ERISA: When do “Lifetime” Healthcare Benefits Last a Lifetime?

District Court Rules that Pension’s Healthcare Benefits Last a Lifetime

By: Andrew B. Bryant

The Northern District of Illinois recently addressed the question of whether healthcare insurance benefits under an ERISA pension plan lasted for a lifetime for two plaintiff retirees, despite the termination of the collecting bargaining agreement that established those benefits.   In Its analysis, the Court noted that unlike pension benefits, insurance benefits (such as healthcare benefits) do not automatically vest by contract to plan members.  Such benefits can be terminated by an employer.   However, a plan agreement may by its terms vest such insurance benefits to plan members for a “lifetime.”

The Court turned to the terms of the agreement to resolve whether health insurance benefits under the terminated collective bargaining agreement continued for the lifetime of the retirees.   The Court noted that the agreement stated that insurance benefits continued

so long as the individual remains retired from the Company or receives a Surviving Spouse’s benefit, notwithstanding the expiration of this Agreement.

The Court read this language to state that retired employees were in fact entitled to benefits after the expiration of the agreement, thereby vesting healthcare insurance benefits upon the plan members for life.

The employer & union defendants argued that further language in the agreement allowed for limitation and termination of the insurance benefits under the contract, despite the language noted by the Court.   The Court disagreed, holding that the various sections of the contract relied upon by defendants specifically allowed for termination of the agreement, but not termination of benefits, stating,

The agreement does not provide for the right to terminate the benefits. The provision of lifetime benefits without provision for their termination constitutes vested benefits.

The content provided here is for informational purposes only and should not be construed as legal advice on any subject.

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