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Sixth Circuit Determines Retirement Healthcare Benefits Did Not Vest Under Collective Bargaining Agreements

In Michigan Educ. Ass’n Fam. Retired Staff Ass’n v. Michigan Educ. Ass’n, No. 20-1174, __F.3d__, 2021 WL 1546129 (6th Cir. Apr. 20, 2021), the Sixth Circuit considered whether retirement healthcare benefits under an ERISA plan have vested under a collective bargaining agreement (“CBA”). Defendants-Appellees are the Michigan Education Association (“MEA”) union, Michigan Education Special Services Association and MEA Financial Services, which are nonprofit organizations that provide health insurance and retirement programs to MEA and its affiliates’ employees and retirees. Plaintiffs-Appellants include the Michigan Education Association Family Retired Staff Association (“RSA”) and two members of the association who are retired employees of Defendants. Many of RSA’s members were members of collective bargaining units represented by the United Staff Organization (“USO”). Defendants and USO entered CBAs which obligated Defendants to provide eligible retirees with healthcare benefits. The district court denied Plaintiffs’ request for a preliminary injunction because it determined that Plaintiffs were unlikely to succeed on the merits of their case. Plaintiffs contend that the retiree healthcare benefits would vest for life upon retirement because: (1) a signed “Letter of Understanding” (“LOU”)—a separate enforceable contract from the CBAs—provides for lifetime vesting and (2) Defendants’ ERISA-governed retiree medical plan explicitly states that retiree insurance benefits become vested for eligible participants.

The court found that the district court erred by not considering whether the LOU is a valid, standalone contract that vested benefits for retirees. If it is, then it would vest non-negotiable healthcare benefits to anyone who had retired by the day it was signed in 1993. Though the subsequent CBA, signed a week after the LOU, offered the sole source of the parties’ legal relationship when signed, the LOU could have vested benefits for employees who retired before the parties signed the subsequent CBA. The district court decide in the first instance whether the parties formed a contract that vested rights in the first place. The court vacated and remanded the denial of the preliminary injunction to the district court.

The court found that the district court did not err by determining that the healthcare plan documents do not clearly manifest an intent for retirement healthcare benefits to vest. The court did agree with Plaintiffs that the CBA’s general durational clause does not control because the plan documents only reference sections of the CBA and not the CBAs in their entirety. However, “Plaintiffs have not shown that the language [of the plan], read in conjunction with the referenced portions of the CBAs, contains ‘clear, affirmative language’ of vesting.” For instance, the portions of the CBA do not say that the benefits become vested upon satisfaction of the eligibility requirements or other language that clearly indicates vesting. This is supported by the reservation-of-rights language in the Retiree Health Benefit Plan which allows the employer to make amendments to the plan or terminate the plan at any time. Plaintiffs have not established that the plan documents-based claim is likely to succeed on the merits. The court noted that the district court is considering a motion for judgment on the pleadings, and if it can be resolved on the pleadings, then the court should do so. But if it revisits the preliminary injunction question then it should also answer the question of irreparable harm that does not turn on the likelihood of success on the merits.

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