WASHINGTON – The Supreme Court has rejected a request by a group of former CUNA Mutual Group employees for appeal of a lower court ruling that said the credit union insurer was within its rights to cancel payments on the retirees’ healthcare costs.
In a ruling posted yesterday the High Court denied without comment the petition by the CUNA Mutual retirees for a writ of certiorari, or appeal.
The lower court, the U.S. Court of Appeals for the Seventh Circuit, ruled last year that 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 big 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 appeals 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.”
