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AARP Adds Voice to Retiree Health Care Suit Vs. Caterpillar

AARP Presses for Continuation of Retiree Benefits

AARP attorneys have joined as co-counsel in a class action lawsuit that charges that Caterpillar, Inc. has violated a binding labor agreement by limiting its medical care costs for more than one thousand company retirees. The action continues AARP's drive to protect promised health care benefits for retirees.

AARP Foundation Litigation attorneys now are co-counsel in a suit which was originally filed in March in the U.S. District Court for the Middle District of Tennessee (Nashville). It is believed that as many as 1,100 retirees could be eligible to participate in the suit.

The suit states that, as of September 2004, Caterpillar violated collectively bargained agreements that provide for no-cost retiree medical care for life, and began deducting health care premium charges from the retirees' monthly pension checks.

The plaintiffs are asking that Caterpillar be required to reinstate full coverage for the retirees and to reimburse them for the costs already imposed since 2004.

This year, many retirees face medical care deductions totaling $174 per month for themselves and dependents. The monthly deduction is scheduled to rise to $222 in 2007, and is likely to continue to increase thereafter. Under the new policy, the retirees also are confronted with higher co-pays for medication and for physicians' visits.

"Caterpillar is delivering a crushing financial blow by withholding some of the promised benefits," said Jay Sushelsky, the primary AARP Foundation Litigation attorney in the case. "These retirees, with long careers behind them at the company, have understandably counted on health coverage as a building block for a reasonably secure future.

"Now they are without bargaining power and at the mercy of the company, which has pulled the plug on them," Sushelsky added.

The lawsuit states that many of the potential class members in the suit began work prior to 1970. In that year, the company's medical plan Summary Plan Description (SPD) provided for lifetime benefits without cost. The document read:

"If you retire and are eligible for the immediate receipt of a pension under...(the plan)...you will be eligible for the Retired Medical Benefit Plan, continued at no cost...For the surviving spouse of a retired employee, coverage will be continued for his or her lifetime at no cost."

Later, in 1992 during a strike at the company, Caterpillar announced without union consent that it would cap retiree medical costs, beginning in 2000.

The firm stated that it would begin to pay only the same amount for retiree health care as it paid in 1999. The company said that if the program costs for year 2000 exceeded the 1999 amount, anyone who retired after 1992 would be assessed a monthly premium.

The monthly premium charge was then first assessed in September, 2004. Caterpillar retirees who retired before 1992 are not being assessed any charges for retiree medical benefits.

The Caterpillar suit comes at a time when other companies have announced retiree medical care cutbacks, citing financial setbacks. Caterpillar reported profits of more than $2 billion for 2004—the year in which it began charging post-1991 retirees for medical care—and, according to newspaper reports, profits of $2.85 billion in 2005.

AARP Foundation Litigation attorneys are representing the plaintiffs, along with the Chicago firm of Meites, Mulder, Mollica & Glink and the Nashville office of the national firm Lieff, Cabraser, Heimann & Bernstein, LLP. Caterpillar is headquartered in Peoria, Illinois.

The Caterpillar lawsuit comes as AARP continues its legal fight to block a ruling by the federal Equal Employment Opportunity Commission (EEOC) to exempt employers from the Age Discrimination in Employment Act (ADEA) in providing retiree health care.

EEOC's proposed exemption would allow employers to eliminate employer-sponsored health benefits for Medicare recipients, while continuing to provide younger retirees with health care coverage that is better than for a Medicare-eligible retiree.

AARP has appealed an adverse decision in the EEOC case to the U.S. Court of Appeals for the Third Circuit in Philadelphia. Oral arguments are expected later this year.

AARP is a nonprofit, nonpartisan membership organization that helps people 50+ have independence, choice and control in ways that are beneficial and affordable to them and society as a whole. We produce AARP The Magazine, published bimonthly; AARP Bulletin, our monthly newspaper; AARP Segunda Juventud, our bimonthly magazine in Spanish and English; NRTA Live & Learn, our quarterly newsletter for 50+ educators; and our website, www.aarp.org. AARP Foundation is an affiliated charity that provides security, protection, and empowerment to older persons in need with support from thousands of volunteers, donors, and sponsors. We have staffed offices in all 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands.

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