## Facts

- General Motors Corporation (GM) provided health-care coverage to non-union salaried retirees and surviving spouses beginning in the 1960s; GM later assumed the full cost of basic coverage and offered optional supplemental coverage with retiree cost-sharing.
- GM communicated benefits through written plan documents and summary booklets; some materials used “for life” language, but plan documents included express clauses reserving GM’s right to amend, modify, suspend, or terminate benefits.
- During 1970s–1980s early-retirement incentive programs, some early retirees alleged supervisors or HR staff orally represented that retiree health coverage would continue for life at no cost, while written materials continued to reference GM’s reserved right to change or terminate coverage.
- In 1987, GM imposed deductibles and annual out-of-pocket maximums on benefits previously fully paid by GM.
- Retirees sued under ERISA and related theories, alleging GM promised fully paid lifetime health benefits and that later cost-sharing changes were unlawful.

## Issues

1. Whether GM’s retiree health benefits vested, based on plan documents, summary materials, or early-retirement communications, such that GM could not later modify benefits.
2. Whether early retirees could enforce alleged lifetime, no-cost benefits as “separate contracts” formed through early-retirement packages and individualized meetings.
3. Whether ERISA equitable estoppel could bar GM from invoking unambiguous reservation-of-rights clauses based on alleged oral assurances.
4. Whether a class of early retirees was properly certified under Rule 23 given the need for individualized proof of representations and reliance.

## Decision

- The Sixth Circuit (en banc) held that GM’s retiree health benefits did not vest because the governing plan documents unambiguously reserved GM’s right to amend or terminate the plan.
- The court rejected the theory that early-retirement programs created vested benefits separate from the ERISA plans.
- The court held ERISA equitable estoppel could not be used to contradict unambiguous plan terms and that reliance on oral statements inconsistent with written materials was unreasonable as a matter of law.
- The court affirmed the district court’s conclusion that general retirees’ benefits did not vest and left undisturbed the denial of a general-retiree class.
- The court reversed certification of the early-retiree class because determining what was promised and whether reliance occurred required individualized inquiries, defeating Rule 23 requirements.
- Judgment was directed for GM on the named plaintiffs’ claims.

## Legal Principles

- ERISA does not impose statutory vesting for welfare benefits (such as retiree health insurance); vesting occurs only if the employer contractually agrees to vest benefits in clear plan language.
- Unambiguous reservation-of-rights clauses allowing amendment or termination control and prevent courts from inferring vested lifetime welfare benefits from general “for life” statements in summaries.
- ERISA equitable estoppel is narrowly available and cannot vary or override the clear terms of an unambiguous plan document; it also requires misrepresentation, reasonable and detrimental reliance, and extraordinary circumstances.
- Class treatment is improper where liability depends on individualized proof of what was communicated to each participant and whether each participant reasonably relied on those communications.

## Conclusion

The Sixth Circuit held that GM’s retiree medical benefits did not vest because the plan documents clearly reserved GM’s right to change or terminate coverage, foreclosing contract and estoppel theories based on inconsistent oral or summary statements; it also decertified the early-retiree class because individualized communications and reliance issues predominated.


Sprague v. Gen. Motors Corp., 133 F.3d 388 (6th Cir. 1998) (en banc)