In 2002, Caterpillar, Inc., added

The Employer Giveth and Taketh Away Retiree Health Benefits under ERISA-Governed Health Plans By Helen M. Kemp In 2002, Caterpillar, Inc., added $75 million to income with the accounting gain it got from boosting the health care premiums its retirees had to pay and making other changes to retiree benefits. Caterpillar s position was that it did not cut benefits to boost earnings. Rather, it did it to help retirees, by keeping the plan more affordable for the company. Throughout 2004, corporations such as AT&T, General Motors, Motorola, Sears, and SBC Communications announced that they either are eliminating company-subsidized medical insurance for employees after retirement or increasing the premiums that retirees pay for these benefits. Then there are retirees such as Mabel Kramer, who has an income of $989 per month from her pension benefit and Social Security. Until 2000, she had been paying nothing for her health care coverage because it had been provided as part of the retiree medical benefits of GenCorp, her husband s employer. This changed when GenCorp began to charge retirees for health insurance. Now, her medical benefits cost her $284 a month not a large premium in and of itself but an enormous amount considering her monthly income. 1 Before 1980, most employers that provided retiree health coverage did so on a lifetime basis. The trend, especially for firms with labor unions, was to continue to improve retiree health benefits with each successive labor contract. Beginning in the early 1990s, however, sharply rising medical costs and the adoption of Financial Accounting Standard No. 106 (FAS No. 106) made employers aware of the extent of their liabilities in this area. In brief, FAS No. 106 requires employers to calculate their accumulated postretirement benefit obligations, i.e., the cost of providing future health benefits, and to charge the entire future cost against current earnings or to accrete the liability over 20 years or more, with a correlative annual charge against current earnings. 2 As a result of FAS No. 16, a growing number of employers began to cut back or eliminate altogether health insurance coverage. According to the Employee Benefit Research Institute, in 1993 40 percent of companies with 500 or more employees offered health benefits for current and future Medicare eligible retirees. That figure declined to 23 percent in 2001. 3 A 2003 survey of 408 large companies found that one-fifth said they were likely to terminate health coverage for future retirees in the next three years. 4 From the employee s perspective, the promise of health insurance benefits at retirement may be a significant inducement in determining employment. Employees such as Mabel Kramer are placed in an untenable financial position when their employer unilaterally reduces their health care subsidy or withdraws health insurance benefits at a time in their lives when they have the fewest options. Courts understand that lack of health insurance for many Americans, retirees included, has been a source of ongoing debate in Congress and state legislatures. They are also aware that most Americans who are insured receive health benefits through their employers. From the employer s perspective, however, courts should not lightly impose an indefinite financial obligation on companies when these employers lack the ability to predict or control costs, unlike with pension plans. Additionally, employers believe that courts should hesitate to impose such an obligation when the result could be as implied by Caterpillar s actions to discourage employers from providing these benefits in the first instance. These brief examples indicate the depth and breadth of the legal area surrounding the realm of the retiree health benefits, an area that not only includes the legal precepts and tenets of ERISA, contract law, and vesting but almost invariably attempts to take into account the competing and significant policy concerns at issue. ERISA and Employee Welfare Plans Congress enacted the Employee Retirement Income Security Act (ERISA) 5 after employer mismanagement left thousands of workers and retirees without their pensions. Before ERISA, these benefit plans had been subject to widespread abuse, leaving employees responsible for policing their individual plans or at risk of losing their benefits. Prompted by this mismanagement and the considerable growth 1

in the size, scope, and numbers of employee benefit plans, Congress sought to protect employees by requiring plan disclosure, establishing standards of conduct, and providing employees access to the federal court system. 6 The intent of ERISA was to provide a uniform body of employee benefit law for vesting, funding, insurance, and portability standards. It proposed to eliminate conflicting or inconsistent state and local regulation of employee benefit plans and to establish exclusive federal authority for this regulation. Title I of ERISA is comprised of three subchapters, with subchapter I providing protection of employee benefits. Within subchapter I, ERISA encompasses any employee pension or welfare benefit plan. An employee welfare benefit plan is statutorily defined as any plan, fund, or program... to the extent that such plan, fund, or program was established or is maintained for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, (A) medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment, or vacation benefits, apprenticeship or other training programs, or day care centers, scholarship funds, or prepaid legal services,... 