ERISA-Sixth Circuit Rules That The Employer Cannot Unilaterally Change Retiree Prescription Drug Coverage

In Shy v. Navistar International Corporation, Nos. 11-3215/4143 (6th Cir. 2012), the class action plaintiffs were seeking an injunction against Navistar International Corporation (“Navistar”), claiming that Navistar’s unilateral move to substitute, into their medical plan (the “Plan”), Medicare Part D for the retiree prescription drug benefit contained in the Plan violated the parties’ 1993 settlement agreement (the “Agreement”). The district court found that Navistar’s actions were in violation of the Agreement. It ordered Navistar to reinstate, retroactively, the retiree prescription drug benefit that was in effect under the Plan before Navistar made the unilateral substitution. Navistar appealed.

In analyzing the case, the Sixth Circuit Court of Appeals (the “Court”) dealt with three issues. First, the Court determined that Navistar did not have discretionary authority to construe and interpret the Plan, since the Plan did not grant such discretion to Navistar. Second, the Court found that that the Agreement, by its terms, did not grant Navistar the power to substitute Medicare Part D for the retiree prescription drug benefit being offered under the Plan. Third, the Court ruled that the district court did not err when it ordered Navistar to retroactively reinstate the pre-change retiree prescription drug benefit under the Plan. As such, the Court affirmed the district court’s order.

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