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Daily Report for Executives™
March 13, 2015
Retirement Plans
Supreme Court's Tackett Decision Gives Employers Chance to Review
Retiree Benefits
BNA Snapshot
ALI CLE Webinar on Tackett Decision
Topic: Strategies employers can use to reduce potential liability in the wake of the Supreme Court's M&G Polymers v. Tackett
decision.
Takeaway: Attorneys encourage employers to review documentation for pitfalls and consider tying retiree health benefits to health
benefits for nonunion employees.
By Jacklyn Wille
March 12 — In the wake of the U.S.
Supreme Court's Tackett decision,
employers with collectively
bargained retiree health benefits
should consider various strategies
for reducing potential liability,
attorneys said during a webcast
presentation.
M.J. Asensio, a partner with Baker &
Hostetler LLP in Columbus, Ohio,
said employers should review their
documentation to determine whether
retiree health benefits have been
tied to pension benefits or
guaranteed at the levels in effect at a
particular employee's retirement.
Either situation could be bad news
for an employer attempting to argue
that the health benefits provided to
retirees don't vest for life at specified
benefit levels, Asensio said.
Asensio and others spoke March 11 during a webcast titled M&G Polymers v. Tackett: Implications for Employers' Liability for
Retiree Medical Benefits, sponsored by American Law Institute Continuing Legal Education.
In M&G Polymers USA, LLC v. Tackett , 135 S.Ct. 926, 59 EBC 1425 (U.S.2015) (17 DER EE-9, 1/27/15), the U.S. Supreme
Court rejected the retiree-friendly Yard-Man presumption, which some courts used to find that retiree health benefits vest for
life absent specific language to the contrary in a collective bargaining agreement or plan document. Rather, the Supreme
Court said in Tackett that vesting of retiree benefits is to be determined with reference to “ordinary principles of contract law.”
Post-Tackett Suggestions
Asensio offered three main suggestions for employers navigating retiree health benefits in a post-Tackett world.
Supreme Court's Tackett Decision Gives Employers Chance to Review Retiree Benefits, Daily Report for Executives (BNA)
© 2015 The Bureau of National Affairs, Inc. All Rights Reserved. Terms of Service
// PAGE 1

“I think the language of the Tackett decision does give some guidance, and that is that you're going to have to be a little bit
more clear in your collective bargaining agreement in order to have that flexibility to reduce or eliminate retiree health care,”
Asensio said.
First, he suggested that employers determine whether any documentation ties the receipt of retiree health benefits to the
receipt of pension benefits. If such tying exists, retirees can use this factor to argue that health benefits are intended to last so
long as a retiree is receiving pension benefits, Asensio said.
Next, he advised reviewing the full history of collective bargaining to determine whether retiree health benefits had ever been
guaranteed at the benefit levels in effect at a particular employee's retirement. According to Asensio, this is “really deadly
language,” because it arguably can require an employer to maintain much more generous benefit structures for indefinite
periods of time.
Finally, he suggested that employers consider bargaining for “me-too benefits,” in which retirees receive health benefits under
the same terms as the employer's nonunion workforce.
These “me-too benefits” can give employers greater flexibility to reduce or modify retiree benefits when faced with escalating
cost concerns, Asensio said.
Ambiguity Likely
Because of the unique context in which retiree benefit provisions are drafted, the panelists agreed that ambiguous language is
a constant possibility.
Greta E. Cowart, a shareholder with Winstead PC in Dallas, said that retiree benefit provisions in collective bargaining
agreements are likely to be less clear than those contained in Employee Retirement Income Security Act-governed plans,
because CBA language is typically the result of contentious negotiations between adverse parties.
Asensio agreed, saying there was a “huge difference” between the language typically found in ERISA plans and the language
found in CBAs.
Further, he said that some amount of CBA vagueness could be attributed to genuine disagreement between the parties,
where neither labor nor management had the leverage to implement the clear language they may have desired.
“Those types of distinctions make collective bargaining agreements very unique,” Asensio said. “It really depends on what
kind of leverage you have at the table.”
Gregg M. Formella, vice president of human resources for Envoy Air Inc. in Irving, Texas, who spoke about retiree benefits in
the Railway Labor Act context, agreed that this “potential tension between precision and ambiguity” could cause problems in
determining whether retiree health benefits are intended to be vested.
Further, Formella said that this tension “tees up” a point made by Justice Antonin Scalia during the Tackett oral
arguments—specifically, that whichever side loses a fight over vested retiree benefits may “deserve to lose,” because they
chose to roll the dice and leave the provision ambiguous.
Formella also noted that outsiders reviewing CBAs—such as judges or arbitrators—were even more likely than the parties to
find CBA language to be ambiguous.
“There is always a possibility—if not a likelihood in many cases—that an outsider not familiar with the contract history or
negotiations could very easily find that there's ambiguity in a contract,” Formella said.
Extrinsic Evidence
With ambiguities possible if not likely, courts may look to Justice Ruth Bader Ginsburg's concurring opinion in Tackett, in
which she emphasized that extrinsic evidence can be used to determine the meaning of ambiguous CBA provisions.
In particular, Formella listed a number of considerations courts or arbitrators may look to in interpreting a contract, including
bargaining history, the progression of language over the course of negotiations, contemporaneous actions or statements by
the parties, communications to employees or retirees regarding benefits, past practices and industry standards.
// PAGE 2

