Retiree health benefits case goes before Supreme Court

The U.S. Supreme Court is set to hear arguments today in a case that has implications for employers that provide retiree health care benefits subject to a collective bargaining agreement.

The case, M&G Polymers USA, LLC v. Tackett, involves the so-called “Yard-Man presumption,” which infers that the duration of retirement health insurance benefits established under a collective bargaining agreement is meant to apply for the lifetimes of covered retirees if the collective bargaining agreement is silent on the issue.

Having to provide medical benefits for the duration of a retiree’s lifetime following the expiration of a collective bargaining agreement is “obviously not something employers want or intended to commit to providing,” says Amanda Sonneborn, an attorney with Seyfarth Shaw. “So there’s been some significant litigation, largely in the 6^th Circuit, over this question of what is it you have to say to make it clear that the benefits don’t continue on.”

About firms with 200 or more workers offering health benefits to active workers, 25% offer retiree health benefits, according to the Kaiser Family Foundation and  Health Research & Educational Trust 2014 Employer Health Benefits Survey.

Also see: SCOTUS to hear retiree health benefits case

Alden Bianchi, a partner at law firm Mintz Levin and practice group leader of the firm’s employee benefits & executive compensation practice, expects a two-part holding from the Supreme Court. First, he believes the court will rule that if a collective bargaining agreement is silent, then the employer can make changes after the close of the bargaining agreement. However, he also expects the court to rule that the parties subject to the collective bargaining agreement can change that result by contract, meaning they can write into the collective bargaining agreement: “You can never change these benefits.”

Many plans are silent on the duration of the medical benefits, says Stuart Gerson, an attorney in the Washington, DC office of Epstein Becker Green. Still, “nothing in this case will license a cut-off of health care benefits,” he says. “What this case deals with are the various contracts – and there are quite a few of them – that are silent.”