CUNA Mutual Insurance Society maintains a retiree health care plan. CUNA contributed half the annual premium, the retirees contributed the other half. Beginning in 1982, CUNA calculated the value of each retiree's unused sick-leave and allowed retirees to use that to "pay" their share of the annual premiums. Although management employees had no other options, retirees who had been covered by collective bargaining agreements could choose to take the sick-leave value in cash. In 2008, CUNA amended its plan. It stopped its own contributions to the annual premiums. The retirees were liable for 100% of the premiums. It also discontinued its unused sick-leave credit program for management. For those retirees who could have taken their sick-leave credit in cash were treated as having done so and invested that value in an account administered by the health care plan. Four retired management employees and one retired non-management employee filed a class action pursuant to ERISA. Judge Crabb (W.D. Wis.) entered judgment on the pleadings to CUNA and the Plan. The class appeals.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Judges Manion and Hamilton (dissenting in part) affirmed. The Court noted that welfare benefit plans such as the one at issue differ from pension plans in two fundamental ways. One, they need not be funded. Two, employers can reduce or even eliminate welfare benefits altogether. In fact, CUNA inserted a clause in every version of its health care plan stating that it reserved its rights to amend or terminate the plan. The retiree class principally argued that CUNA violated ERISA by transferring assets of the plan to itself. They cite to the $120 million gain on CUNA's balance sheet when it terminated the plan. The Court disagreed. The $120 million entry did not reflect a company asset. The company carried that figure on its books to reflect its projected cost of contributions to the plan. The balance sheet merely reflected the company's removal of that liability. Alternatively, the retirees argue that the sick-leave balances, if not governed by ERISA, are governed by state law. The Court identified the same flaw with this argument -- the sick-leave balances are not assets at all. Finally, the retirees argue that the plan created vested rights, notwithstanding its reservation of rights language. They point to many documents created by the Plan that do not contain a reservation of rights. The Court was unpersuaded. The absence of a reservation of a right to amend in any particular document does not create a vested right.

Judge Hamilton dissented. He noted that, without ERISA, the retirees would have a straightforward promissory estoppel claim. CUNA made a promise. It intended its employees to reply upon that promise. The employees did rely. CUNA broke its promise and the employees were harmed. Judge Hamilton conceded, however, that ERISA preempts that result. Addressing the issue under ERISA, he concluded that the majority's test result was not mandated by ERISA’s language or Supreme Court or Seventh Circuit precedent. To the extent that courts have honored a reservation of rights clauses, he suggested they reconsider. A better approach might be a middle ground where a court could fashion an appropriate remedy under principles of promissory estoppel.