In Halbach v. Great-West Life & Annuity, No. 07-3865/07-3867 (CA8 April 13, 2009), the 8th Circuit Court of Appeals recently addressed what constitutes a valid amendment to an employee welfare benefit plan. In 2004, Great-West provided a package of medical coverage to both active employees and former employees who were also receiving long-term disability benefits. That package included health, vision, dental, and prescription drug benefits, and life insurance coverage.
In late 2004, Great-West decided to cease providing medical coverage to the long-term disability claimants, and mailed all participants a letter advising them of the changes to the plan effective January 1, 2005. Specifically, the letter stated:
- “effective December 31, 2004, ‘medical benefits will no longer be continued for current or future Long Term Disability claimants.’ Further, the letter stated that ‘due to the change in the 2005 benefit package, your health coverage will terminate December 31, 2004, and you will be offered the option to elect coverage under COBRA.”
The letter was signed by one of Great-West’s officers. Along with the letter, Great-West mailed all participants an unsigned summary plan description (SPD).
The participants who were former employees also receiving long-term disability benefits brought a lawsuit against Great West, claiming that the letter did not constitute a valid amendment to the plan. The Court found that it did constitute a valid amendment to the plan. In making this determination, the Court looked at the language in the plan document, which stated:
- “5.1 Amendment of the Plan. The Company reserves the right at any time or times to amend the provisions of teh Plan to any extent and in any manner that it may deem advisable, by a written instrument signed by an officer of the company; provided, however, that no such modification shall divest a Participant of benefits under the Plan to which he has become entitled prior to the effective date of the amendment.”
Applying this language, the Court found that the letter and the SPD, when reviewed together in harmony with each other, constituted a valid amendment to the Plan because it was a written instrument signed by an officer of the company.
The former employees also claimed that benefits were vested at the time Great-West made its decision to eliminate them, and, as such, Great-West violated the plan’s terms by discontinuing them.
The Court stated that, unlike pension benefits, ERISA does not mandate vesting for employee welfare benefit plans. Because of this, the only way the benefits discontinued by Great-West could have become vested is if the plan document provided vesting for these benefits. The Court found, after reviewing Section 5.1, that the plan language was ambiguous as to whether Great-West intended to vest these benefits. For this reason, the Court reversed the district court’s grant of summary judgment, and remanded the case for a trial on the issue of whether the welfare benefits were vested.
[tag]pension protection act, ppa, vesting, amendment, halbach, Great-West, 8th Circuit, ERISA[/tag]