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U.S. Department of Labor
Employee Benefits
Security Administration
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Providing for health care is an important
part of retirement. Some employees are fortunate: they belong to
employer-provided health care plans that carry over to
retirement. |
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On This Page |
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However, an important question arises for
employees and retirees: How secure are my health care benefits
after retirement? Under what circumstances can the company
reduce or terminate my health benefits? |
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Employees and retirees should know that
private-sector employers are not required to
promise retiree health benefits. Furthermore, when employers do
offer retiree healthcare benefits, nothing in federal law
prevents them from cutting or eliminating those benefits--unless
they have made a specific promise to maintain the benefits.
{ProtectSeniors Editor:
only a very few employers have made a legal promise to provide
healthcare for life to their retirees.} |
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The key to understanding your retiree health
benefits lies in the documents governing your retiree healthcare plan. |
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To understand the terms of employer-provided
retiree health benefits, you should first review your plan
documents. |
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The Summary Plan Description (SPD) is a
summary of the terms of the plan. Employers are required to
provide a copy to you within 90 days after you become a
participant in the plan. |
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For retirees, the SPD that was in effect when
you retired may be the controlling document. You should save a
copy of it. You also should save any SPD changes affecting your
benefits after you retire. |
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In addition, there may be formal written
documents that outline how your health plan is operated. These
may include a collective bargaining agreement or an insurance
contract. |
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If your employer has reserved the right in
the SPD and controlling plan document to change the terms of the
plan, you may lose coverage at any time during your retirement.
If your employer made a clear promise that you will have
specific health care benefits for a definite period of time or
for life, and did not reserve the right to change the plan, you
should be covered. |
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Check all your plan documents with the
following questions in mind:
Do the SPD or other plan documents promise
that health benefits after retirement will continue at a
specified level for a certain period of time? |
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If there is no specific language describing
retiree health benefits in your plan documents, it is unlikely
that you have coverage. If there is such language, how specific
is it? |
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Sometimes language covering retiree health
benefits is included in the documents, but it is too vague to
stand up to a test in the courts. Conversely, there is language
on employee health benefits that has held up in court. Here is
an example:
"Basic health care coverages will be
provided at the company's expense for your lifetime."
Even if a specific promise is made, is there
also language that gives your former employer the right to
change or terminate that specific promise or to amend or
terminate the entire plan? |
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Typical language giving the employer that
right might read:
"The company reserves the right to
modify, revoke, suspend, terminate, or change the program,
in whole or in part, at any time."
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This is an actual example, but other similar
language may be found anywhere in the plan documents. |
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If you are an employee reviewing the current
plan, it is important to remember that it can change in the
future. The documents in effect when you retire are the ones
that will determine your health benefits, if any, in your
retirement. However, court rulings in these matters have not
been uniform. |
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Benefit plan documents are often not easy to
interpret, and the language, described above, providing an
employer's right to change benefits may be contained in any part
of the documents. |
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Some courts may not enforce what seems like
clear "promise" language if the plan document contains general
language reserving the employer's right to amend or terminate
the plan. |
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On the other hand some courts have enforced
clear promise language in an SPD, even in cases where the plan
document contained a right by the employer to amend the promise.
You need to check all documents. |
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You should obtain whatever information is
available indicating the intentions of your former employer with
respect to retiree health care benefits.
Has your employer sent any
correspondence--letters, brochures, medical plan booklets,
employee handbooks or other written materials--containing
promises concerning the duration of retiree health benefits?
Are there records of meetings where your
employer made such promises?
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You should know that some courts may take
into account any informal communications that you have had with
your employer concerning retiree health care benefits, at least
where the plan document and SPD are ambiguous. |
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If you retire early and have a special
agreement with your employer, carefully consider the materials
you have received concerning the terms of your early retirement.
Do any of these documents contain
language regarding the duration of your retiree health
benefits?
Are there any records of meetings that
your employer may have had with you concerning an early
retirement offer?
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You should know that some courts have
permitted plans to change promises made with respect to early
retirement offers even if the formal plan document, collective
bargaining agreement or SPD contain language allowing the
employer to terminate or amend the plan. |
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If you are considering an early retirement,
you may wish to protect yourself by negotiating a written
contract with your employer that includes the specific terms of
health care benefits and the circumstances, if any, under which
they can be changed. |
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Given the uncertainty of the law in this
area, you may wish to seek legal advice in negotiating such
arrangements with your employer. |
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This brief was prepared to help you
understand the terms governing your health benefits after
retirement. If there are questions or disputes about your
individual retirement benefits or about the possibility of
changes and cuts for you and other employees or retirees, you
should consult your union representative or an attorney who is
familiar with employee benefits. |
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Legal action can help interpret or enforce
retirement health care promises. |
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As an employee or retiree, you are entitled
to a copy of your SPD. You can request a copy from your employer
or from the Department of Labor at any time and receive it
within 30 days. There may be a reasonable charge (not to exceed
25¢ per page). |
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However, you have a right to examine plan
documents at no cost to you. |
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To obtain copies of other plan documents, you
must submit a written request to your employer. Again, there may
be a reasonable copying charge. |
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If you have questions or need assistance in
obtaining these documents, contact EBSA's Toll-Free Employee &
Employer Hotline number, 1.866.275.7922, or write us at:
U.S. Department of Labor
Employee Benefits Security Administration
Division of Technical Assistance and Inquiries
200 Constitution Avenue, N.W, Suite N-5619
Washington, DC 20210
Tel 202.693.8632
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