MADISON, Wis. – A group of former CUNA Mutual Group executives have filed suit challenging the credit union insurer’s conversion of its health insurance plan for retirees the beginning of the year.
The group, which purports to represent non-union CUNA Mutual executives and union workers, claims the credit union insurer violated provisions of the Employee Income Retirement Act, known as ERISA, when it eliminated a plan on December 31 that partially funded retiree health insurance by accumulated sick days accrued to eligible employees.
Because CUNA Mutual was not allowed to offer its employees stock options, the health plan was seen as a way offer other benefits or compensation, according to the suit. Some retirees accumulated more than $100,000 at the time of their retirement, which they claim, is enough to fund the full amount of anticipated expense for retiree health benefits for them and their families.
The named plaintiffs on the suit are: John Sullivan, a former senior vice president; William Phillips, who retired as vice president of league marketing; Paul Sprecht, who was director of operations for MEMBERS Development Co.; Thomas Olson, former chief of staff for international markets, and Karen Withee, a 43-year employee of CUNA Mutual in the credit life and disability division and a member of its union. The ex-employees have asked the federal court to grant them class action status to represent more than 500 union and non-employee retirees.
The group claims that moving the funds from a segregated account into the company’s general ledger CUNA Mutual enabled to add more than $100 million to the 2008 balance sheet and income statement.
Under the health plan, created in 1982, all employees were allowed to accrue unused sick days to pay for their portion of the retiree health plan and the company would pay the rest. A 1995 addendum to the plan stated, "No amendment of the Plan shall cause any part of the Plan used for, or diverted to purposes other than for the exclusive benefit of the Participants or their dependents covered by the plan."
The retirees claim this year’s changes to the plan violate that provision.
The company disputed the claims in the suit. "CUNA Mutual has the right and authority to make changes to employee benefit plans – including retiree medical benefits. Retiree medical benefits are not vested benefits and, as such, aren’t subject to the terms outlined in the lawsuit," said Rick Uhlman, spokesman for the credit union insurer.
"The company carefully considered the impact to retirees and alternatives before making the decision to eliminate company-funded subsidies for health insurance premiums," said Uhlman. "Unfortunately, given the unprecedented economic circumstances and our obligation to protect the company’s financial position and CUNA Mutual’s 400,000 policyholders, we came to the conclusion that this change – in addition to several other expense actions – was necessary.
"Retirees will be able to continue choosing from health plans available to company employees and benefit from the related expense savings versus purchasing individual policies. To allow retirees time to transition to absorbing the cost of medical coverage or to obtain other coverage, the company authorized a one-time payment equivalent to approximately two-years’ of the previous subsidy, with a 25% gross up to offset the bulk of the resulting tax liability for most retirees."