7 ERISA applies to welfare benefit plans for unionized and nonunionized workers. It does not apply to the welfare benefit plans sponsored by governmental agencies or some churches. No one disputes that a retiree health insurance benefit plan is a welfare benefit plan under ERISA and that an employer is generally free under ERISA to amend or terminate such benefits at any time. 8 Unlike pension plans, welfare benefit plans are not subject to mandatory vesting requirements under ERISA, and, in fact, the general rule is that an employee welfare benefit plan is not vested. 9 It is this difference that drives, and decides, much of the litigation with regard to the elimination of retiree health benefits. Vesting In examining the issues surrounding alteration of retiree health benefits, the first issue that courts address is whether or not a right to benefit arises from a vested contractual obligation, and the second is the scope of that right or benefit. 10 An employer may relinquish its freedom to amend or terminate benefits by contracting with its employees for the vesting of welfare benefits. Thus, even though an employer is generally free to modify its life insurance plan, if an employer promised vested benefits, those benefits will be enforced. 11 A general rule is that written ERISA plans cannot be amended or modified through informal communications. Accordingly, many circuits have held that a retiree s right to lifetime benefits can only be found if it is established by contract under the terms of the ERISA-governed benefit plan document. 12 Additionally, because vesting of welfare plan benefits is not required under ERISA, courts have held that an employer s commitment to vest these benefits is not to be inferred lightly, and the establishment of these benefits must be stated in clear and express language. 13 Courts often require that any promise of vested benefits be made in the plan documents rather than contained in extrinsic nonplan documents. If a plan document unambiguously indicates whether retiree benefits are vested, the unambiguous language should be enforced. However, if the language is ambiguous, a court will review evidence extrinsic to plan language to determine if benefits have vested. Informal communications, such as oral promises made by human resources employees, may sometimes be considered if those statements create an ambiguity when they (1) are considered in relation to the plan documents and (2) are misleading. 14 When an employee is retired, employers look to documents in effect at the time of retirement to determine vesting. For unionized employees under collective bargaining agreements (CBAs), employers and employees may agree that welfare benefit plans cannot be terminated or changed. But the general rule is that after a CBA expires, an employer generally is free to modify or terminate any retiree medical benefits that the employer provided pursuant to that CBA. The parties to a CBA may agree, however, that the benefits provided for in the CBA will vest and thus survive the termination of the CBA. Under both ERISA and the Labor Management Relations Act, 15 if an employer promises vested benefits, that promise will be enforced. 16 Plan Documents Whether under a CBA or other benefit plan, courts typically expect that any promise of vested benefits will have been made in the plan documents. Thus, the first place the parties look for such a commitment is the summary plan description (SPD). The SPD is the statutorily established means of informing participants of the terms of the plan and its benefits. 17 The SPD may contain language promising vested benefits or reserving for the employer the right to change or discontinue plans and plan benefits. However, regardless of the language in the SPD, ambiguity may arise in a number of ways. For example, there could be a clear promise of benefits coupled with an ambiguous reservation of rights clause in the SPD or an unequivocal reservation of rights clause in plan documents coupled with clear lifetime promises in nonplan documents and oral communications made to employees. While there is no one definite 2

position, courts have usually held that an unambiguous reservation of rights provision in an SPD generally negates a claim that retiree health benefits are vested. Although a provision reserving the employer s right to terminate or amend health benefits may not, alone, be sufficient to negate an inference that employees benefits have vested, it is generally strong evidence that an employer did not intend to allow vesting. The weight of authority throughout the circuits indicates that an unambiguous general amendment provision in a welfare benefits plan is of itself sufficient to negate any inference that the employer intends for employee welfare benefits to vest contractually, and thus become unalterable, after the employee retires. 