ERISA-District Court Rules That Kraft Could Alter Retiree Medical Benefits Which Are Subject To Collective Bargaining Agreements

In Kraft Foods v. Retail Wholesale and Department Store Union, No. 11 C 6498 (N.D. Illinois 2012), the plaintiff, Kraft Foods Global (“Kraft”), had maintained the Kraft Foods Global Retiree Medical Plan (the “Plan”), also a plaintiff in the case. The Plan offers retiree medical coverage to certain Kraft retirees, their eligible dependents and surviving spouses. In early 2011, Kraft changed certain retiree benefits offered under the Plan. Affected retirees (the “Retirees”) felt that a series of collective bargaining agreements (“CBAs”), between Kraft and the unions representing its employees (the “Unions”), prevent Kraft from making these changes. Kraft and the Plan filed this suit against the Unions, seeking a declaratory judgment that the changes were permitted, and that Retirees from Battle Creek did not have vested rights to unchangeable retiree medical coverage.

After dealing with some technical issues, the Court noted that Kraft and the Unions had negotiated and entered into a series of successive CBAs. Pursuant to those CBAs, Kraft offered health insurance benefits to its active, hourly employees represented by the Unions. It also offered health insurance through the Plan to former employees who satisfied retiree medical eligibility requirements as of their retirement and during their retirement, and to their eligible dependents and surviving spouses. The CBAs do not state that employees have an unchangeable right to continue to receive medical benefits in retirement or that Kraft may not alter retiree medical benefits.

The CBAs, however, do refer to Summary Plan Descriptions (“SPDs”) created by Kraft to communicate the terms and conditions of various Kraft-sponsored benefits plans. The SPDs have been revised over the years, but consistently included substantially similar “reservation of rights” language stating that Kraft may change or terminate the Plan at any time. The Court concluded that no language in the CBAs, or in the SPDs to which the CBAs refer, states that specific medical benefits are vested and cannot be changed. As such, the Court ruled that that Kraft’s 2011 changes to medical coverages for retirees provided by the Plan did not violate any of the applicable CBAs, and that the CBAs did not give the Retirees from Battle Creek a vested right to a lifetime of unchangeable medical benefits. Therefore, the Court issued the declaratory judgment the plaintiffs sought.

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