heading Depth: 4
Heading Rank: 1

Heading: The “lifetime” nature of the HCA benefit

Text: The plaintiffs claim that all of the VSRP’s enhanced benefits were vested, including the HCA, and that the HCA cannot be “carved out” of the VSRP package of vested retirement benefits. This contention is easily disposed of since the HCA benefit differs qualitatively from the VSRP’s other enhanced benefits: it is a welfare benefit, as the No. 03-2090 15 plaintiffs concede (Appellants’ Br. at 22-23), not a pension benefit. Thus, absent language expressly indicating that the HCA benefit is vested, it would not vest upon retirement.4 The plaintiffs argue that the VSRP documents indicate that the HCA is a “lifetime” benefit, and that this had been confirmed in oral representations made to them. Specifically, they assert that the personalized calculation worksheet, which states that eligible employees will receive an HCA allowance of $465 per month to age 65 and $180 per month thereafter, indicates that this benefit is “for life.” (R. 109-2, ex. 10.) The payment election form, which prescribes the same HCA allowance amounts as appear on the personalized calculation worksheet and which allows eligible employees to choose to have their surviving spouses receive the HCA benefit after their death, is also offered for the implication that the benefits were for life (and even beyond). (R. 109-2, ex. 11.) That the HCA benefit was a “lifetime” benefit—both for regular retirees and for retirees who accepted the VSRP package—is actually conceded by CNA. (Appellees’ Br. at 27; 1992 Retirement Guide at 6.) The problem for the plaintiffs is that “lifetime” may be construed as “good for life unless revoked or modified.” This construction is particularly plausible if the contract documents include a reservation of rights clause (which, as will be shown, is the case here). See UAW v. Rockford Powertrain, Inc., 350 F.3d 698, 704 (7th Cir. 2003) (“We must resolve the tension between the lifetime benefits clause, and the plan termination and 4 As we discuss in more detail below, the characterization of a benefit as “lifetime” can, absent a reservation of rights clause, indicate that the benefit is vested. However, the packaging of a welfare benefit with pension benefits does not on its own alter our presumption against vesting in the absence of express language to the contrary. 16 No. 03-2090 reservation of rights clauses, by giving meaning to all of them. Reading the document in its entirety, the clauses explain that although the plan in its current iteration entitles retirees to health coverage for the duration of their lives and the lives of their eligible surviving spouses, the terms of the plan—including the plan’s continued existence—are subject to change at the will of [the employer]. The health insurance section of the plan description unambiguously does not provide the plaintiffs with vested lifetime health insurance benefits.”) (internal citations omitted); Diehl v. Twin Disc, 102 F.3d 301, 307 (7th Cir. 1996) (“[W]hen potentially conflicting provisions coexist . . . within a single contract formed of several documents, the rule that contractual provisions be read as parts of an integrated whole will lead a court to seek an interpretation that reconciles those provisions.”); see also In re Unisys Corp. Retiree Med. Benefit “ERISA” Litig., 58 F.3d 896, 904 (3d Cir. 1995) (“An employer who promises lifetime medical benefits, while at the same time reserving the right to amend the plan under which those benefits were provided, has informed plan participants of the time period during which they will be eligible to receive benefits provided the plan continues to exist.”); Chiles v. Ceridian Corp., 95 F.3d 1505, 1512 n.2 (10th Cir. 1996) (“[T]he weight of case authority supports the Unisys 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.”). As laypersons, the plaintiffs’ confusion on this issue is understandable; it is also very unfortunate, if it was a basis for their accepting the VSRP package. But in the perhaps beady eyes of the law, the “lifetime” nature of a welfare benefit does not operate to vest that benefit if the employer reserved the right to amend or terminate the benefit, given “what it takes to overcome the presumption that welfare benefits do not vest, combined with [our] reluctance to interpret a contract as being at war with itself.” Diehl, 102 F.3d at 307. No. 03-2090 17 It is true that some of our decisions have indicated that the use of “lifetime” to denote the duration of benefits may create an ambiguity and is not tantamount to silence (with its presumption against vesting). See id. at 306 (finding that separate agreement containing entitlement to lifetime benefits modified reservation of rights clause incorporated from another agreement and entitled retirees to welfare benefits for their lifetime); Bidlack, 993 F.2d at 608 (“But the agreements are not silent on the issue; they are merely vague. They say that once retired employees reach the age of 65 the company will pick up the full tab for their health insurance and that when they die their spouses will continue to receive supplemental health benefits, again at the company’s cost. This could be thought a promise to retired employees that they and their