WASHINGTON – A group of former CUNA Mutual employees on Tuesday asked the Supreme Court to overturn an appeals court decision that said the credit union insurer was within its rights to cancel payments on retirees’ healthcare costs.
The lower court, the U.S. Court of Appeals for the Seventh Circuit, last year ruled CUNA Mutual did not violate provisions of the Employee Retirement and Income Security Act, known as ERISA, when it stopped paying retiree healthcare costs in 2008, including to non-union employees who had agreed to trade their accrued unused sick leave to cover their portion.
The change in retirees’ healthcare policy allowed CUNA Mutual to book a $120-million gain in 2008 by removing this huge liability from its books.
The former CUNA Mutual employees bringing the suit were Thomas Olson, a well-known former senior vice president of corporate affairs, John Sullivan, William Phillips, Paul Specht and Karen Withee.
Under the policy, CUNA Mutual had calculated how much each person’s unused sick leave days would be worth at that person’s daily wage. The company’s union workers could choose between taking that sum in cash or putting it toward the retiree’s premium, but non-union employees did not have that option.
In dismissing the case, the appeals court explained that health care is considered a welfare benefit and not a pension benefit under ERISA and employers must fund pension benefits but not welfare benefits under ERISA. In fact, employers are free to reduce or abolish benefits under welfare plans. “CUNA Mutual therefore was entitled to cut back on health benefits even though this dashed retirees’ expectations,” the court ruled.
Though the retirees argued that the credits they accrued by accumulated unused sick leave amounted to assets of their retirement plans. But the court ruled otherwise, saying the sick leave accounts of former managers “don’t contain money and never did,” ruled the appeals court. “Far from being assets, these balances were liabilities: they represented amounts that CUNA Mutual had agreed to contribute to the Plan in lieu of cash from retirees.”
“CUNA Mutual,” ruled the appeals court, “reserved the right to amend its health care plan. It is a business decision, not a legal question.”
A CUNA Mutual representative expressed confidence the appeals court’s ruling will stand. “We are pleased the federal courts in Madison and Chicago dismissed this case, and confirmed CUNA Mutual Group did not violate the law when it made the difficult decision to end subsidies for retiree health coverage,” said Rick Ulhmann, senior manager of media relations for the credit union insurer. “This is not a case that merits review by the U.S. Supreme Court.”