18 As stated by the Second Circuit Court of Appeals in the case of Abbruscato v. Empire Blue Cross & Blue Shield, 19 employees cannot reasonably believe that their benefits are vested if the same document that promises lifetime benefits also clearly informs employees that those benefits are subject to change. 20 In a vesting situation, the employees or retirees usually argue that the employer made contradictory promises during their company careers that company-funded benefits would continue for their lives, creating an ambiguity in the official plan document or SPD, or overriding it. Once again, however, an unambiguous reservation of rights clause generally negates ambiguous contractual or plan provisions. For example, even though some documents may promise lifetime benefits, the majority of the circuits have held that the lifetime nature of a welfare benefit does not operate to vest that benefit if the employer reserved the right to amend or terminate the benefit, given what it takes to overcome the presumption that welfare benefits do not vest, combined with [our] reluctance to interpret a contract as being at war with itself. 21 The following are examples of typical unambiguous reservation of rights provisions that courts have held negate any inference that the employer intended for benefits to vest: 1. This plan can be amended at any time, without consent of the insured employees or any other person having a beneficial interest in it. 22 2. The coverage described here may be amended, revoked or suspended at the Company s discretion at any time, even after your retirement. 23 3. The Plan Sponsor and your employer intend to continue the Plan indefinitely. Since future changes and conditions cannot be foreseen, we do reserve the right to suspend, terminate or modify the Plan at any time when deemed to be in the best interest of the participating member firms. 24 As held in Wise v. El Paso Natural Gas Co., 25 even the omission of a reservation of rights clause from the documents (or silence ) does not necessarily operate to waive the employer s right to terminate or modify the benefits available under an ERISA welfare benefit. 26 In Wise, the employer issued SPDs that described health care benefits for retirees but failed to include any express reservation of the right to amend or terminate the plan s benefit provisions. When the employer realized this failure, it issued new SPDs that laid the groundwork for future changes 27 by including a reservation clause. Shortly after issuing these new SPDs, the employer announced the termination of health care benefits for those retiring after a certain cutoff date. The Fifth Circuit Court of Appeals affirmed the grant of summary judgment to El Paso Natural Gas, reasoning that it had not contractually vested its employees with free lifetime health care coverage because such extra-erisa commitments must be found in the plan documents and must be stated in clear and express language. In support of its decision, Wise explained that contractual vesting was a narrow doctrine and to prevail the plan must assert strong prohibitory or granting language. Mere silence was not of itself abrogation. 28 Conversely, in Devlin v. Empire Blue Cross & Blue Shield (Kunkel), 29 a case where one SPD promised lifetime benefits but a subsequently issued SPD contained a reservation of rights clause, the Second Circuit concluded that the relevant provisions were only those contained in the earlier SPD, and that the reservation of rights clause contained in the later SPD was ineffective as to those retirees. 30 Extrinsic Evidence In most circuits, where language in the agreement suggests a grant of lifetime benefits and no unambiguous reservation of rights clause exists, courts have allowed extrinsic evidence to be presented to determine if benefits had vested. 31 One of the canons of interpretation requires that if the plan is ambiguous, a court may resort to extrinsic evidence to aid its interpretation of the plan and to resolve the ambiguity. ERISA welfare plans are generally interpreted by looking to the language of the plan (supplemented in appropriate cases by evidence essential to resolving a relevant ambiguity), not to any one party s interpretation of that language. However, if the plan language is not ambiguous, extrinsic evidence cannot be used to create an ambiguity and should not be used to add terms to a contract that is plausibly complete without them. 32 Courts begin by determining if ambiguity exists in the contract language and whether extrinsic evidence is required. For example, many plans or contracts contain the phrase lifetime benefits. The employer will assert that the phrase simply refers to benefits continuing through the life of the contract or until the plan is amended. The employee will argue with equal fervor that the phrase means the benefits will continue throughout the life of the retiree. 3

In Unisys II, 33 the Third Circuit Court of Appeals was asked to decide whether the district court erred in holding, on a breach of contract claim, that the SPDs that used the terms lifetime or for life to describe the duration of medical benefits, while at the same time reserving the right to modify or terminate at any time and for any reason the plans under which these benefits were provided, were unambiguous. The Third Circuit held that for medical benefit plans to be vested, an intent to vest such benefits should be evident from the language of the plan documents. 34 Similarly, the Third Circuit held that the Unisys documents straightforward promise in conjunction with reservation of rights clauses would not render plan documents unambiguous. The court therefore rejected the retirees claim that the employer breached the terms of the plan. If the court determines that the language is ambiguous, it will allow extrinsic evidence. Once allowed, the type of extrinsic evidence considered by the court takes many forms. Courts have considered not only handbooks, brochures, letters, and other documentation but also informal communications, such as oral promises made by human resources or other management employees, especially when those statements are in contravention of plan documents. 35 One example of extrinsic evidence by omission can be found in the case of Maurer v. Joy Technologies, Inc., 36 in which the court held that the union was precluded from arguing that retirement benefits had vested because it failed to file a grievance when the employer distributed an SPD containing an explicit reservation of rights allowing the employer to terminate coverage. 37 Presumptions for and against Vesting In situations where the SPD or another plan document contains ambiguous language, a preliminary question is whether, to interpret the agreements to determine whether there is a right to benefits, a particular legal presumption should be imposed, either against or in favor of vesting. This question has been the subject of extensive debate and differing treatment among the circuits. Some circuits impose a presumption that there is no vesting in the absence of a written, unambiguous expression of intent to do so, 38 whereas others impose a presumption in favor of vesting if there is some ambiguity in the language conferring the benefit. 39 However, a majority of the circuits appear to prefer no vesting presumption at all and decide the vesting issue on the fact-specific nature of the particular case in front of them. 40 The circuits that allow a vesting presumption generally base their reasoning on the Court of Appeals for the Sixth Circuit s decision in International Union, United Automobile, Aerospace & Agricultural Implement Workers v. Yard-Man, Inc., 41 which sets forth the guiding principles for determining whether the parties to a CBA intended for retiree health insurance benefits to vest. In this case, the Sixth Circuit held that courts must apply basic rules of contract interpretation to discern the intent of the parties and should look to extrinsic evidence to determine the parties intent only when the terms of the contract are ambiguous. Considering the context in which the benefits at issue arose in Yard- Man, the Sixth Circuit went on to note that since benefits for retirees are only permissive rather than mandatory subjects of collective bargaining, it is unlikely that such benefits, which are typically understood as a form of delayed compensation or reward for past services, would be left to the contingencies of future negotiations. 42 Thus, the court noted, there is an inference that retiree benefits will vest because retiree benefits are in a sense status benefits that, as such, carry with them an inference that they continue as long as the prerequisite status is maintained. 43 The courts imposing a presumption against vesting base that approach largely on their construction of ERISA, drawing an adverse inference from Congress s decision to require vesting for pension rights but not to include a comparable requirement for welfare benefits. 44 Courts drawing this adverse inference believe that the lack of such a requirement was not merely an oversight on the part of Congress but part of its plan because the costs of such plans are subject to fluctuating and unpredictable variables that prevent accurate prediction of future needs and costs. 45 As the Second Circuit has observed, [a]utomatic vesting was rejected because the costs of such plans are subject to fluctuating and unpredictable variables. Actuarial decisions concerning fixed annuities are based on fairly stable data, and vesting is appropriate. In contrast, medical insurance must take account of inflation, changes in medical practice and technology, and increases in the cost of treatment independent of inflation. These unstable variables prevent accurate prediction of future needs and costs. 46 Becoming somewhat frustrated with the issue of vesting and presumptions, the Seventh Circuit Court of Appeals in the case of Rossetto v. Pabst Brewing Co. 47 devised guidelines for subsequent cases in that circuit. The Rossetto case concerned the issue of whether retiree health benefits survive the termination of the CBA. When looking at the relevant CBA provisions, the Seventh Circuit reasoned that if someone who read these provisions without knowing anything about their background or real-world context would say, Yes, it sure looks as if the provisions are in effect only for the term of the agreement in which they appear then Pabst is off the hook as a matter of law 4