Asensio agreed, saying that “a lot of different issues might come into play to try to determine the parties' intent.”
Involve ERISA Attorneys
The panelists also agreed that employers should be proactive about including ERISA attorneys—as opposed to just labor
lawyers—in the negotiation process.
Cowart said this was particularly important in terms of assessing health-care costs, which she said have been on the rise. She
added that the Cadillac tax on high-cost health benefits, which is expected to take effect in 2018, will be an especially big
issue for retiree health benefits, because retirees tend to be more expensive to cover than other employee populations.
Further, Cowart said that employers may be surprised to learn what types of benefits might become subject to the Cadillac
tax, which she said isn't just for the very highest-cost benefit levels.
“This is not a Cadillac, it's more like a Camry and may be moving closer to a Corolla,” she said.
Given these considerations, Formella said that “there will need to be more tag-teaming between the ERISA and labor
attorneys.”
Cowart agreed.
“You can't just leave the ERISA geeks in the corner,” she said.
To contact the reporter on this story: Jacklyn Wille in Washington at jwille@bna.com
To contact the editor responsible for this story: Jo-el J. Meyer at jmeyer@bna.com
// PAGE 3

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Daily Labor Report®
March 12, 2015
Retiree Benefits
Supreme Court's Tackett Decision Gives Employers Chance to Review
Retiree Benefits
By Jacklyn Wille
March 12 — In the wake of the U.S.
Supreme Court's Tackett decision,
employers with collectively
bargained retiree health benefits
should consider various strategies
for reducing potential liability,
attorneys said during a webcast
presentation March 11.
M.J. Asensio, a partner with Baker &
Hostetler LLP in Columbus, Ohio,
said employers should review their
documentation to determine whether
retiree health benefits have been
tied to pension benefits or
guaranteed at the levels in effect at a
particular employee's retirement.
Either situation could be bad news
for an employer attempting to argue
that the health benefits provided to
retirees don't vest for life at specified
benefit levels, Asensio said during
the webcast sponsored by American Law Institute Continuing Legal Education.
In M&G Polymers USA, LLC v. Tackett , 135 S. Ct. 926, 59 EBC 1425 (U.S.2015) (16 DLR AA-1, 1/26/15), the U.S. Supreme
Court rejected the retiree-friendly Yard-Man presumption, which some courts used to find that retiree health benefits vest for
life absent specific language to the contrary in a collective bargaining agreement or plan document. Rather, the Supreme
Court said in Tackett that vesting of retiree benefits is to be determined with reference to “ordinary principles of contract law.”
Post-Tackett Suggestions
Asensio offered three main suggestions for employers navigating retiree health benefits in a post-Tackett world.
“I think the language of the Tackett decision does give some guidance, and that is that you're going to have to be a little bit
more clear in your collective bargaining agreement in order to have that flexibility to reduce or eliminate retiree health care,”
Asensio said.
First, he suggested that employers determine whether any documentation ties the receipt of retiree health benefits to the
receipt of pension benefits. If such tying exists, retirees can use this factor to argue that health benefits are intended to last so
long as a retiree is receiving pension benefits, Asensio said.
Next, he advised reviewing the full history of collective bargaining to determine whether retiree health benefits had ever been
guaranteed at the benefit levels in effect at a particular employee's retirement. According to Asensio, this is “really deadly
language,” because it arguably can require an employer to maintain much more generous benefit structures for indefinite
Supreme Court's Tackett Decision Gives Employers Chance to Review Retiree Benefits, Daily Labor Report (BNA)
// PAGE 1

