Justices Uphold Right to Amend Worker Benefits

The Supreme Court upheld standard employee benefit-plan wording that gives companies the right to revise or cancel health insurance and other benefits.

The court ruled unanimously Monday in a New Jersey case that the language complies with a federal law governing employee benefit plans.

“The . . . clause says in effect that the plan may be amended by the company,” Justice Sandra Day O’Connor wrote for the court.

The U.S. Chamber of Commerce had said in a friend-of-the-court brief that a ruling against the standard benefit-plan language would cause “horrendous consequences” for employers and employees.

Employers would have to reimburse employees millions of dollars for benefits they had eliminated, and many benefit increases would be canceled, the chamber said.

The case involved Curtiss-Wright Corp., a multinational manufacturing company, which canceled health benefits to retired non-union employees of a Wood-Ridge, N.J., plant it closed in 1983 due to declining defense-related business. The retired employees challenged the cancellation.

A federal law governing employee benefits requires plan documents to set out a procedure for amending the plan and identifying those who have the authority to do so.

The Curtiss-Wright plan stated that the company reserved the right to amend the plan at any time.

A federal judge and the U.S. 3rd Circuit Court of Appeals decided that the language did not meet the federal law’s requirements and ordered the company to pay $2.7 million in back benefits.

On Monday, the Supreme Court disagreed and said the standard clause was enough to comply with the federal law.

“Curtiss-Wright is correct, we think, that this states an amendment procedure,” O’Connor wrote. “To the extent that this procedure is the barest of procedures, that is because the Curtiss-Wright plan is the simplest of plans: a voluntarily maintained single-employer health plan.”

More complicated benefit plans may have more complicated amendment procedures, she added.

O’Connor noted that the federal Employee Retirement Income Security Act does not create any employee right to employer-provided benefits such as health insurance. The law simply sets out procedures a company must follow when choosing to provide such benefits.

The justices sent the case back to a lower court.