Scant Retiree Protection Seen After Ruling

Retirees beware.

A federal court ruling in January has opened the door for employers to change promises made to retirees about health-care coverage.

The decision stems from a case in which thousands of General Motors Corp. retirees sued the company, contending that it had promised them full coverage, only to later reduce it. The U.S. 6th Circuit Court of Appeals in Cincinnati ruled that GM had taken the legal steps to be able to change its promises, even if it never told employees directly that it had done so.

Two months after that decision, the consensus among employers and benefits experts is that retirees have scant protection from such changes and that health-care coverage could become tougher for them to obtain.

“The bottom line is it doesn’t bode well for retirees,” said Mary Ellen Signorille, an attorney for the American Assn. of Retired Persons, which has supported the former GM workers in their legal battle. “We basically have to tell retirees that call us that you can’t count on” health-care benefits.

“We think the decision is a tragedy,” said Olena Berg, associate secretary for the Labor Department’s pension and welfare benefits division. “The court has said that if you retire and have a deal, the company can still change it.”

When the class-action suit against GM was filed in 1988, 37% of retirees received health-care coverage from their former employer, the Labor Department said. By 1994, that number had dropped to 27%. Moreover, many of those who still have coverage are being asked to pay more of the costs.

The suit, representing 84,000 former GM employees, contended that the company promised them full health-care benefits while they were employed then attempted to trim those benefits and add costs after they had retired.

General Motors concedes that it did change the plan but sought only limited help from former employees. In its ruling, the appeals court said that while GM had made specific benefits promises, it also had reserved the right to change its mind. But that stipulation was confined to a document never given to the employees: the pension and health-care plan the company filed with the government under federal pension laws.