SAG-AFTRA Health Plan Facing Class Action Over Cuts to Coverage

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The SAG-AFTRA health plan is at the center of a putative class action brought by a group of actors who say premiums have skyrocketed and medical coverage is being stripped from elderly guild members under the guise of a COVID-19-related restructuring, according to a complaint filed Tuesday in California federal court.

The actors — led by the iconic Ed Asner — are suing the SAG-AFTRA Health Fund and its board of trustees for allegedly breaching their fiduciary duties. Guild members Michael Bell, Raymond Harry Johnson, Sondra James Weil, David Jolliffe, Robert Clotworthy, Thomas Cook, Deborah White and Donna Lynn Leavy are also named plaintiffs, as well as surviving spouse Audrey Loggia.

Since 1960 the SAG Health Plan provided coverage to all guild members and, according to the complaint, in order to raise the funding necessary launch the program "every SAG performer surrendered the entirety of their television residuals for movies made prior to 1960." Four decades later, those actors say they've been abandoned by their guild and are losing their health coverage.

"On August 12, 2020, in the midst of a pandemic and a work shutdown and economic crisis, 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," writes attorney Neville Johnson in the complaint. "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."

According to the complaint, those cuts raise the covered earnings threshold, impose a penalty on participants 65 years of age and older, increase quarterly premiums, and limit spousal coverage. Premiums are increasing from $300 to $375 per quarter for covered individuals; $348 to $531 per quarter for individuals plus one covered dependent; and $375 to $747 per quarter for individuals with two or more covered dependents.

It's expected that at least 10 percent of the 33,000 participants, and nine percent of the covered dependents, will lose coverage — including more than 8,000 seniors. The actors argue the new structure amounts to illegal age discrimination. In order to qualify for coverage, an actor must earn $25,950 and under the new rules participants 65 or older who take their vested pension won't get credit for residuals and many of them won't be able to meet that earnings threshold.

Adds Johnson, "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."

Spouses of deceased guild members are also taking a hit, according to the complaint. Prior to the guild merger, the SAG health plan "unconditionally promised Senior Coverage to surviving spouses for life so long as the surviving spouse did not marry."

While the changes have been attributed to the pandemic, the actors allege it's really a result of rushing the merger of the health plans back in 2017 and trustees have admitted the cuts had been in the work for a couple of years.

"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," writes Johnson in the complaint, adding that the trustees knew soon after the merger that the benefit structure was unsustainable.

They also allege that this information was kept from members and non-health plan trustees on the SAG-AFTRA national board during the negotiation of collective bargaining agreements.

"The union negotiating team could have directed much more money into the SAG-AFTRA Health Plan had the team known the funding required to sustain the health benefit and eligibility of participants for coverage," writes Johnson in the complaint, which is posted below. "Postcards were sent to the membership by the union urging members to approve the TV/Theatrical contract. The post cards urged 'Vote Yes,' touting 'transformative gains,' increase of 'up to $54 million' to the health plan and '26% increase in fixed streaming residuals.' The membership was not informed the up to $54 million was insufficient to sustain the health benefit or that residuals earnings would no longer count toward covered earnings for health coverage of Retirees."

All of this, they argue, amounts to a breach of the health plan trustees' fiduciary responsibilities under ERISA, the Employee Retirement Income Security Act of 1974, which could make them personally liable for any losses.

The first proposed class includes "all participants and beneficiaries of the SAG Health Plan at the effective time of the Health Plans Merger," except for defendants and any plan fiduciaries. The second is "all participants and beneficiaries of the SAG-AFTRA Health Plan," with the same exception.

They're seeking a declaration that defendants breached their fiduciary duties under ERISA, an order compelling those found liable to restore the losses to the plan arising from those breaches, and disgorgement of profits made by any defendant.

The actors are represented by a team of attorneys from Johnson & Johnson, Chimicles Schwartz and Law Offices of Edward Siedle.

A spokesperson for the SAG-AFTRA Health Plan on Tuesday sent The Hollywood Reporter this statement: "We have just received a copy of the complaint that was filed this afternoon and are reviewing."