SPONSORED LINKS

GenCorp Retirees sue over benefits Counting the days before retirement often means closely monitoring your personal finances including the pension and healthcare benefits offered by your employer. But what happens when companies promise one thing and do another. If the past is any indication, retirees may have little legal recourse when their former employer makes post-retirement changes to their benefits. The Wall Street Journal recently profiled a group of GenCorp retirees currently engaged in a five year lawsuit with the company. The retirees decided to sue the company after it announced it would begin charging them for their health insurance. The technology manufacturer stands accused of reducing retirees’ health benefits by as much as 16 percent. GenCorp claims that when it promised to provide retirees with lifetime benefits, it didn’t mean that it would continue to provide the benefits at no cost. Taking Legal Action The GenCorp lawsuit shows the challenges faced by retirees if they go to court on their own to recover health benefits from their former employer. C. William Jones is president of the Association of BellTel Retirees, which fights to protect the pension and other benefits of more than 100,000 Verizon retirees. Jones also helped found the National Retiree Legislative Network, a retiree advocacy group formed in the aftermath of another retiree lawsuit nearly two decades ago. “It was one of the most egregious retiree court cases in recent history,” said Jones referring to Sprague vs. General Motors. In the late 1980s, General Motors made major changes to its medical plans requiring retirees to make contributions and pay higher deductibles. The retirees claimed that the changes violated the law. Consequently, a ten year legal battle ensued, said Jones recalling the sequence of events. The lower courts ultimately decided in favor of the retirees. But, General Motors appealed to the federal district courts, which sided in favor of the company. The case was appealed to the U.S. Supreme Court, where a judge refused to hear the case. In the end, the retirees lost. Who’s suing whom? These types of lawsuits, pitting retirees against their former employers, are not uncommon. Last year, over 1,800 retirees of Massachusetts’ largest investor-owned electric and gas utility, NStar, sued the company for reneging on its promise to provide lifelong healthcare benefits. And retirees are not the only ones suing. In 2004, the beverage-can maker Rexam sued some 1,000 retirees for the right to reduce or eliminate their benefits. In the 1980s General Motors case, the higher courts decided that the company upheld the law due to significant clauses in its employer contracts. A key component in the GenCorp case could be a benefit enrollment card, which contained a reservation of rights clause. According to GenCorp, the card permits the company to make changes to its contractual obligations at anytime. Reform Needed “If I promise X, Y, Z to you and then renege on the commitment, how is this upholding the law,” questioned Jones, who retired from the former NYNEX telephone company, currently Verizon, in 1990. With the changing economic landscape and little legislation protecting retirees’ benefits, cases like GenCorp and NSTAR have left many retirees uncertain about their financial security. Recently, more fears were raised when the Pension Benefit Guaranty Corporation (PBGC) announced that the program's fiscal year-end deficit increased to $23.3 billion in 2004 from $11.2 billion in 2003. The PBGC is a federal insurance program allowing employers to pay insurance premiums so that in the event the employer can no longer support its pension plan, the agency takes over the assets and liabilities and pays the benefits up to certain amount. This is the first year that the total number of people owed benefits by the program passed 1 million and the total amount of benefits paid surpassed the $3 billion mark, according to the agency. “In 2000, people weren’t concerned with their pensions or benefits because the economy was booming. Companies and the stock market were doing well. The future didn’t look so bleak,” said Jones. However, post-September 11 Americans have seen poor interest rates on savings and investment accounts and an unsteady stock market. People, in general, are concerned with the security of their future. Avoiding unilateral approaches to deal with economic troubles, many retirees have banned together to fight back. However, more regular changes are needed at the federal level, said Jones, who helped draft a bill that would prohibit employers from making post-retirement benefit changes. The bill would also require companies to restore health benefits that were previously reduced or taken away after retirement unless a company could demonstrate substantial business hardship. Because a judge refused to classify the GenCorp case as a class action lawsuit, over 295 retirees plan to file individual suits against the company in January 2005, according to the Wall Street Journal report. -Fall 2004 Issue

http://www.pbgc.gov/default.htm