When actor Robert Loggia died in 2015, his widow, Audrey Loggia, was notified by the SAG Health Plan that she was entitled to receive continuing health coverage as a surviving spouse “for the remainder of her lifetime or until she remarried.” But a class action lawsuit filed today against the SAG-AFTRA Health Plan and its trustees says that “before either of those circumstances appreciated, the Plan notified her on November 24, 2020, that she would lose coverage on September 30, 2021” under eligibility and benefit changes that take effect in the New Year.
Facing staggering deficits, the SAG-AFTRA Health Plan announced in August that it will be raising premiums and earnings thresholds for coverage on Jan. 1 in order to stay afloat. “While this restructuring will preserve access to an excellent health plan for the majority of our participants, the changes will be disruptive for some,” the Plan said in a letter to participants, noting that those who lose coverage because they don’t meet the new earnings requirements may be eligible for coverage under Obama Care. “Without restructuring the Health Plans, we are projecting a deficit of $141 million this year and $83 million in 2021, and by 2024 the Health Plan is projected to run out of reserves,” the letter stated.
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The lawsuit, filed in U.S. District Court in Los Angeles by attorney Neville L. Johnson, claims that the coming benefit changes “illegally discriminate based on age and violate the Age Discrimination and Employment Act of 1967,” and are a breach of fiduciary duty under the Employee Retirement Income Security Act (ERISA). Named plaintiffs in the suit include Audrey Loggia and nine other actors, including former SAG president Ed Asner and David Jolliffe, currently a vice president of the union’s Los Angeles Local – both of whom are leaders of the union’s dissident faction that spearheaded the lawsuit.
During a town hall meeting in August, leaders of the union’s Membership First faction — who had opposed the 2012 merger of SAG and AFTRA — said that they were mulling legal action to prevent thousands of participants and their family members from losing their health coverage when the sweeping changes take effect next year. “We have been talking to lawyers. We have been talking to government agencies,” said Patricia Richardson, president of the union’s Los Angeles Local and the host of the virtual meeting – the second in a series of Zoom meetings organized by leaders of the union’s longtime opposition party. “I can tell you right now, there’s some illegal stuff going on here. There’s certainly a lawsuit. Whether there’s going to be money for the lawsuit is a whole other question.” Richardson, it should be noted, is not a named plaintiff.
“On August 12, 2020, in the midst of a pandemic and a work shutdown and economic crisis,” the suit states, “the SAG-AFTRA Health Plan participants were shocked when the SAG-AFTRA Health Plan Trustees suddenly announced draconian changes to the SAG-AFTRA health benefits structure. The trustees blame the Covid-19 pandemic for the suddenly urgent need to impose the benefit cuts and drop thousands of participants from SAG-AFTRA health coverage. This blame ignores the facts and readily available measures that could have addressed such a one-time event without dramatically ending SAG-AFTRA health coverage for primarily older participants, including many performers who surrendered their right to pre-1960 film residuals to start the SAG pension and health plans for all members.”
See the full complaint here.
The suit notes that the SAG Health Plan was formed in 1960 to provide health coverage to all SAG members. “To provide seed funding for the pension and health plans, every SAG performer surrendered the entirety of their television residuals for movies made prior to 1960. Now, the same performers who made those tremendous sacrifices have been abandoned by the pension plan and a health plan. They are being eliminated from health coverage by the health plan as a result of the January 1, 2017 merger of the SAG Health Plan with the AFTRA Health Plan, which union leadership touted would position the new health plan ‘to be financially sustainable for all members for years to come’ and would ‘strengthen the overall financial health of the plan while ensuring comprehensive benefits for all participants.’”
The lawsuit’s claims for breaches of fiduciary duty under ERISA were filed against the former SAG Health Plan’s trustees relating to their “consideration, approval and implementation” of the merger with the AFTRA plan, and against the current SAG-AFTRA Health Plan trustees relating to their “administration and management” of the SAG-AFTRA Health Plan following the health plans’ merger.
