Legal Issues and Retirement Benefits and Employment Law and Law and Workplace Issues

AARP backs retirees in court fight over IPL benefits plan

May 20, 2010

The AARP is cheering a fight by 16 retirees of Indianapolis Power & Light who want the utility to resume funding a post-retirement health and life plan that’s struggled to pay benefits.

Washington, D.C.-based AARP, a seniors advocacy group, on May 10 filed an amicus brief with the Indiana Supreme Court, which has been asked to hear the case by the IPL retirees and the International Brotherhood of Electrical Workers. Amicus briefs are documents of support filed in a court by parties not directly related to the case under consideration.

The legal battle between IPL and retirees has entered its third year.

“It’s been a long time in the pipeline and we’re plugging away,” said Todd Richardson, an attorney at Indianapolis-based Lewis & Kappes, which is representing retirees and the union.

IPL, using an estimated $19 million a year from ratepayers, funded the IPALCO Enterprises Voluntary Employee Beneficiary Association, or VEBA, fund until about 2001, when the utility was acquired by Virginia-based AES Corp.

The plan was spun off by IPL, and the VEBA later had to reduce or eliminate some benefits for retirees and their families. The former utility workers blamed additional burdens on the plan caused by a wave of early retirements as AES downsized the Indianapolis operations.

Retirees allege IPL continues to collect money from ratepayers to fund a plan it no longer administers. They also point to statements during a 1995 rate settlement that set current IPL rates in which then-executives said VEBA benefits could be removed only if the company went back on a “solemn” promise.

“There have been a lot of broken corporate promises, but this is one which the court can and should take steps to remedy,” the AARP said in its brief to the Indiana Supreme Court.

The court has not yet decided whether to hear the case.

In 2007, the retirees and union asked the Indiana Utility Regulatory Commission to force IPL to backfund the retirement plan to the tune of $100 million.

They argued that, not only is IPL still collecting about $19 million a year from ratepayers for a plan it no longer funds, but that the money ultimately flows back to AES in the form of dividends.

They further argued that IPL was able to obtain a rate increase in the mid-1990s in part because it promised regulators it would continue to fund the VEBA plan.

IPL countered that the rate settlement authorized it to account for post-retirement VEBA benefits on the accrual accounting basis, but did not formalize an agreed-upon level of expenses to be contributed to the plan.

The commission last year agreed with IPL in a ruling against the retirees.

In response, they took the case to the Indiana Court of Appeals.

In January, the court ruled against them, saying it would give deference to the commission because “we cannot find unreasonable the commission’s interpretation of its own order.”

But the Court of Appeals left the retirees with some ammunition. It did not condone actions of IPL or parent company AES, saying “it appears IPL obtained a substantial rate increase based in large part on its promise to continue funding the VEBA trust for its retirees’ benefits.”

The appeals court also noted statements from then-executives of the utility who said removing the benefits could be done only if IPL “were to go back on a solemn promise to employees.”

The AARP says the Supreme Court needs to stop IPL from evading its obligations.

“IPL’s refusal to continue funding the VEBA trust, and the commission’s interpretation of what IPL ‘proposed’ for the use of the rate-increase revenue, perverts what was promised to be a method to secure retiree health coverage security into nothing more than an accounting trick which benefits only IPL’s shareholders,” AARP said in its brief.

Moreover, the group told the court the public “did not agree to add $20 million annually to the rate burden simply to make IPL more attractive as a corporate acquisition.”

IPL had not yet filed a response in the Supreme Court petition.

The utility declined to comment, citing pending litigation.

 

 

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