periods of time.
Finally, he suggested that employers consider bargaining for “me-too benefits,” in which retirees receive health benefits under
the same terms as the employer's nonunion workforce.
These “me-too benefits” can give employers greater flexibility to reduce or modify retiree benefits when faced with escalating
cost concerns, Asensio said.
Ambiguity Likely
Because of the unique context in which retiree benefit provisions are drafted, the panelists agreed that ambiguous language is
a constant possibility.
Greta E. Cowart, a shareholder with Winstead PC in Dallas, said that retiree benefit provisions in collective bargaining
agreements are likely to be less clear than those contained in Employee Retirement Income Security Act-governed plans,
because CBA language is typically the result of contentious negotiations between adverse parties.
Asensio agreed, saying there was a “huge difference” between the language typically found in ERISA plans and the language
found in CBAs.
Further, he said that some amount of CBA vagueness could be attributed to genuine disagreement between the parties,
where neither labor nor management had the leverage to implement the clear language they may have desired.
“Those types of distinctions make collective bargaining agreements very unique,” Asensio said. “It really depends on what
kind of leverage you have at the table.”
Gregg M. Formella, vice president of human resources for Envoy Air Inc. in Irving, Texas, who spoke about retiree benefits in
the Railway Labor Act context, agreed that this “potential tension between precision and ambiguity” could cause problems in
determining whether retiree health benefits are intended to be vested.
Further, Formella said that this tension “tees up” a point made by Justice Antonin Scalia during the Tackett oral
arguments—specifically, that whichever side loses a fight over vested retiree benefits may “deserve to lose,” because they
chose to roll the dice and leave the provision ambiguous.
Formella also noted that outsiders reviewing CBAs—such as judges or arbitrators—were even more likely than the parties to
find CBA language to be ambiguous.
“There is always a possibility—if not a likelihood in many cases—that an outsider not familiar with the contract history or
negotiations could very easily find that there's ambiguity in a contract,” Formella said.
Extrinsic Evidence
With ambiguities possible if not likely, courts may look to Justice Ruth Bader Ginsburg's concurring opinion in Tackett, in
which she emphasized that extrinsic evidence can be used to determine the meaning of ambiguous CBA provisions.
In particular, Formella listed a number of considerations courts or arbitrators may look to in interpreting a contract, including
bargaining history, the progression of language over the course of negotiations, contemporaneous actions or statements by
the parties, communications to employees or retirees regarding benefits, past practices and industry standards.
Asensio agreed, saying that “a lot of different issues might come into play to try to determine the parties' intent.”
Involve ERISA Attorneys
The panelists also agreed that employers should be proactive about including ERISA attorneys—as opposed to just labor
lawyers—in the negotiation process.
Cowart said this was particularly important in terms of assessing health-care costs, which she said have been on the rise. She
added that the Cadillac tax on high-cost health benefits, which is expected to take effect in 2018, will be an especially big
issue for retiree health benefits, because retirees tend to be more expensive to cover than other employee populations.
// PAGE 2

Further, Cowart said that employers may be surprised to learn what types of benefits might become subject to the Cadillac
tax, which she said isn't just for the very highest-cost benefit levels.
“This is not a Cadillac, it's more like a Camry and may be moving closer to a Corolla,” she said.
Given these considerations, Formella said that “there will need to be more tag-teaming between the ERISA and labor
attorneys.”
Cowart agreed.
“You can't just leave the ERISA geeks in the corner,” she said.
To contact the reporter on this story: Jacklyn Wille in Washington at jwille@bna.com
To contact the editor responsible for this story: Jo-el J. Meyer at jmeyer@bna.com
// PAGE 3

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