News Notes: Incomplete Summary Plan Descriptions Can Be Costly

Auto parts manufacturer Kelsey-Hayes Co. gave employees a summary plan description of their employee benefits plan stating that health insurance would continue at no cost when they retired. The summary didn’t mention the company had the right to modify or terminate benefits, even though the master health care plan paperwork did. Later, when Kelsey-Hayes informed retired workers that their benefits were no longer free, the retirees sued. A federal appeals court ruled the company didn’t have the right to reduce or terminate the retirees’ vested benefits because the benefits summary didn’t clearly spell out that right.7 In light of this decision, it’s important to make sure your summary plan descriptions include all the critical benefit provisions-especially that you have the right to terminate or modify benefits at any time. And, according to a previous U.S. Supreme Court decision, you should also mention the procedure to be followed to make such changes.