Pamela A. MacLean
RedwoodAge.com

Seventeen retirees at three phone companies have won the right to expand their challenge of  cancellation of their health benefits and life insurance to include nearly 14,000 similar retirees in 18 states.

US District Judge Eric Melgren granted class-action status just after the new year to a lawsuit against Sprint Nextel and Embarq, a North Carolina-based phone company.  The ruling opens the way for nearly phone company retirees and their spouses in the additional states to press for resumption of health benefits and life insurance.

The issue exemplifies a growing trend to cut retiree benefits in a tough economy with companies trying to find ways to save money.  In 2008, the US Supreme Court said employers had the right to reduce health benefits to retirees when they turn 65 without running afoul of age discrimination law. 

The following year Congress held hearings in a failed attempt to protect retirees from these cuts.  But the corporate cuts continue to pile up.

In many areas the dispute boils down to retiree rights to rely on decades-old promises of medical care, or whether it is trumped by company contracts that reserve the right to change or eliminate benefits at some future date.

The phone company lawsuit, filed in 2007, said that Embarq announced the benefit cutbacks that year but did not tell retirees of any review procedure or allow for any administrative challenges.

Retired Employee
The suit was filed by William Fulghum of Fayetteville, N.C., a retiree of Embarq Corp. who retired in 1996 at age 58. Fulghum and all but one of the other plaintiffs in the suit are in their 60s.  The companies are accused of unilaterally terminating or reducing company-paid medical, prescription drug and life insurance benefits.

The suit contends the cuts would same Embarq alone $40 million per year beginning in 2008 and reduce its long-term postretirement obligations by $301 million.

In an unrelated case, retirees at California's Livermore Laboratory, formerly run by the University of California, have suit in state court over loss of medical benefits after the university transferred control of the lab to private operators.

The state judge recently said the retirees should show they were granted the health benefits "in perpetuity."  That case is still pending.

For the phone company retirees, the Kansas ruling is not a judgment on the merits of their claims but it is a significant step in allowing a broad number of retirees to have the court decide whether  the companies breached their financial duties to a wide number of retirees.