United States: Circuit Courts Grapple With The Permanence Of Retiree Health Benefits Under Collective Bargaining Agreements

Last Updated: August 14 2019
Article by Sarah Bryan Fask and Danielle K. Herring

On August 7, 2019, in Kelly v. Honeywell International, the Second Circuit handed down the latest decision in a series of cases across the country on a company's obligation to provide lifetime health care to retirees.

Unlike for ERISA-regulated pension plans, which have strict vesting requirements, ERISA permits employers to adopt, modify, or terminate welfare benefit plans, such as health care plans, "for any reason at any time." M & G Polymers USA, LLC v. Tackett, 135 S. Ct. 926, 933 (2015). The Supreme Court in Tackett explicitly overturned UAW v. Yard-Man, Inc., 716 F.2d 1476, 1482 (6th Cir. 1983) and its progeny, which held that when an employer and union "contract for benefits which accrue upon achievement of retiree status, there is an inference that the parties likely intended those benefits to continue as long as the beneficiary remains a retiree." Now, under Tackett, whether the parties to a collective bargaining agreement (CBA) intended that the employer would provide vested welfare benefits is a question of contract interpretation. There is no automatic presumption of vesting.

Since Tackett, courts across the country have grappled with what language could require an employer to extend welfare benefits beyond the expiration of a CBA. The Second Circuit's decision is the latest in series of separate cases involving Honeywell International over the past year, and exemplifies this challenge.

The Second Circuit Finds Retiree Benefits Vested

In Kelly, the Second Circuit determined that an effects bargaining agreement (EBA) between Honeywell's predecessor and the United Automobile, Aerospace and Agricultural Implement Workers of America contained "unambiguous language vesting welfare benefits" and that the agreement's general durational clause did not prevent those benefits from vesting. Specifically, the EBA provided:

All past and future retired employees and surviving spouses shall continue to receive . . . full medical coverage as provided in the . . . Group Insurance Agreement, as now in effect or as hereafter modified by the parties for the life of the retiree or surviving spouse.

The EBA was incorporated into the broader CBA between the parties. Both the EBA and the more general CBA had a durational clause. A separate supplemental group insurance agreement was also incorporated into the CBA and described medical benefits and plan options available to eligible employees and retirees. This group insurance agreement contained a provision that "[i]f the Collective Bargaining Agreement is canceled in whole or in part benefits hereunder will immediately cease."

The Second Circuit, using principles of general contract interpretation, emphasized that the EBA provided lifetime medical covered "as now in effect or as hereafter modified by the parties." Furthermore, because the EBA contained affirmative language stating that retiree medical benefits will continue "for the life of the retiree or surviving spouse," this language trumped any durational limitation of the CBA more generally. The language in the supplemental group insurance agreement did not change the analysis, because, among other reasons, this clause just articulates that if the CBA were cancelled, the supplemental group insurance agreement would not continue either. It did not permit the company to unilaterally amend the retirees' benefits.

Accordingly, the Second Circuit permanently enjoyed Honeywell from terminating medical coverage for union retirees who retired before the CBA expired. It also temporarily enjoined the company from terminating medical coverage for union retirees who retired after the CBA expired and remanded the case to the district court for further proceedings on that issue.

The Sixth and Eighth Circuits Held that Retiree Health Benefits did not Vest

The Kelly decision stands in stark contrast to three other federal appellate court decisions decided in 2018 and 2019 regarding Honeywell's alleged obligations to provide retiree health benefits.

In Pacheco v. Honeywell International Inc., 918 F.3d 961 (8th Cir. 2019), the Eighth Circuit determined that early retiree healthcare benefits did not vest when an employee retired.

Unlike in Kelly, the retiree healthcare benefit provisions at issue in the Pacheco CBAs provided:

The following insurance and benefit plans . . . shall be implemented and maintained as specified by the time periods outlined before for the duration of this agreement.

But, compounding the clarity of this language, the CBAs also specified under what circumstances the company would make contributions towards the annual retiree medical premium. That provision did not indicate that such contributions would cease if the CBA terminated. Finally, the CBAs also contained a general durational provision, similar to the one in Kelly.

Ultimately, the Eighth Circuit determined that the promise of benefits "for the duration of this agreement" and the general durational clause were not trumped by the fact that the CBAs did not include a time limit on when the company would make contributions towards the annual retiree medical premiums. The plaintiffs were not entitled to ongoing retiree health benefits after the expiration of the CBAs at issue.

Considering slightly different language, the Sixth Circuit came to a similar conclusion one year earlier in Cooper v. Honeywell Int'l, Inc., 884 F.3d 612 (6th Cir. 2018). There, it held that employees who retired at a Honeywell plant in Michigan under a CBA providing that "[r]etirees under age 65 ... will continue to be covered under the [applicable Medical] Plan, until age 65" did not receive vested benefits. The court held that "that general durational clauses should dictate when benefits expire, unless an alternative end date is provided." This language did not unambiguously provide vested retiree healthcare benefits:

A promise to continue providing benefits in a CBA—whether that promise is left open-ended, or whether, as here, it has a specific terminus—does not by itself vest those benefits in retirees beyond the CBA's expiration. All it does is (1) provide a guarantee of those benefits while the CBA is in effect and (2) provide for the expiration of those benefits even before the CBA itself expires. ... That language also protects retirees by ensuring Honeywell cannot prematurely terminate benefits for eligible, under-age-65 retirees.1

Bottom Line for Employers

When negotiating language in a CBA, employers should aim to ensure the language unambiguously demonstrates that retiree health benefits do not continue past the expiration of the contract (assuming that is the desired outcome). As exemplified by the different outcomes different courts reached involving the same employer, small tweaks to the language of the CBA can have a massive financial impact on a company.

Furthermore, employers should remember that retirees are not limited to bringing claims under the terms of the CBA or ERISA plan itself. Employees may also try to bring claims of estoppel or breach of fiduciary duty if a plan sponsor or fiduciary makes a representation that retiree benefits would continue beyond the expiration of the CBA. Thus, plan sponsors and those acting in fiduciary capacities should take care to avoid actions that could create a basis to argue that a plan participant's rights could not be changed in the future.


1 884 F.3d at 619-20. See also Fletcher v. Honeywell Int'l, Inc., 892 F.3d 217, 224 (6th Cir. 2018) (language that simply provided that retirees will be eligible for a particular healthcare plan and that the company will pay the premium costs for that plan did not survive the general durational language of the CBA); Watkins v. Honeywell Int'l, Inc., 875 F.3d 321, 322-25 (6th Cir. 2018) (holding that a CBA that provided, "[f]or the duration of this Agreement, the Insurance Program shall be that which is attached hereto" meant that "Honeywell's obligation to pay for its Fostoria retirees' healthcare ended when the agreement expired.").

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions