GE Retirees Seek 'Greater Justice' on Health Care in Class-Action Suit

NEW YORK (TheStreet) -- Two retired employees suing General Electric (GE) over cuts to health-care coverage are seeking class-action status for the complaint, which asks for their previous benefits to be reinstated.

Dennis Rocheleau and Evelyn Kaufman made the request in a motion filed Wednesday in U.S. District Court in Milwaukee, and Tom Geoghegan, their attorney, said Judge Lynn Adelman is slated to hold a scheduling conference Friday with attorneys for both sides. Class-action status allows individuals to serve as representatives for a broad group of plaintiffs in a civil case, bringing more resources to bear and potentially heightening awards.

"Plaintiffs in seeking to restore the plans are necessarily acting in a representative capacity for others, and this litigation would necessarily affect them," Rocheleau and Kaufman said in the motion. "The relief sought is indivisible by nature. It cannot be awarded to named plaintiffs unless it is awarded as well to all other participants."

Quite simply, "either the plan is reinstated or it's not," Geoghegan said in a phone interview. "We are not seeking individual monetary relief."

The motion to add class allegations comes on the heels of Judge Adelman's June denial of GE's request to dismiss the suit in its entirety, though he did toss out one of the claims. His decision to let the remainder of the case go forward was based largely on a statement in an employee handbook a few years ago that "GE expects and intends to continue the GE Medicare Benefit Plans described in this handbook indefinitely."

GE moved shortly afterward to end the plans, instead offering reimbursements of about $1,000 a year to retirees who obtain Medicare-supplement policies through Towers Watson's (TW) OneExchange program, a system the former employees claim increases their financial burden significantly. The company reported about $3.3 billion in savings from the change as well as adjustments to retiree life-insurance benefits, as of the second quarter.

"GE will continue to defend the one surviving count of the complaint and remains confident that the company acted properly and lawfully in making changes to retiree health benefits consistent with trends among other large companies," GE said in an emailed statement on Thursday.

Geoghegan said in a phone interview he expects little resistance to obtaining class-action status and that a trial may be held as early as the beginning of 2016.

"They took their best shot to get this thrown out, and they lost," he said.

The retirees' case turns on whether GE violated the Employee Retirement Income Security Act of 1974, known as ERISA, by breaking a commitment implied in the handbook, even though the handbook also noted that the Fairfield, Conn.-based company reserved the right to end the policies at any time. GE, which employed more than 300,000 people at the end of last year, declined to comment because the case is pending.

The company has previously said the changes to its retiree health-care plans are consistent with trends among major companies. Corporations including Time Warner (TWX), IBM (IBM), and Walgreens (WBA), have also moved to private exchanges following passage of the Affordable Care Act, known as Obamacare, in 2010.

GE shifted salaried retirees to the exchange first, then announced this year that hourly production retirees would be moved as well, starting Jan. 1, 2016. That followed three weeks of labor negotiations starting in early June with the company's two largest unions -- IUE-CWA, which represents machine and electrical workers, and the United Electrical, Radio and Machine Workers of America. The talks led to four-year national contracts on health care, wages, and pensions that will be extended to additional unions that provide local coverage, according to a GE statement. 

While the contract negotiations were limited to active employees, the IUE-CWA is "very concerned about the announced plan changes to post-65 retirees," Thomas Kennedy, an attorney at Kennedy Jennik & Murray who represents the union, said in an interview. "We intend to vigorously defend them and are exploring our options." 

The $3.3 billion GE has reported in benefit adjustments so far represents about 2% of the company's roughly $150 billion in 2014 revenue and about 4% of cash on hand at the time, according to its annual SEC filing. GE stock has climbed 3.3% this year to $26.10, as of Wednesday's close.


 

Source: GE employee handbook, issued in July 2012


Source: GE employee handbook, effective January 2015


"I'm looking for some modification, some improvement, and some greater degree of justice for retirees than what currently abides," Rocheleau said in an interview.

The suit comes as many U.S. corporations look to reduce their financial obligation to former workers, Thomas Kochan, a professor of employment policy at the Massachusetts Institute of Technology and co-director of MIT's Sloan Institute for Work and Employment Research.

"Corporations are essentially breaking the social contract that corporations made with their employees where they said, 'If you stay with us, we will honor our retiree and health-care coverage," Kochan said. 

Still, separating health-care coverage from employers can be beneficial for both retirees and businesses if it's done collectively and properly, he said. 

"Society would be much better off if we completely divorced health-care coverage from employers, but to do that we have to do that as a country, so we have a substitute in place and a public health-care option that is affordable, which we and the companies all have to contribute to, in order to set a level playing field," he said. "But we ought to be doing that as a national policy and with corporate leadership, where people don't get hurt or fall through the cracks."

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