John A. Entenman | Dykema, Gossett PLLC | 400 Renaissance Center | Detroit, MI 48243 | 313-568-6914

Amicus counsel argues that welfare benefits must be intended, certain, and incontrovertible in order to be considered vested. Additionally, unlike pension plans under the Employee Retirement Income Security Act (ERISA), welfare plans, which include health insurance benefits, do not vest automatically. In fact, Congress exempted welfare plans from complying with vesting requirements. Moreover, there is a circuit split as to when welfare benefits vest, however, a majority of circuits do not endorse a presumption in favor of vesting. Also, no courts have held that welfare benefits automatically vest; instead, it is for to trier of fact to determine the intent of the contracting parties when interpreting contracts to determine whether health care benefits have vested. Intent of the parties is discovered through context, through surrounding circumstances, not simply the four corners of the document. Past practice is the best extrinsic evidence for the triers of fact to look at when determining intent. Here, the collective bargaining agreement (CBA) is silent regarding Medicare B premiums, but for the past twenty to thirty years the retirees, not the City, have paid their own Medicare Be premiums. This indicates that it was the intent of the parties for the retirees to pay these expenses. Furthermore, the Sixth Circuit, along many others, rejects a pro-vesting inference, but there should be a presumption against vesting because an employer may alter or terminate medical benefits after a collective bargaining agreement expires, the plaintiff has the burden of proving that the CBA provides vesting benefits, and neither ERISA nor the Michigan Constitution create vested rights in welfare benefits. If the court should find that the benefits have vested, Amicus counsel argues alternatively that reasonable flexibility be allowed to employers when determining the scope of the health care benefit. Employers must be allowed a degree of flexibility to make reasonable changes in response to changing circumstances regarding health care. Not allowing for change is disadvantageous for both retirees and employers alike.

Michigan Court of Appeals:
We vacate the judgment for plaintiffs and vacate the status quo order, and we remand for entry of summary dispostion in favor of defendant in the 2006 action.

This case involves a breach of contract claim by the four Plaintiffs, all retirees of the City of Dearborn Heights. Plaintiffs claim that under the express provision of the Collective
Bargaining Agreements (CBA), the City is obligated to pay their Medicare Part B premiums. However, the City has never, at any time, paid for, nor reimbursed the retirees, for the costs
of such Medicare premiums. Plaintiffs’ interpretation of their contracts (CBA) is not supported by the express language of the contracts. It is also contrary to the past practice of the City in having the retirees pay the premiums of Medicare Part B.