As a result of a Plan amendment, a participant in a multi-employer employee benefit pension plan issued pursuant to a collective bargaining agreement (CBA), found that occupational disability benefits he had received for fifteen years were terminated. He appealed the termination by arguing that his benefits became vested when he became disabled. The trial court agreed.
In vacating the District Court’s summary judgment ruling, the Sixth Circuit Court of Appeals, in Price v. Board of Trustees of the Indiana Laborer’s Pension Fund, et al., observed that since the Plan at issue was a welfare benefit plan, ERISA’s vesting requirements were inapplicable. The court acknowledged, however, that such welfare benefits may become vested if the parties expressly or inferentially agree for such vesting to occur. Since the fact that there was no express agreement to vest plaintiff’s benefits was not in dispute, the court’s analysis turned to whether there could be an inference of vesting pursuant to the Circuit’s “Yard-Man inference,” which applies to welfare benefit plans issued pursuant to a CBA. The court held that the Yard-Man inference was inapplicable because plaintiff’s benefits were occupational disability benefits, not retiree health benefits. Thus, as a matter of law, it could not infer that plaintiff’s benefits were vested.
Next, the court turned to whether the Board of Trustees’s decision to terminate plaintiff’s benefits was improper pursuant to the terms of the Plan. The court held that because the Plan gives the Board of Trustees discretion to interpret the Plan’s terms and to make benefit determinations, the applicable standard of review for the Board’s decision that plaintiff’s benefits were not vested and terminable due to the relevant Plan amendment was the abuse of discretion standard of review, not the de novo standard of review applied by the District Court. As a result, the court remanded the case for further briefing before the District Court on the reasonableness of the Trustees’ decision to terminate plaintiff’s benefits. The Sixth Court’s recognition that, under certain circumstances, the abuse of discretion standard of review could apply to benefit decisions related to Plan amendments is critical, particularly as economic conditions continue to affect whether and how employers and welfare benefit plan providers offer future welfare benefits to former active employees.