As baby boomers seek to exercise rights under employer-provided retiree health insurance plans, they may face resistance from employers who seek to reduce their fringe benefit costs. One employer tactic is to argue the retiree does not qualify for the benefits. In Stoflet v. City of Eau Claire and L. E. Phillips Memorial Public Library, 2013 A. 2049 (Ct. App. Feb. 25, 2014), the employer refused to provide retiree health insurance benefits to an employee whose position they eliminated. The former employee successfully sued the former employer for the retiree health benefits. In response to the employer’s appeal, the District III Court of Appeals ruled that because the definition of the term “retirement” was ambiguous, it should be construed against the Library and in favor of the retired employee.
Stoflet was an information systems manager for the Library until his position was eliminated. Shortly thereafter, he turned age 55 and became eligible for retirement annuity payments under the Wisconsin Retirement System (WRS).
While he was employed at the Library, Stoflet received health insurance benefits through the Library’s group health insurance plan. After his employment ended, Stoflet sought health insurance benefits under the Library’s Retiree Health Insurance Plan. The policy stated:
Upon retirement at age fifty-five (55) or later, the L. E. Phillips Memorial Public Library (LEPMPL) will pay ninety percent (90%) of the amount paid for active Library Professional and Confidential employees towards monthly health insurance premiums until the employee becomes eligible for Medicare, dies or receives ten (10) years of contributions, whichever comes first. Employees may choose single or family coverage. Employees who were part-time at retirement will receive prorated benefits. Employees who discontinue coverage will not be able to re-enroll in a LEPMPL Health Insurance Plan.
Employees retiring before the age of fifty-five (55), but remaining covered by LEPMP Group Health Insurance Plan will receive the Library’s contribution when they reach age fifty-five (55). Retirement is defined as receiving a WRS annuity.
The Library denied Stoflet the health insurance coverage, saying that he was not eligible for benefits under the Retiree Health Insurance Plan because he did not retire at age 55 or later because he had not reached age 55 at the time his position was eliminated. The circuit court heard Stoflet’s challenge to the Library’s interpretation and determined Stoflet was entitled to benefits under the Retiree Health Insurance Policy. The Library appealed. The District III Court of Appeals affirmed the trial court’s decision that Stoflet was eligible for benefits.
Stoflet argued the term “retirement” in the policy is defined in paragraph 2 of the policy which stated: “retirement is defined as receiving a WRS annuity.” Stoflet began receiving a WRS annuity 10 months after he turned age 55.
The Court of Appeals concluded that because the definition of “retirement” was ambiguous, it would interpret the language considering what would be a reasonable employee’s expectations concerning coverage. It determined Stoflet was entitled to the health insurance benefit despite the ambiguous language. Because neither party could cite any extrinsic evidence to clarify the ambiguity, the Court of Appeals construed the ambiguous language against the Library, as the policy’s drafter.
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