A recent decision by the U.S. Supreme Court changes the previously held principles governing vesting of retiree health benefits. In M&G Polymers v. Tackett, the Court held that general contract principles determine if a collective bargaining agreement serves to vest retirees in their health benefits and the contributions they must pay for health coverage.
Before this decision, retiree health benefits were largely seen as vested upon retirement with little ability for an employer to change those benefits going forward. The Court found that this approach was not warranted, and the determination should be based on the terms of the contract.
This new decision opens the door to changes in benefits after retirement. Employers should consider spelling out specific terms relating to retiree benefits when they are offered to employees.