(that is, the case would not reach the jury) unless the plaintiffs can adduce (1) objective evidence of (2) a latent, or, as it is sometimes call, an extrinsic, ambiguity. A plaintiff s showing of a genuine ambiguity (beyond silence), either patent or latent, knocks out the presumption that an employee s entitlement to health benefits expires with the agreement that created the entitlement. This presumption against vesting, however, kicks in only if all the court has to go on is silence. 48 As indicated by these different approaches, it should come as no surprise that the circuit courts are split on what contract language is necessary to create vested rights in welfare benefits. Courts have found that the following language is capable of creating a vested benefit in retirees: 1. The Health Care... coverages an employee has under this Article at the time of retirement... shall be continued thereafter provided that suitable arrangements for continuation can be made with the Carrier(s). 49 2. [R]etired employees, after completion of twenty years of full-time permanent service and at least age 55, will be insured. 50 3. Both you and your spouse will be covered for the remainder of your lives. 51 Courts have found that the following language is ambiguous and have allowed extrinsic evidence to be presented on the issue of vesting: 1. Employees retiring at age 62 or later... will be entitled to comprehensive medical expense insurance benefits for themselves and their covered dependents until the death of the retired employee. 52 2. The surviving spouse of an Employee who is retired by the Company on or after the effective date of this Agreement shall continue to be eligible to receive such benefits to the earlier of the date of death or remarriage... 53 3. When the former employee has attained the age of 65 years then: (1) The Company will provide insurance benefits equal to the active group benefits... for the former employee and his spouse. 54 Courts have found the following language insufficient to create a vested benefit for retirees: 1. During the term of this [a]greement, there shall be no reduction in the schedule of benefits. 55 2. During your retirement, you and your covered dependents will have the same Basic Health Care coverage as you had while active at no cost to you. 56 3. The company fully intends to continue this [benefit] indefinitely, but reserves the right to change or discontinue it if necessary. 57 Whether the language is considered specific enough to create a vested benefit is in some part dependent on the circuit. However, all of the circuits have found vesting commitments where the promise was clearly and succinctly expressed in a singular location rather than hidden within a semantic swamp involving a multitude of documents. Breach of Fiduciary Duty Claims Regardless of vesting presumptions, claims by a beneficiary for wrongful denial of benefits (no matter how they are styled) have been held by the Supreme Court to fall directly under 502(a)(1)(B) of ERISA, which provides an exclusive federal cause of action for resolution of such disputes. 58 While ERISA generally preempts statutory and common-law claims based on oral representations that contradict unambiguous written plan terms, a party may nevertheless pursue a breach of fiduciary duty cause of action. 59 Section 404(a)(1) of ERISA provides that a fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries. The law in most circuits instructs that when a plan administrator explains plan benefits to its employees, it acts in a fiduciary capacity. 60 Generally, an employer may modify or terminate its retiree benefit plan without implicating fiduciary duties. However, because of the administrator s status as fiduciary under Section 404(a)(1), the fiduciary may not materially mislead those to whom the duties of loyalty and prudence are owed. Not all misleading communications constitute affirmative or material misrepresentations. In Varity Corp. v. Howe, 61 the U.S. Supreme Court held that when a company intentionally misleads beneficiaries about the future of their benefits, the company is acting as a fiduciary but also cautioned that a company does not act as a fiduciary simply because it makes statements about its expected financial condition or because an ordinary business decision turned out to have an adverse impact on the plan. 62 The following case is illustrative in this regard. In the Sixth Circuit s Sprague v. General Motors Corp., 63 the company made numerous representations, both in writing and orally, that retirement benefits were for life. Despite this evidence, the court rejected the retirees breach of fiduciary duty claim, stating that what the company told the retirees was that their coverage was to be paid by GM for their lifetimes, which was undeniably true under the terms of GM s then-existing plan. 64 The Seventh Circuit has found that advice to employees stressing the availability of lifetime benefits without any qualifiers indicating that the employer reserved the right to change or terminate the benefits was not a breach of fiduciary duty. 65 When do the representations cross the fine line between merely misleading and affirmative misrepresentation? The Second Circuit, which has given the broadest scope 5

