ERISA-10th Circuit Rules That There Are No Vested Health or Life Insurance Benefits

In Fulghum v. Embarq Corporation, No. 13-3230 (10th Cir. 2015), the Plaintiffs represented a class of retirees formerly employed by Sprint-Nextel Corporation (“Sprint”), Embarq Corporation(“Embarq”), or a predecessor and/or subsidiary company of either Embarq or Sprint (collectively “Defendants”). Plaintiffs brought this suit after Defendants altered or eliminated health and life insurance benefits for retirees. Plaintiffs asserted, among others, that Defendants violated ERISA by breaching their contractual obligation to provide vested health and life insurance benefits. The district court granted Defendants summary judgment on this claim, and Plaintiffs appeal.

In analyzing the case, the Tenth Circuit Court of Appeals (the “Court”) noted that the plans at issue provide health or life insurance benefits and, thus, are welfare benefit plans under ERISA. Welfare benefit plans are not governed by ERISA’s minimum vesting standards and employers are generally free under ERISA, for any reason at any time, to adopt, modify, or terminate welfare plans. If, however, an employer has contractually agreed to provide retirees with vested benefits, it may not unilaterally modify or terminate the welfare benefit plan that establishes those benefits. Further, the interpretation of an ERISA plan is governed by federal common law. The Court said that, in deciding whether an ERISA employee welfare benefit plan provides for vested benefits, it will apply general principles of contract construction. In particular, the Court will interpret an ERISA plan like any contract, by examining its language and determining the intent of the parties to the contract. A plaintiff cannot prove his employer promised vested benefits unless he identifies “clear and express language” in the plan making such a promise. Further, a promise to provide vested benefits must be incorporated into the formal written ERISA plan. Summary plan descriptions (“SPDs”) are considered part of the ERISA plan documents.

Continuing, the Court said that, having reviewed the SPDs at issue in this matter, the Court concludes Plaintiffs cannot show that any plan contains clear and express language promising vested benefits. The SPDs presented either contained a reservation of rights clause, under which the employer could change or discontinue the benefits at any time, and/or had no clear and express or affirmative promise under which benefits will vest. As a result of the foregoing, the employer may change or stop the health and life insurance benefits in any manner and at

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