On January 26, 2015, in M&G Polymers USA, LLC v. Tackett, the US Supreme Court held that ordinary principles of contract law must be applied in interpreting collective bargaining agreements (CBAs) that define rights to retiree health benefits. In reaching its decision, the Court rejected inferences adopted by the Sixth Circuit in International Union, United Auto., Aerospace & Agric. Implement Workers of Am. v. Yard-Man, 716 F.2d 1476 (6th Cir. 1983) (Yard-Man). In Yard-Man and its progeny, the Sixth Circuit inferred that parties to a CBA intended to contractually vest ERISA welfare benefits where the CBA did not:

The retirees in Tackett were formerly employed at a manufacturing plant that was purchased in 2000 by M&G Polymers USA, LLC. The employer entered into a CBA under which certain employees who retired on or after January 1, 1996 were eligible for a full contribution by the employer for the cost of health benefits. Those benefits were to be in effect for the duration of the agreement.

In December 2006, however, the employer announced that it would begin requiring retirees to contribute to the cost of their health benefits. In response, the retirees sued the employer under the Labor Management Relations Act (LMRA), which grants federal courts jurisdiction to resolve disputes between employers and labor unions about CBAs, and the Employee Retirement Income Security Act of 1974 (ERISA). The retirees alleged that:

The district court dismissed the retirees' claims, finding that the agreement's language did not create a vested right. The US Court of Appeals for the Sixth Circuit reversed, however, citing Yard-Man, in which it inferred that the parties to a CBA would intend for retiree benefits to vest for life because these benefits are not mandatory or required to be included in CBAs. The Yard-Man court had concluded that its inferences outweighed any implications from a general termination clause that the benefits ended with the CBA. Relying on the Yard-Man inferences, the Sixth Circuit ruled in the retiree's favor, concluding that it was unlikely that the union representing the retirees would agree to health benefits that could be taken away by the employer upon expiration of the agreement.

On remand, the district court issued a permanent injunction ordering the employer to reinstate the benefits, which the Sixth Circuit affirmed. In 2014, the Supreme Court agreed to review the case.

In analyzing the Sixth Circuit's Yard-Man inferences, the Supreme Court observed that employers who sponsor ERISA welfare plans:

Citing its Heimeshoff decision, the Court noted that in enforcing ERISA welfare plans, contractual provisions ordinarily should be enforced as written (see Legal Update, Supreme Court Upholds Limitations Period in ERISA Disability Plan).

The Supreme Court's decision in Tackett may have significant implications because several circuits have relied on Yard-Man to frame their analyses of contractual vesting of ERISA retiree welfare benefits. Employers and purchasers of former employers may face fewer successful claims for life-long retiree welfare benefits that would have been inferred under Yard-Man and its progeny. The decision also should cause CBA-vesting cases to be analyzed more like vesting cases arising from non-CBA contracts (for example, the Sixth Circuit's decision in Sprague v. General Motors Corp., 133 F.3d 388 (6th Cir. 1998)).

In addition, the concurring opinion suggests that although the Yard-Man presumption has been eliminated, ambiguities about an employer's right to amend or terminate retiree welfare benefits or the duration of those benefits still may be litigation fodder. The focus of litigations may simply shift to disputes about whether extrinsic evidence of the parties' intents should be admissible (and whether particular types of extrinsic evidence should be precluded). Therefore, employers are still best served negotiating CBA provisions that include express provisions either or both: