Supreme Court Grants Certiorari To Review Sixth Circuit’s Pro-Union Inference In Retiree Health Insurance Benefits Cases

The Supreme Court of the United States has agreed to resolve a circuit split about how courts should interpret collective bargaining agreements that provide for health insurance benefits for retired employees in M&G Polymers USA, LLC v. Tackett. The U.S. Court of Appeals for the Sixth Circuit says that such retiree health insurance benefits carry with them an inference that they are vested, or guaranteed to continue for life, while the majority of the other federal appellate courts require specific durational language to find that benefits are vested. Given the high cost of retiree health insurance on many employers' balance sheets, M&G Polymers USA could represent a game changer for employers' ability to modify retiree benefits going forward.

In a surprising development, the Supreme Court of the United States granted certiorari on May 5, 2014, in M&G Polymers USA, LLC v. Tackett, an appeal that should resolve a split among the federal appellate courts over how to interpret the duration of retiree health insurance benefits provided under collective bargaining agreements.

Coupled with the recent changes in health insurance markets, the decision in M&G Polymers USA, LLC v. Tackett (expected in the spring of 2015) could be a game changer for companies currently providing retiree health insurance benefits to their union employees and retirees, especially for operations in Michigan, Ohio, Kentucky and Tennessee.

The U.S. Court of Appeals for the Sixth Circuit has held since 1983 that retiree health insurance benefits provided in collective bargaining agreements carry an inference that they are vested or guaranteed to continue for life where the agreement is silent as to their duration. The majority of the other federal appellate courts have consistently held that retiree health insurance benefits are not vested or lifetime unless there is specific durational language saying that the benefits will continue beyond the term of a collective bargaining agreement.

The practical effect of the circuit split has been that identical collective bargaining agreements are interpreted in contradictory ways depending on where plan participants, their union and the employer end up in court. For example, a federal district court sitting in Ohio would more likely find that a collective bargaining agreement stating that retiree benefits "will continue" provides for lifetime health insurance benefits. However, courts interpreting identical contract language one...