WASHINGTON - The U.S. Supreme Court unanimously decided companies can change their pension and other benefits as long as plan documents give them the right to do so.
The court rejected lower court rulings that found standard plan amendment clauses used in many plans too vague to qualify as amendment procedures required by ERISA.
In Curtiss-Wright Corp. vs. Frank C. Schoonejongen et al., the issue was whether Curtiss-Wright had a workable amendment procedure to modify its retiree health plan. The high court said it did. Whether the Lyndhurst, N.J., defense contractor followed procedures in the document will be decided by the 3rd U.S. Circuit Court of Appeals.
"We're back to where we were before the Supreme Court's decision on Curtiss-Wright," said Kathleen Rosenow, an attorney consultant who deals with retiree-health cases for The Wyatt Co., Washington. "This has saved employers from getting very specific on amendment procedures."
The Supreme Court reversed a December 1993 decision by the appeals court. That decision said Curtiss-Wright owed more than $2 million in medical benefits to retired workers in its Wood-Ridge, N.J., plant after the company eliminated those benefits when it closed the plant in 1983.
Curtiss-Wright's plan document contained a standard clause that authorized the company to amend the plan at any time. Retirees who had lost their benefits argued Curtiss-Wright violated the 1974 Employee Retirement Income Security Act by empowering the company, and not trustees, or a specific group of people to amend the plan.
The 3rd U.S. Circuit Court of Appeals agreed with the retirees, and said the standard provision was too vague to be an amendment procedure.
Writing for the high court, Justice Sandra Day O'Connor disagreed with the appeals court.
To read ERISA "as requiring a plan to specify on its face who has authority to act on the company's behalf might lead to invalidation of a myriad amendment procedures that no one would think violate the statute," Justice O'Connor wrote.
Before the Curtiss-Wright decision, there were dozens of retiree health lawsuits where employees charged companies broke their promises when they eliminated retiree health benefits.
Bill Boies, a partner at McDermott, Will & Emery, Chicago, who litigates retiree-health cases, said court decisions in the past typically hinged on what the retiree health and welfare plan provided. Unlike pension plans, welfare plans are not a fixed benefit, and are treated in the courts like a contract.
In the 1993 5th U.S. Circuit Court of Appeals decision in George G. Wise et al. vs. El Paso Natural Gas Co., the court ruled in favor of the company because its plan documents authorized the company to amend the plan. In the 1984 6th U.S. Circuit Court of Appeals decision in United Autoworkers vs. Yard-Man Inc., the court ruled in favor of the employees, because the plan documents had a provision that fixed the welfare benefits for life.
"Results varied depending on the details" in the health and welfare documents, Mr. Boies said.
After the Curtiss-Wright appeals decision in 1993, many companies added more detailed and complicated amendment procedures, so that if the Supreme Court upheld the appeals decision, companies would have a specific set of rules in place.
But what the Supreme Court affirmed is that companies do not have to have a detailed procedure; companies simply need to have a mechanism in place that will allow them to amend the plan.
"This outright identification necessarily indicates a procedure for identifying the person as well, since the plan, in effect, says that the procedure is to look always to the company rather than to any other party," Justice O'Connor wrote in her opinion.
Now it's up to the court of appeals to decide whether Curtiss-Wright followed its own procedure. Justice O'Connor said the decision would depend on which people or committees within Curtiss-Wright had plan amendment authority and whether they approved the new plan provision.