In a case that reminds Plan Sponsors to tread carefully when dealing with retire health care in the collective bargaining context, a court has recently ruled that United Parcel Service of America, Inc., violated the terms of a summary plan description when it imposed "increased health care premiums on retirees who were represented by International Brotherhood of Teamsters Local 705, while not imposing the same increases on retirees of the Teamsters International Union.
In a 2002 labor contract with Local 705, United Parcel Service (UPS) agreed to provide health insurance to retirees as outlined in the SPD, which stated that if retirees' contributions were increased, the higher rates would not be implemented until after the expiration of the "current" contract. Another provision of the SPD stated that if UPS's annual cost-per-retiree rose above $6,250, all retired employees would "share equally" in paying increased contributions. In 2006, after costs rose above $6,250, UPS informed retirees that in 2008 their premiums would increase. UPS and the international Teamsters reached an agreement that UPS would not collect increased retiree contributions until the contract with the international expired. UPS did not extend the agreement to Local 705 retirees, who filed suit under the Employee Retirement Income Security Act. A federal district court in Illinois found that UPS had violated the SPD but that the company could impose a premium increase before the expiration of the 2008 contract.
The Seventh Circuit affirmed, finding that the SPDs required that all retirees share equally in the cost of their benefit. The Court also threw a bone to the company and held that UPS would not need to wait until the 2008 contract expired before it could charge all retirees the increased premiums because the SPD "current" language referred to the 2002 contract.
(Green v. UPS Health & Welfare Package, 187 LRRM 3298, 7th Cir., No. 09-2445, 2/10/10)
