In Maytag Corporation v. International Union, United Automobile, Aerospace & Agricultural Implement Workers of America, No. 11-2931 (8th Cir. 2012), the plaintiffs, the United Automobile, Aerospace, and Agricultural Implement Workers International Union and Local 997 (collectively, the “Union”), were appealing the district court’s judgment that the defendant, Whirlpool Corporation (“Whirlpool”), may unilaterally modify the health benefits it provides to certain retired hourly workers. One issue for the Eighth Circuit Court of Appeals (the “Court”): do the retirees have a vested right to health benefits under ERISA? If so, the unilateral modification is not valid.
In analyzing the case, the Court noted that, unless an employer has contractually agreed to provide vested retiree health benefits, it may unilaterally modify or terminate the benefits at any time. In this case, beginning in 1961, the Union and Maytag (Whirlpool’s predecessor-in-interest) negotiated a series of provisions (the special insurance provisions or “SIAs”) in their collective bargaining agreements providing medical benefits to active and retired hourly employees. The SIAs are treated as ERISA governed medical plans. Consistent with the SIA term clause, the parties terminated each SIA at expiration and negotiated a new SIA. The SIA at issue is the SIA governing in 2004. A summary plan description (an “SPD”), which described the 2004 SIA, stated that:
“The benefits described in this booklet are not vested benefits, and Maytag reserves the right to modify, suspend or terminate the plan or any component or successor plan, in whole or in part, at any time and for any reason, except to the extent that the federal labor laws require it to bargain any such changes with the Union.”
The Court stated that an SPD may not strip collectively bargained rights from the ERISA plan it summarizes, but an unchallenged SPD may clarify that plan benefits are not vested. The Court found that this SPD reflects Maytag’s intent not to vest retiree medical benefits. It further found that the SIA does not contain any express vesting language, or any unambiguous language indicating an intent to vest. There was language in the SIA that that an employee eligible for retirement pension benefits “shall continue” to receive the medical and drug benefits “for himself and eligible dependents during his life” , but this is not the unambiguous language required to create vested rights. As such, the Court concluded that the retirees in question do not have a vested right to health benefits, so that Maytag may unilaterally modify the benefits. The Court affirmed the district court’s ju