Contracts without Clarity – May Result in Lost Retiree Health Benefits

Yesterday the Supreme Court Ruled in favor of the employer in the case of M&G Polymers USA, LLC vs. Tackett, U.S. Supreme Court, No. 13-1010.  The ongoing litigation began in 2006 when M&G announced they were requiring retirees contribute towards their retiree health care benefits.  The union and retirees argued language in their contract implied a lifetime duration of full company contribution to the cost of health benefits.  The employer however pointed out the duration of the benefits was not clearly stated in the contract.


Justice Clarence Thomas, on behalf of the court, wrote “when a contract is silent as to the duration of retiree benefits, a court may not infer that the parties intended those benefits to vest for life”.

This is not a simple win for M&G Polymers USA; the case is to be retried.

Both employers and unions alike should take careful note of this situation in regard to their own health care benefit contracts.  This outcome, as well as the impending extra trial, is a well-publicized example of two parties neglecting to produce clear and concise contract language.

For related articles, click here for Insurance Journal or here for Employee Benefit Adviser.