The 4th Circuit in a published opinion released yesterday affirmed the longstanding rule that companies can freely terminate their post-retiree, ERISA-governed health benefits as long as there is no contractual obligation to continue them.
Citing escalating healthcare costs, New Century Aluminum modified or terminated its post-retiree health benefits for some retirees in 2007. Predictably, they sued, arguing that collective bargaining agreements guaranteed their right to continued coverage. Relying on the durational language of the agreements–and even despite the lack of an express provision securing the right to terminate post-retiree benefits–the 4th Circuit ruled that the retirees could not show they had a likelihood of success on the merits to grant the injunction the retirees were seeking.
However, with or without bargaining agreements, employers should still include an explicit provision in any post-retiree health plan that the retirees have no vested right to continued coverage and that benefits may be terminated at any time.