“As structured, the benefit cuts wrongfully and illegally discriminate based on age,” the suit claims — an allegation the trustees have vehemently denied. “The benefit cuts eliminated the Senior Coverage lifetime SAG-AFTRA secondary health coverage for members with 20 years vested accrued pension credit and took this accrued coverage from members or surviving spouses already receiving it. In addition, the benefit cuts imposed a penalty on participants 65 years of age or older who take their vested pension. Such participants get zero covered earnings credit for residuals earnings toward the new $25,950 earnings threshold for SAG-AFTRA health care eligibility, yet they continue to have contributions paid into the Plan and dues calculated based on residuals and sessional earnings at the same rate as younger participants. All participants must take a pension at 70.5 years of age. The vast majority of participants 65 years of age or older taking a pension will not have $25,950 in sessional earnings to continue to qualify for coverage. In addition, prior to the benefit cuts, a participant’s base earnings year was either: January 1-December 31; April 1-March 31; July 1-June 30; October 1-September 30. Effective immediately, the base earnings year for all participants 65 years of age or older is October 1-September 30. Where this resulted in a change, the time of the affected participant to seek sessional opportunities was limited. The Benefit year for all participants 65 and older was changed to January 1 – December 31. Further, the plan is refusing to credit sessional earnings for work that occurred prior to September 30 but for which checks were not received until later.”
The suit notes, however, that prior to the 2017 merger of the SAG and AFTRA health plans, the SAG trustees “unconditionally promised Senior Coverage to surviving spouses for life so long as the surviving spouse did not marry. The January 17, 2016 letter to surviving spouse Madonna Magee stated: ‘Under the rules of the Health Plan we are privileged to provide continuing benefits under the Extended Spousal Benefit effective January 1, 2016. You are eligible for these benefits until you remarry or upon your demise.’ Plaintiff Audrey Loggia received the same promise following the December 2015 death of her spouse, Robert Loggia.”
According to the lawsuit, the coming changes in eligibility “substantially raise the covered earnings threshold for SAG-AFTRA health coverage eligibility for many participants; eliminate Senior Performers/surviving spouses lifetime SAG-AFTRA secondary health coverage (‘Senior Coverage’); impose a penalty on participants 65 years of age and older who take their vested pension by no longer permitting residuals earnings from the covered earnings of these participants to qualify for SAG-AFTRA health coverage; increase quarterly premiums; and limit spousal coverage.”
The pending changes in coverage, the suit says, “were projected by the Plan’s administrators to remove 10% of the Plan’s 33,000 participants and 9% of their 32,000 dependents from SAG-AFTRA health coverage. This estimate excludes the over 8,000 seniors who will lose Senior Coverage. In fact, the benefit cuts will likely drop more than one-third of health plan participants from coverage, while the Plan is projected to continue to have a ‘fund reserve’ of more than $250 million at the end of 2020, which has been funded in part by the participants who will be cut from continued SAG-AFTRA coverage.”
The suit claims that internal union politics prompted the 2017 merger of the SAG and AFTRA health plans, which was touted at the time as positioning the new merged Plan as one that would “be financially sustainable for all members for years to come,” and that would “strengthen the overall financial health of the Plan while ensuring comprehensive benefits for all participants.”
“In actuality,” the suit claims, “the SAG Health Plan trustees hastily proceeded with the health plans’ merger for political purposes to benefit the union and union leadership, without a diligent pre-merger investigation and analysis to assess the impact of the merger on the SAG Health Plan and its participants’ future health benefits under the funding structure of the merged plan, and what, if any, measures could be implemented in the merged Plan to protect the participants and their benefits, as required by their fiduciary duties under ERISA. A diligent pre-merger investigation and analysis would have revealed the looming peril and the inadvisability of proceeding with the merger unless the merged plan and its funding and structure would protect and sustain the benefits for the SAG Health Plan participants. In fact, the SAG-AFTRA Health Plan Trustees knew soon after the health plans’ merger that the health benefit structure was not sustainable in the merged Plan under then-current funding. According to representations made by defendant-trustees (former SAG presidents) Richard Masur and Barry Gordon on August 19, 2020, cuts had been in the works for two years, with the trustees working nearly every day of those years to figure out how to preserve the benefit.”
