Supreme Court Decides Retiree Health Benefits Case

If a collective bargaining agreement contains a general durational clause, retiree health insurance benefits last the duration of the agreement and aren’t vested for life the Supreme Court held in a per curiam (unauthored) opinion in CNH Industrial N. V. v. Reese.

CNH Industrial N.V. agreed to a six-year collective bargaining agreement providing those who retired under the pension plan health insurance but no other insurance benefits. The Sixth Circuit concluded the agreement was ambiguous as to whether retiree health insurance vested for life because it “carved out certain benefits” like life insurance “and stated that those coverages ceased at a time different than other provisions.” Extrinsic evidence supported lifetime vesting.

In 2015 in M&G Polymers v. Tackett the Supreme Court rejected the Sixth Circuit’s use of so-called Yard-Man inferences that often lead the court to conclude that collective bargaining agreements vested retiree health benefits for life. Those inferences included that “a general durational clause” in a collective-bargaining agreement “‘says nothing about the vesting of retiree benefits’”; if the collective bargaining agreement lacked “a termination provision specifically addressing retiree benefits” but contained specific termination provisions for other benefits, it presumably vested retiree benefits for life; and vesting is presumed if “a provision . . . ‘tie[d] eligibility for retirement health benefits to eligibility for a pension.” All these factors were present in the agreement in this case.

According to the Supreme Court, “the Sixth Circuit held that the same Yard-Man inferences it once used to presume lifetime vesting can now be used to render a collective-bargaining agreement ambiguous as a matter of law, thus allowing courts to consult extrinsic evidence about lifetime vesting.” But there was no ambiguity in this collective bargaining agreement. “If the parties meant to vest health care benefits for life, they easily could have said so in the text. But they did not.”

As a practical matter it is unlikely that this case will have any impact outside of the Sixth Circuit. As the Supreme Court stated in its opinion “no other Court of Appeals would find ambiguity in these circumstances.” Also, this case was decided under the Labor Management Relations Act (LMRA) which doesn’t apply to state and local government employees. But an arbitrator or court interpreting a public sector collective bargaining agreement retiree health benefit provision might find this case persuasive.