This lawsuit arose after an employer made modifications to its non-union retiree well being advantages. Initially, the employer changed its fee of well being protection premiums for non-union retirees and their spouses with contributions to HRAs. Staff have been later informed that spousal HRA contributions would proceed just for staff who retired earlier than a specified date. To retain the spousal profit, some staff retired on or earlier than the said date, sooner than they’d initially deliberate. Finally, the employer introduced that every one non-union retiree medical advantages can be eradicated, with any amassed HRA funds reverting to the employer. A gaggle of retirees sued, asserting that the employer breached its fiduciary responsibility by misrepresenting that non-union advantages can be pretty much as good as or higher than advantages for union retirees and that staff who retired by the said date would retain their advantages for all times. The employer countered that the plan’s phrases allowed it to switch or terminate the plan at any time for any motive and requested the courtroom to dismiss the case.

In refusing to dismiss the case, the courtroom defined that, to prevail of their fiduciary breach declare, the retirees would wish to indicate that they relied on materials misstatements the employer made whereas appearing as a fiduciary. Normally, the courtroom famous, fiduciary concerns come into play when employers talk with staff about profit plans. Based on the retirees, the employer’s representations that non-union advantages have been pretty much as good as union advantages have been false as a result of the union plan didn’t permit the employer to unilaterally remove advantages or take again plan funds. As well as, the employer’s communications concerning the continuation of spousal advantages—together with its responses to questions from affected people—weren’t full or correct as a result of they didn’t point out that the HRA profit may very well be terminated at any time. The courtroom concluded that the retirees’ arguments, together with their claims that they’d made particular choices in reliance on the employer’s statements, have been sufficient to permit the case to proceed and for the retirees to pursue the equitable treatments of reformation or surcharge.

EBIA Remark: Fiduciaries have an obligation to offer truthful data to members and beneficiaries, which features a prohibition on deceptive statements and dangerous silence. Though it stays to be seen whether or not the retirees will reach proving their claims, this lawsuit serves as a reminder that the suitable to amend and terminate welfare advantages, whereas broad, could also be restricted if specific statements have been made about these advantages. For extra data, see EBIA’s ERISA Compliance handbook at Sections XXVIII.F (“ERISA Fiduciary Duties and Participant Disclosure”) and XXVIII.I.5 (“Fiduciaries Might Typically Be Chargeable for Hurt Induced to Particular person Members”). See additionally EBIA’s Self-Insured Well being Plans handbook at Part VIII.C (“Overview of ERISA Fiduciary Tasks”) and EBIA’s Shopper-Pushed Well being Care handbook at Part XXV.D (“HRAs and ERISA”).

Contributing Editors: EBIA Workers.