Stop Paying Retiree Subsidy?

[Fielding Mellish]

I have a multiemployer H&W Plan ("Plan 1") that terminated earlier this year. All the participants became covered by a different plan ("Plan 2").

Retirees were covered under Plan 1 and the amount they had to pay for coverage was pretty cheap. Retiree coverage under Plan 2 is much more expensive. When Plan 1 terminated, after paying claims, there was still a good chunk of money left. The Trustees decided to use that money to pay part of the retiree coverage in Plan 2. The idea was to pay part of it for a year, thereby giving retirees a year to figure out what they wanted to do (exchanges or buy their own plan) and to plan ahead for the increased premiums with Plan 2.

However, Plan 1 is now pretty much out of money. Right before Plan 1 terminated, there were a couple out of the blue large claims that killed a lot of assets. We didn't find out about them for a while just due to the lag in claims being submitted.

So, it looks like Plan 1 is not going to have enough money to continue paying the retiree coverage for the full year that it promised.

My question is, is Plan 1 required to give notice to the retirees that it will not be paying the amount? If so, how far in advance does the notice need to go out?

Keep in mind, Plan 1 is not paying claims. It is merely providing a subsidy to the retirees to help them pay their premiums to Plan 2. Plan 1 does not pay any benefit claims anymore.

Thanks.

[Chaz]

My initial thought is that, depending on the language in the communication to participants explaining the arrangement (and also the plan document/SPD), an affected participant may have a contractual claim against Plan 1.

Hopefully, the communication and plan documentation contains appropriate language regarding the ability of the trustees to change the subsidy for coverage under Plan 2.