spouses will be covered for the rest of their lives.”). However, none of those decisions involve situations where a reservation of rights clause is an integral part of the contract that provides the “lifetime” benefits. In Diehl, we found that the contract providing “lifetime” benefits “was an independent contract, supported by separate consideration and capable of modifying or supplanting prior contractual arrangements,” such as the one that contained the reservation of rights clause. Diehl, 102 F.3d at 306-07. Here, the nature of the HCA as a “lifetime” benefit is not one of the enhancements created by the VSRP because the HCA is also a “lifetime” benefit for regular retirees according to the general retirement plan documents. Thus, unlike Diehl, the “lifetime” nature of the HCA benefit could not abrogate the reservation of rights clause included in the 1992 Retirement Guide and other general retirement plan documents because both were offered by the same contract. Moreover, the reservation of rights clause in Diehl provided an “unsure foundation of the putative right to discontinue” benefits. Id. at 308. The use of “lifetime” with respect to the VSRP’s HCA benefit simply does not operate to vest that benefit for the early retirees. In Bidlack, the only reservation of rights clause applicable 18 No. 03-2090 to the plan at issue was in a contract between the employer and an insurance company for the purchase by the former of health insurance sold by the latter. Bidlack, 993 F.2d at 606. We specifically found that clause inapplicable to the contract between the employees and the employer as to duration of benefits, the main issue in that case. Id. Thus, Bidlack did not involve the situation here where “lifetime” benefits were granted by the employer while the right to terminate or modify them was reserved. We have held that, when “lifetime” benefits are granted by the same contract that reserves the right to change or terminate benefits, the “lifetime” benefits are not vested. See Rockford Powertrain, 350 F.3d at 704. The plaintiffs additionally argue that the Brief Description Newsletter’s heading, “No reductions in the Retiree Health Care Allowance” indicated that the HCA benefit levels could not be altered. (Brief Description Newsletter at 2.) However, the paragraph accompanying that heading shows that no such promise was made. The paragraph reads: The maximum Retiree Health Care Allowance is earned at age 62 after 25 years of service as an active em- ployee. If you retire under the Voluntary Special Retirement Program, you will be credited with the maximum Retiree Health Care Allowance, even if you have less than 25 years of service or are under age 62.”5 5 We note, as an aside, that although “earned” might seem to connote “vested,” the two are distinguishable (though related) concepts. In the context of claims to benefits related to a break in service, the Second Circuit has noted that “[a]ccrued” benefits refer to those normal retirement benefits that an employee has earned at any given time during the course of employment. 29 U.S.C. § 1002(23)(A); see generally (continued...) No. 03-2090 19 Id. With respect to the plaintiffs’ contention here, we agree with the district court that the “plaintiffs’ interpretation of the provision is not the most sensible one.” (12/28/00 Order at 8-9.) In context, the heading in the Brief Description Newsletter refers to and rejects the reduced benefit amounts that would otherwise apply if an employee who does not meet the age and service requirements retires under the general retirement plan.6 Thus, the VSRP’s enhancement to the regular retirement plan’s HCA benefit was to ensure that the early retirees qualified for the maximum HCA amounts; it was not, and could not reasonably have been construed as, a promise to vest the HCA benefit at that maximum level for the remainder of the early 5 (...continued) Esden v. Bank of Boston, 229 F.3d 154, 162-63 (2d Cir. 2000). “Vested” benefits, on the other hand, refer to those normal retirement benefits to which an employee has a “nonforfeitable” claim; in other words, those accrued benefits he is entitled to keep. 29 U.S.C. § 1002(19). McDonald v. Pension Plan of the NYSA-ILA Pension Trust Fund, 320 F.3d 151, 156 (2d Cir. 2003). Moreover, we have held that “ ‘[a]ccrued benefit’ . . . has been interpreted to include retirement benefits and to exclude ‘ancillary benefits not directly related to retirement benefits’ like insurance or disability benefits.” Heinz v. Cent. Laborers’ Pension Fund, 303 F.3d 802, 804-05 (7th Cir. 2002), aff ’d, 2004 U.S. LEXIS 4028 (U.S. June 7, 2004). Thus, while the use of “earned” as applied to the maximum HCA benefit level might indicate poor drafting, it does not here indicate an intent to vest. 6 The plaintiffs may have recognized this in their Statement of Undisputed Material Facts In Opposition to the Defendant’s Second Motion for Summary Judgment. (See R. 117 at 5, ¶ 19 (“The VSRP retirees were entitled to receive the maximum Retiree Health Care Allowance even if they had less than 25 years of service or were under the age of 62. This benefit was not offered under the general retirement plan.”).) 20 No. 03-2090 retirees’ lives. The plaintiffs’ insistence to the contrary is unsupportable.