But during this two-year period, the suit says, “three major collective bargaining agreements were negotiated. Two of these agreements were approved by the SAG-AFTRA National Board members and put to a membership vote, while the third was negotiated by staff, approved by the SAG-AFTRA National Board, but not put to a membership vote. The SAG-AFTRA Health Plan Trustees knew that strong negotiating power of the union negotiating team was vital to protect health benefits in the merged Plan and that union negotiators owed the duty of fair representation to the members. When these contracts were negotiated, the components of the package of value for the members were still in play, including contribution rates for sessional and residuals earnings, wages and working conditions. The contributions plus wages plus working conditions constitute the value package for the members in exchange for their work under the contracts. The SAG-AFTRA Health Plan Trustees, several of whom participated in the negotiations and the SAG-AFTRA National Board approvals of the contracts, failed to disclose to the non-health plan trustee members of the union negotiating teams and the SAG-AFTRA National Board, or to the membership, the funding structure necessary to sustain the health benefit structure, the imminence of benefit cuts or the insufficiency of the negotiated contract terms to sustain the health benefit structure.
“The non-trustee negotiators lacked information material to the funding terms and relative value of contributions versus wage increases or needed diversions to sustain the benefit structure. The non-health plan trustee union negotiating committee members and SAG-AFTRA National Board members and the membership lacked information that the contracts were insufficient to sustain the benefit structure, and to assess the value of the negotiated terms. The health plan trustee SAG-AFTRA National Board members failed to disclose the information in connection with the SAG-AFTRA National Board approval votes, failed recuse or to abstain from voting and voted to approve the contracts.”
According to the lawsuit, “The trustees’ fiduciary duties required them to conduct a diligent, fully-informed investigation and analysis to determine the impact of the merger on the SAG Health Plan participants and their beneficiaries, and to proceed only if the merger is solely in the best interests of the participants and their beneficiaries. As alleged herein, the trustees failed to do so and disloyally pushed through the hasty merger to benefit SAG-AFTRA for the political purposes of union leadership at the unfair expense of the SAG Health Plan participants and their beneficiaries. The SAG-AFTRA trustees knew by at least shortly after the merger the health benefit structure in the merged Plan was not sustainable as then-funded, and cuts were looming.”
“As a result of the benefit cuts and the elimination of residuals earnings from covered earnings to qualify for coverage,” the suit claims that named plaintiffs Ed Asner, Michael Bell, Donna Lynn Leavy, Sondra James Weil, Deborah White and Raymond Harry Johnson “will lose (their) SAG-AFTRA coverage and will not reach the qualifying threshold by sessional earnings.” The suit also says that as a result of the changes, 90-year-old plaintiff Thomas Cook “and his dependents will lose and not qualify for SAG-AFTRA Senior Coverage health coverage as of January 1, 2021.”
As for plaintiff Robert Clotworthy, who is over 65 and takes a pension, the suit says that prior to the changes, he “would have qualified for Senior Coverage upon reaching age 65 on October 24, 2020,” having had more than $25,950 in yearly covered earning with residuals and sessional earnings prior to the announced changes. But after the changes go into effect, the suit says, he will have “lost credit for residuals earnings,” and “as a result of the benefits cuts and the elimination of residuals from covered earnings, Robert Clotworthy will not qualify for SAG-AFTRA health coverage.”
The suit says that prior to the changes, plaintiff David Jolliffe “accrued Senior Coverage by 20 years of pension service. The benefit cuts changed David Jolliffe’s base earnings year effective immediately from April 1-March 31, to October 1-September 30. The change limited his time to obtain sessional opportunities. The benefit cuts also changed his benefit year to January 1-December 31. Prior to the benefit cuts, David Jolliffe had pre-qualified for coverage through March 31, 2022. Under the changed benefit year in the benefit cuts, his end benefit date was rolled back to December 31, 2021, taking accrued advanced contributions already made.”
The lawsuit, which seeks a jury trial, also asked the court to appoint “an independent fiduciary” to administer the Plan, to manage its assets and to “correct and reverse the wrongful changes to the benefit structure alleged herein.” It also seeks a court order compelling the Plan’s fiduciaries “to provide a full accounting” of all fees paid, directly or indirectly, by the Plan.
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