to ERISA fiduciary duty claims, has held that representing to plan participants that a plan s benefits are lifetime when they are not vested can create a genuine issue of material fact as to whether misrepresentations were made or whether there was a failure to provide complete and accurate information. 66 The Third Circuit in Unisys I 67 held that a fiduciary duty claim could proceed, despite the employer s reservation of the right to terminate retirement benefits, when oral and written representations were made to employees that the benefits would continue for life and the employer was aware that retirement decisions were being based on the mistaken assumption that the benefits were also vested. 68 The Sixth Circuit has held that a breach of fiduciary duty claim was made out where a company both of its own accord and in response to specific employee inquiries misrepresented to employees that a reservation of rights clause in the plan did not allow retirement benefits to be changed when the legal effect of the clause was precisely the opposite. 69 But the Seventh Circuit has held that while there is a duty to provide accurate information under ERISA, negligence in fulfilling that duty is not actionable, which is why the employer must have set out to disadvantage or deceive its employees, as in Varity, in order for a breach of fiduciary duty to be made out. 70 The Unisys I litigation is instructive. The Unisys retirees had alleged that the employer had breached fiduciary duties by misrepresenting to them that benefits were for life when, in fact, the plan language made benefits terminable. The evidence showed that the message that medical benefits would last for life was confirmed repeatedly and systematically throughout the... organization, by all levels of management, in writing and verbally. 71 Evidence also indicated that the highest levels of management recognized that employees believed their medical benefits were forever and could not be taken from them, and that the company knew that employees accelerated their retirement plans because of the belief that by retiring at a certain point in time they would lock in the lifetime coverage that they had under the current plan. The Unisys I court recognized that an ERISA fiduciary may not affirmatively mislead plan participants 72 and further determined that equitable relief is available to retirees if a breach of fiduciary duty is proven. Thus, the circuit concluded that where a plan administrator... fails to provide information when it knows that its failure to do so might cause harm, the plan administrator has breached its fiduciary duty to individual plan participants and beneficiaries. 73 The court noted in this case virtually the entire company management had consistently misrepresented the plan, not just on one occasion or to one employee, but over a period of many years both orally (in group meetings) and in writing (in newsletters) as well. 74 In sum, case law indicates that to make out a claim for breach of fiduciary duty under ERISA, a plaintiff must show that (1) the company was acting in a fiduciary capacity, (2) the company made affirmative misrepresentations or failed to inform plan participants and beneficiaries adequately, (3) the company knew of the confusion generated by its misrepresentations or its silence, and (4) there was resulting harm to employees. Thus, the breach of fiduciary claim focuses not on the company s failure to continue to provide lifetime or continued benefits but on its conduct or actions in leading employees to believe that the plans did provide these benefits. Estoppel Claims Estoppel is another viable theory of recovery in retiree health benefit cases. However, in general, estoppel can usually only be invoked in the context of ambiguous or unwritten plan provisions coupled with oral representations. To prevail on an estoppel cause of action, a plaintiff must establish (1) a material representation, (2) reasonable and detrimental reliance upon the representation, and (3) extraordinary or extreme circumstances. 75 If plan documents unambiguously reserve the right to deny, change, or terminate benefits, the employees estoppel claim must fail because they cannot show reasonable reliance. The Third Circuit s decision in Unisys II holds that an ERISA beneficiary may recover benefits under an equitable estoppel theory upon establishing a material misrepresentation, reasonable and detrimental reliance upon the representation, and extraordinary circumstances. 76 Applying this standard to the facts therein, the Unisys II court held that due to the unambiguous reservation of rights clauses in the SPDs by which Unisys could terminate its retiree medical benefit plans, the regular retirees could not establish reasonable detrimental reliance based on an interpretation that the SPDs promised vested benefits. 77 The Seventh Circuit applies a similar standard in holding that employees cannot show reasonable reliance even when promised lifetime benefits where the general retirement plan documents, to which the employees were referred, contained numerous, unambiguous provisions reserving CNA s right to amend, suspend, or terminate the health care subsidy. 78 Conversely, the Second Circuit has allowed estoppel claims even if the plan contains an unambiguous reservation of rights when the employees reliance is reasonable based upon responses made by management personnel to their questions about the retirement program. 79 The prerequisite of the estoppel claim being extraordinary is also difficult to overcome. In the Second Circuit decision of Devlin v. Transportation Communications International Union, 80 retired union employees challenged their former employer s amendment of a welfare 6

