Legal opinions sought: Lucent-Alcatel cancelling my parents' disability benefits

Hey all,

I know next to nothing about the rules surrouding retirement/disability benefits, so I’m hoping those of you with more experience can offer your insights in order to help me make a more informed decision.

The situation: my dad is on long-term disability from Lucent Technologies (now Lucent-Alcatel) with multiple sclerosis. He recently got a letter from them stating that they were cancelling his medical coverage. Prior to this, the terms of his long-term disability were that he would have the same health insurance he’d had as an employee until he was 65. I called the benefits center, and was told that they had “changed the contract” last year and are now allowed to cancel the health coverage of employees on long-term disability. I asked how that was legal, and the guy said he didn’t know the details, but he knew they had done everything by the book so it was legal.

So my main question is: how is this legal? If companies can legally cancel the promised benefits of retirees after the fact, why would they ever pay them? Why not just cancel everyone’s retirement benefits?

Follow-up question: is there any way to fight this short of getting a lawyer and taking them to court? If not, is a legal battle pretty much hopeless for a regular schmo? I’m guessing they wouldn’t have done this unless they thought it was legally defensible, especially against the resources a couple on disability has to throw at them.

As you can imagine, I’m pretty irked, but it’s far more important to me to help my parents make the most pragmatic financial decision than to battle solely based on principle and right vs. wrong.

Is Lucent-Alcatel a unionized company?

No, I don’t think so. I know for a fact my father wasn’t in a union.

Ok. My advice was going to be to go down the road of speaking to a union rep and not reps from HR but that does not come into play here.

Former AT&Ter here, who has a pension theoretically coming from them. (Not betting on it.)

Was your father management? The old Western Electric/AT&T was definitely unionized - I don’t know about the Alcatel part. I was considered management, even when I wasn’t, and was never covered by the union contract.

Unless there is some sort of contractual obligation to keep paying this, they can cancel it. My neighbor used to be a manager for GM, and they just canceled his. Union retirees were not affected, management ones got screwed.

I just talked to my wife who does benefits at a major company. She said they can cancel heath insurance if they so choose if they give notice. She also said that you can get COBRA for an extended period of time before you would have to find other insurance. She also said that it looks like they are not canceling the disability insurance.

She also told me that it was a pretty crappy thing to do and that they should grandfather him in.

talk to a laywer asap. One who specializes in ERISA disability policies.

I’m pretty sure he was considered management, so almost certainly not covered under any sort of union contracts.

Edward, he was offered COBRA, although it will cost quite a bit more per month. If it looks like they’re unlikely to be able to fight it cheaply, I’ll encourage them to sign up for this to avoid a lapse in coverage. I’m in the process of looking for free/cheap legal aid resources in Portland, OR that might be willing to look into the details of the policy and their rights, if any.

Definitely speak to a lawyer. Whether or not it’s legal, it’s scummy beyond belief of them to pull this :frowning:

Doesn’t Medicare offer coverage to people who are permanently disabled? That wouldn’t help your mother, of course (I have a friend in a similar boat and she’s had to investigate her own insurance).

While I am not a lawyer and can’t address your specific situation, I have worked in benefits for a large company. The law does give companies broad freedom to cancel benefits for any category of employees/ former employees, unless otherwise specified in a contract. In other words, they don’t have freedom to just take away benefits from a specific individual (although I think this can possibly be done in some cases of extreme gross misconduct by the employee) but they can say “we no longer provide coverage to this category of employees/retirees.” Stuff that is stated in an employee handbook is not a contract, and is not legally interpreted as a promise to continue. Any employee handbook prepared with proper legal counsel will state clearly that it is not a contract, not a promise, etc. I’d look carefully for wording like this before embarking on a lawsuit.

The reason companies offer health insurance to retirees is to help attract/retain employees. If the cost of offering those benefits outweighs the gain to the company from better recruiting/retention, they will stop offering them. Those costs are soaring, and if the company as a whole is downsizing it is less concerned about recruiting and retention. Generally older, sicker folks are the ones who would even consider the availability of retiree health insurance in choosing a job, and that limits the value of such benefits in recruiting. Stopping benefits for employees hired after a certain date is obviously a kinder, gentler step rather than cutting off current retirees, but it’s not the only way cuts get made.

A negative PR campaign would be an option, even if the company’s action is legal. Maybe it shouldn’t be legal, and these retirees should be contacting their congressmen.

Do look into Medicare as a potential option for your dad’s coverage. See if your mom can get COBRA while he gets Medicare. This might not be possible, but then again it might.

Pension benefits (although I am not clear to what extent disability pensions are the same) do have additional protections through the PBGC that retiree health insurance benefits don’t have.

Sorry to hear about their situation.

I would also suggest contacting your state’s insurance commissioner/department.

Good luck.

Harriet, your explanation makes a lot of sense, thank you. I was thinking of it more like an insurance situation, where you give them something (money, work, etc.) and then are legally entitled to any benefits that meet the conditions of your policy. I hadn’t realized that post-employment benefits like this were so much at the whim of the employer.

Thanks to all who have posted so far, your advice is appreciated.