Retired Employee Medical Benefits: Court Finds That Retired Employees Can Proceed with Claims for Lifetime Medical Benefits

Issues may arise when an employer provides “lifetime” benefits to employees upon retirement and the employer subsequently changes the terms of the employee benefits which it provides. These claims are subject to interpretation under a strict federal law known as ERISA (Employee Retirement Income Security Act) which requires that these claims be filed in federal court. In Grove v. Johnson Controls, Inc. 2013 U.S. Dist. LEXIS 84509 (M. D. Pa. June 17, 2013) retired employees filed a lawsuit concerning their entitlement to ongoing medical benefits alleging violations of their rights to benefits under a retiree health benefit plan provided by their former employer.

In Grove, a successor employer unilaterally reduced the Plaintiffs’ retiree health benefits by instituting a $50,000 cap on medical benefits incurred by each participant after age 65, when the medical plan did not previously have any cap on retiree medical benefits. Once the retirees reached the cap, the employer’s plan refused to provide any further medical benefits. The Defendants argued that the Plaintiffs’ ERISA claims for continued health benefits must fail because the Plaintiffs’ retiree health benefits had not “vested” under the terms and language of the ERISA plan documents. However, in Grove, the Court refused to dismiss the Plaintiff’s claims because the Plan at issue had definitive language that the retiree’s health coverage “is continued until your death” and that the spouses of retirees, “will remain eligible until the earlier of death or remarriage.” Moreover, the Court noted other contractual terms in the Plan could also be interpreted as demonstrating vesting of benefits, including a provision indicating that there was no overall limit on how much the Plan will pay for an individual’s medical bills which could lend support the argument that the Plaintiffs’ retirement benefits are vested under the Plan. In addition, the Court also held that the Plaintiffs may also have a viable claim against the Defendants for other ERISA violations for breach of fiduciary duty (affirmative misrepresentations or failing to adequately inform plan participants and beneficiaries, misrepresentation or inadequate disclosure of material information and detrimentally reliance en the misrepresentation or inadequate disclosure) and equitable estoppel (a material representation,reasonable and detrimental reliance upon the representation and extraordinary circumstances).

For more information on employee benefit claims under ERISA and Abramson Employment Law see


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Filed under Employee Benefits, ERISA

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