benefit plan to require retirees to pay a monthly premium for medical benefits that were previously provided at no charge. As part of their evidence, the retirees claimed that they were told on a number of occasions by high officials of the union that their health benefits would be paid throughout their retirement. In addition, the retirees proffered a letter from the president of the union to the same effect, as well as an affidavit from an ex-official in which he stated that he and other officials communicated to members and retirees that their health benefits would always be free. The Second Circuit assumed that the retirees could satisfy the material misrepresentation element. However, the court rejected the claim based on its view that the retirees had failed to adduce evidence sufficient to show detrimental reliance or extraordinary circumstances because they showed no evidence to suggest that employers sought the retirement of any of the employees or that the promise of free, lifetime health benefits was used to intentionally induce any particular behavior on the employees part. 81 The Second Circuit did find extraordinary circumstances in Kunkel, where an employer induced employees to work for it by promising lifetime benefits, stating: [the retirees were] induced by Empire to work for over twenty and up to forty years in order to receive (inter alia) a particular level of life insurance coverage... Empire intentionally promised lifetime life insurance benefits to lure (and retain) employees away from other firms paying higher salaries and then denied those benefits after the employees were of an age where they could neither make up the salary difference or obtain alternative benefits at a reasonable cost. If so found, we believe that such a practice constitutes extraordinary circumstances sufficient to support plaintiffs promissory estoppel claim. 82 Conclusion The plight of the retirees in cases where they clearly believed that their employer-based medical insurance benefits would continue for their lifetimes is indeed unfortunate. Equally unfortunate are the everincreasing costs of retiree health care, which can threaten the ability of employers to stay in business. As case law shows, employers are not required to give retirees health benefits, and even when employers do offer benefits to their retired workers, nothing in federal law prevents them from cutting or eliminating those benefits unless they have made a specific promise to maintain them. Even then, if the SPD and/or other controlling plan documents such as a CBA give the employer the right to change the terms of that plan, the employee may lose coverage any time during his or her retirement. Notes 1. See Ellen E. Schultz & Theo Francis, How Cuts in Retiree Benefits Fatten Companies Bottom Lines, WALL ST. J., Mar. 16, 2004, at A1. 2. See Wise v. El Paso Natural Gas Co., 986 F.2d 929, 932 33 & n.3 (5th Cir. 1993) (discussing the negative effect of FAS No. 106 on retiree health benefits). 3. P. FROSTIN & D. SALISBURY, EMPLOYEE BENEFIT RESEARCH INSTITUTE, RETIREE HEALTH BENEFITS: SAVINGS NEEDED TO FUND HEALTH CARE IN RETIREMENT 6, fig. 1 (Feb. 2003). 4. HENRY J. KAISER FAMILY FOUNDATION, CURRENT TRENDS AND FUTURE OUTLOOK FOR RETIREE HEALTH BENEFITS: FINDINGS FROM THE KAISER/HEWITT 2004 SURVEY ON RETIREE HEALTH BENEFITS (Executive Summary) at xi xiv (Dec. 2004). 5. 29 U.S.C.S. 1001 1461 (2004). 6. See H.R. REP. NO. 93-533, at 4 (1974), reprinted in 1974 U.S.C.C.A.N. 4639, 4642. 7. 29 U.S.C. 1002(1) (2004). 8. Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73, 78 (1995). 9. See id., 514 U.S. 73 (1995); In re Unisys Corp. Retiree Med. Ben. ERISA Litig., 58 F.3d 896, 901 (3d Cir. 1995) (Unisys II); Gable v. Sweetheart Cup Co., Inc., 35 F.3d 851, 855 (4th Cir. 1994); Alday v. Container Corp. of Am., 906 F.2d 660, 663 (11th Cir. 1990). 10. See Diehl v. Twin Disc, Inc., 102 F.3d 301, 309 (7th Cir. 1996); see also Bidlack v. Wheelabrator Corp., 993 F.2d 603, 609 10 (7th Cir. 1993). 11. Diehl, 102 F.3d at 309; Bidlack, 993 F.2d at 610. 12. See Pisciotta v. Teledyne Indus., 91 F.3d 1326, 1329 (9th Cir. 1996); Moore v. Metro. Life Ins. Co., 856 F.2d 488, 492 (2d Cir. 1988). 13. See, e.g., Unisys II, 58 F.3d at 902; see also Frahm v. Equitable Life Assurance Soc y, 137 F.3d 955, 958 (7th Cir. 1998); Sprague v. Gen. Motors Corp., 133 F.3d 388, 400 (6th Cir. 1998); John Morrell & Co. v. United Food & Commercial Workers Int l Union, AFL-CIO, 37 F.3d 1302, 1304 (8th Cir. 1994). 14. See McMunn v. Pirelli Tire LLC, 161 F. Supp. 2d 97, 122 (D. Conn. 2001). 15. 29 U.S.C.S. 185 et seq. 16. Am. Fed. of Grain Millers v. Int l Multifoods Corp., 116 F.3d 976, 979 (2d Cir. 1997). 17. See 29 U.S.C. 1022(a) & 1102 (2004). 18. See Diehl v. Twin Disc, Inc., 102 F.3d 301, 307 (7th Cir. 1996). See also Chiles v. Ceridian Corp., 95 F.3d 1505, 1512 n.2 (10th Cir. 1996); Alday v. Container Corp. of Am., 906 F.2d 660, 665 (11th Cir. 1990); but see Abbruscato v. Empire Blue Cross & Blue Shield, 274 F.3d 90, 100 (2d Cir. 2001) (general amendment sufficient only in situations where the same document contains both the promise and the reservation of rights). 19. 274 F.3d 90 (2d Cir. 2001). 20. 274 F.3d at 99; see also Moore v. Metro. Life Ins. Co., 856 F.2d 488, 490 (2d Cir. 1988). 21. Diehl, 102 F.3d at 307. 22. Am. Fed. of Grain Millers v. Int l Multifoods Corp., 116 F.3d 976, 982 (2d Cir. 1997). 23. Vallone v. CNA Fin. Corp., 375 F.3d 623 (7th Cir. 2004). 24. Int l Union, United Auto., Aerospace & Agric. Implement Workers v. Skinner Engine Co., 188 F.3d 130 (3d Cir. 1999). 25. 986 F.2d 929 (5th Cir. 1993). 26. Id. at 938. 27. Id. at 933. 28. Id. 29. 274 F.3d 76 (2d Cir. 2001). Due to another case referred to as Devlin, this case is cited in and referred to by the Second Circuit as Kunkel v. Empire Blue Cross & Blue Shield. Kunkel was the second named plaintiff in the case. 7

