Supreme Court Rejects Presumption of Lifetime Retiree Benefits

On Jan. 26, 2015, the U.S. Supreme Court ruled, in the case of M&G Polymers USA, LLC v. Tackett, that courts should interpret the retiree health care provisions of collective bargaining agreements according to the ordinary principles of contract law, rather than presuming that the benefits are vested for life.

The Supreme Court’s decision clarifies that a traditional analysis of contractual language is necessary to determine whether retiree benefits are vested.

The ruling resolves a split in how different circuit courts interpreted collective bargaining agreements. Employers facing lawsuits over retiree welfare benefit plans can now more easily rely on contractual language contained in collective bargaining agreements and ERISA plan documents when determining whether they have the right to amend, modify or terminate those benefits.

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