You have to wonder, given the current state of all things economic. Just how safe are your health care benefits once you’ve retired? Broken promises and disclaimers and renegotiated contracts are everywhere. Just when we tell ourselves ‘they couldn’t possibly do that – could they?’, we find that they have, in fact, already done it! A promise is a promise, right? That is until someone gives the okay to break it. So where does this permission come from?
The key to all this, to understanding how retiree health benefits work and under what circumstances those benefits can be reduced or altogether terminated, is found (of course) in the documents governing that plan.
Here’s the thing: private-sector employers are not required to promise retiree health benefits. Oh, you may well have retired from a firm that had employer-provided health insurance plans that carried over to retirement – which is terrific. But there is nothing in federal law that prevents your former employer from cutting back or even ending those benefits unless they made a very specific promise to maintain those benefits.
Where is that promise (if it indeed exists) to be found? In your plan documents, specifically, your Summary Plan Description (SPD). The SPD is a summary of the plan’s terms, and employers must give you one within 90 days of your enrollment or participation in the plan. Be sure to save a copy at home, with other important papers.
The SPD that was in effect when you retired may be the controlling document. Along with saving a copy of that document, be sure to add to that file any SPD changes and updates that affect your benefits after you retire. And there may be formal written documents outlining how your health plan operates, including, perhaps, a collective bargaining agreement or an insurance contract. Save these documents, too.
Now comes the review part. First, if your former employer has reserved the right in the SPD or in the controlling plan documents to change the terms of the plan, you may lose coverage at any time during your retirement. On the other hand, if your former employer made a clear promise that you will have specific health care benefits for a definite period of time, or for your lifetime, without reserving the right to change the plan in any formal written plan document, you should be fine and covered.
Here are some things to look for in plan documents:
- Does the SPD, or another other related documents, promise that health care benefits after retirement will continue, at a specified level, for a certain period of time?
- If there is no specific language describing retiree health benefits in the plan documents, it is most unlikely that you have guaranteed coverage.
- If there is such language, just how specific is it? The language covering retiree health benefits is sometimes very vague, in fact, too vague to hold up in court. However, there is language on health benefits for employees that has held up – for example “basic health care coverage will be provided at the company’s expense for your lifetime”.
- But be careful: even if specific promises are made, there may also be language giving your former employer the right to change or terminate that specific promise, or to amend or terminate that plan. Such language may read as follows: “The company reserves the right to modify, revoke, suspend, terminate or change the program, in whole or in part, at any time”. And this language, or something like it, may be found anywhere in the plan documents.