I therefore follow the Second Circuit s convention in this article. 30. Id. at 85. 31. Rossetto v. Pabst Brewing Co., 217 F.3d 539, 547 (7th Cir. 2000); see also Abbruscato v. Empire Blue Cross & Blue Shield, 274 F.3d 90, 101 (2d Cir. 2001); Diehl v. Twin Disc, Inc., 102 F.3d 301, 306 (7th Cir. 1996). 32. Bidlack v. Wheelabrator Corp., 993 F.2d 603, 608 (7th Cir. 1993); see also Joyce v. Curtiss-Wright Corp., 171 F.3d 130, 134 35 (2d Cir. 1999); Am. Fed. of Grain Millers v. Int l Multifoods Corp., 116 F.3d 976, 981 (2d Cir. 1997) (extrinsic evidence cannot alter the meaning of unambiguous terms). 33. 58 F.3d 896 (3d Cir. 1995). 34. Id. at 901. 35. McMunn v. Pirelli Tire LLC, 161 F. Supp. 2d 97, 122 (D. Conn. 2001); United Steel Workers of Am., AFL-CIO v. Newman-Crosby Steel, Inc., 822 F. Supp. 862, 865 66 (D.R.I. 1993) (considering oral statements as extrinsic evidence of parties intent in construing ambiguous terms of CBA). 36. 212 F.3d 913 (6th Cir. 2000). 37. Id. at 917. 38. See, e.g., Int l Union, United Auto., Aerospace & Agric. Implement Workers v. Skinner Engine Co., 188 F.3d 130 (3d Cir. 1999); Gable v. Sweetheart Cup Co., Inc., 35 F.3d 851, 855 (4th Cir. 1994). 39. See generally Maurer, 212 F.3d at 917; Int l Union, United Auto., Aerospace & Agric. Implement Workers v. Yard-Man, Inc., 716 F.2d 1476 (6th Cir. 1983); United Steelworkers of Am., AFL-CIO v. Textron, Inc., 836 F.2d 6, 9 (1st Cir. 1987) (relying specifically on Yard-Man in finding benefits were vested); United Steelworkers of Am. v. Connors Steel Co., 855 F.2d 1499, 1505 (11th Cir. 1988) ( We fully concur with the decisions of the Court of Appeals for the Sixth Circuit in [Yard-Man]. ) 40. E.g., Rossetto v. Pabst Brewing Co., 217 F.3d 539, 543 (7th Cir. 2000); Deboard v. Sunshine Mining & Ref. Co., 208 F.3d 1228, 1240 41 (10th Cir. 2000); Joyce v. Curtiss-Wright Corp., 171 F.3d 130, 134 35 (2d Cir. 1999); Int l Ass n of Machinists & Aerospace Workers v. Masonite Corp., 122 F.3d 228, 231 32 (5th Cir. 1997); Barker v. Ceridian Corp., 122 F.3d 628, 634 38 (8th Cir. 1997). 41. 716 F.2d 1476 (6th Cir. 1983). 42. 716 F.2d at 1482. 43. Id. 44. See, e.g., Skinner Engine Co., 188 F.3d at 139 (citing several courts that apply this rationale). 45. Wise v. El Paso Natural Gas Co., 986 F.2d 929, 929 (5th Cir.1993). 46. Moore v. Metro. Life Ins. Co., 856 F.2d 488, 492 (2d Cir. 1988). 47. 217 F.3d 539 (7th Cir. 2000). 48. Id. at 544. 49. McCoy v. Meridian Auto. Sys., 390 F.3d 417, 420 (6th Cir. 2004). 50. Kunkel, 274 F.3d 76, 79 (2d Cir. 2001). See note 29 supra. 51. Bidlack v. Wheelabrator Corp., 993 F.2d 603, 605 08 (7th Cir. 1993). 52. Int l Ass n of Machinists & Aerospace Workers v. Masonite Corp., 122 F.3d 228 (5th Cir. 1997). 53. Groover v. Michelin N. Am., Inc., 90 F. Supp. 2d 1236 (M.D. Ala. 2000). 54. Int l Union, United Auto., Aerospace & Agric. Implement Workers v. Yard-Man, Inc., 716 F.2d 1476, 1480 (6th Cir. 1983). 55. Am. Fed. of Grain Millers v. Int l Multifoods Corp., 116 F.3d 976, 981 (2d Cir. 1997). 56. Joyce v. Curtiss-Wright Corp., 171 F.3d 130, 136 (2d Cir. 1999). 57. Hughes v. 3M Retiree Medical Plan, 134 F. Supp. 2d 1062 (D. Minn. 2001). 58. Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 62 63 (1987). 59. See In re Unisys Corp. Retiree Med. Ben. ERISA Litig., 57 F.3d 1255, 1264 n.13 (3d Cir. 1995) (Unisys I). 60. Id. at 1261 n.10. 61. 516 U.S. 489 (1996). 62. Id. at 505 (quoting from dissent). 63. 133 F.3d 388 (6th Cir. 1998). 64. Id. at 405. 65. Frahm v. Equitable Life Assurance Soc y, 137 F.3d 955, 959 60 (7th Cir. 1998). 66. Abbruscato v. Empire Blue Cross & Blue Shield, 274 F.3d 90, 102 03 (2d Cir. 2001). 67. 57 F.3d 1255 (3d Cir. 1995). 68. Id. at 1266 67. 69. James v. Pirelli, 305 F.3d 439, 455 56 (6th Cir. 2002). 70. Frahm, 137 F.3d at 959 60. 71. 57 F.3d at 1260. 72. Id. 73. Id. at 1264. 74. Id. at 1265. 75. See, e.g., Aramony v. United Way Replacement Benefit Plan, 191 F.3d 140, 151 (2d Cir. 1999); Jordan v. Federal Exp. Corp., 116 F.3d 1005, 1011 (3d Cir. 1997); Weir v. Fed. Asset Disposition Ass n, 123 F.3d 281, 290 (5th Cir. 1997); Sandstrom v. Cultor Food Sci., 214 F.3d 795, 797 (7th Cir. 2000) (all requiring extraordinary or extreme circumstances element). 76. 58 F.3d 896, 901 02 (3d Cir. 1995). 77. Id. at 902. 78. Vallone v. CNA Fin. Corp., 375 F.3d 623, 639 (7th Cir. 2004). 79. McMunn v. Pirelli Tire LLC, 161 F. Supp. 2d 97, 132 (D. Conn. 2001). 80. Devlin v. Empire Blue Cross & Blue Shield, 173 F.3d 94 (2d Cir. 1999). 81. Id. at 102. 82. Kunkel, 274 F.3d at 80. See note 29, supra. 8