Retired public workers can count on promised
benefits, court says
California Supreme Court rules in an Orange County
case that implied contracts covering retirees' healthcare are valid.
By Maura Dolan, Los Angeles Times
November
21, 2011, 5:50 p.m.
READ THE RULING: Retired Employees Association of Orange
County v. County of Orange (pdf)
Health benefits for government retirees may
not be eliminated if state and local governments had clearly promised workers
those benefits, the California Supreme Court
ruled in an Orange
County case Monday.
The unanimous ruling is expected to make it more difficult for state and local
governments to shave costs by cutting health benefits to retirees if elected
officials in previous years made it clear that those benefits would last a
lifetime.
The state high court decided that retired Orange County
employees may be able to show they had an implied contract that prevented the
county from changing a healthcare plan in a way that caused the premiums of
many retirees to skyrocket.
"Under California
law, a vested right to health benefits for retired county employees can be
implied under certain circumstances from a county ordinance or
resolution," Justice Marvin R. Baxter wrote for the court.
Retirees sued Orange
County in 2007 after it
revamped the health benefit program to save money. A federal trial court sided
with the county. An appeals court, which is now considering the case, asked the
California
Supreme Court to clarify state law in the case.
"This decision says that when you are in the process of doing public
employee pension reform, you have to respect the rights of current
retirees," said Ernest Galvan, a lawyer who represented more than 5,000 Orange County
retirees and their family members.
"If you promised them a particular benefit when they were working and
promised that would be part of their retirement, then that is a promise you
have to keep."
But lawyers for cities and counties said they were pleased the court
established a hurdle for showing that such promises were
made.
"The good news for cities and counties is that the court made it clear
that you need very strong evidence that the [elected officials] intended to
create a lifetime benefit," said Jonathan V. Holtzman,
who represented associations of California cities and counties.
Arthur A. Hartinger, who represented Orange County,
said the county changed the health insurance plan to ensure it could survive.
"This was about saving a plan that was on the verge of bankruptcy," Hartinger said. "Almost all the retirees have remained
covered in group health insurance."
The case will now return to the U.S.
9th Circuit Court of Appeals. Lawyers said they expect the lawsuit to be sent
back to the trial court to determine whether there was evidence of clear
promises.
maura.dolan@latimes.com
http://www.latimes.com/health/la-me-1122-health-benefits-20111122,0,7003079.story
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The California
Supreme Court did not declare a winner Monday in a years-long fight over
whether the county’s retirees can be treated differently when it comes to
medical benefits, opting instead to lay the groundwork for the Ninth Circuit
Court of Appeals to decide the issue.
The Supreme Court opinion has both sides claiming
they have the advantage when it comes to the ultimate ruling in the federal
court.
The Retired Employees Association of Orange County is arguing it has a contractual right to be
lumped in with current employees when it comes to medical benefits as a way of
avoiding more expensive premiums. The county argues that there was never a
guarantee that retirees would continue to enjoy the pooling benefit – and the
resulting lower medical premiums – forever.
“Under California law, a vested right to health benefits
for retired county employees can be implied under certain circumstances from a
county ordinance or resolution,” wrote Associate Justice Marvin R.
Baxter in the Supreme Court opinion. “Whether those circumstances
exist in this case is beyond the scope of the question posed to us by the Ninth
Circuit.”
The two sides will take the fight back to the Ninth
Circuit Court, which will decide whether the county broke its promise to
thousands of retirees or whether those retirees relied on a benefit that was
never intended to last forever.
The decision on the case could have significant
implications for local governments across California, many of which are struggling to
get a handle on ever-increasing unfunded liabilities.
“All along this case has been a matter of fundamental
fairness and economic justice,” said said REAOC
Co-President Linda Robinson. “This is about requiring
politicians and bureaucrats to live up to decades-old promises.”
But the county argues that no lifetime promise was ever
made.
And depositions of retirees even question whether the
retirees themselves actually thought it was a lifetime commitment by the
county, said Jennifer L. Nock of Meyers, Nave, Riback, Silver & Wilson, who represented the county
“Even if that is what they thought, you have to go both
ways. It’s not just what the employees think,” said Nock. “You have to look at
what the legislative body intended.”
In June 2006, the county’s employee
union and the Board of Supervisors negotiated a deal to reduce the then-$1.4
billion in unfunded liabilities for the retiree medical plan.
Up until then retirees and workers were lumped in the
same benefit pool. But because retirees are usually older than current
employees, they are more likely to suffer from health problems, resulting in
higher medical costs.
The brokered deal split the pool, which helped the county
get a much-needed handle on its unfunded liabilities when it came to its
retiree medical plan. But it also resulted in higher premium costs for
retirees, said Robinson. Some retirees saw premiums go up more than 90
percent in a single year, she said. That kind of increase was
difficult, if not impossible, to absorb by retirees on a fixed income, Robinson
said.
Splitting the retirees from current employees slashed the
unfunded liability by more than half, but REAOC filed a federal lawsuit
claiming breach of contract and violation of due process.
The county argues the pooling was not a vested benefit
and there is no evidence that the Board of Supervisors intended for the pooling
benefit to continue indefinitely.
“It’s just not contained anywhere,” said Nock of Meyers,
Nave, Riback, Silver &
Wilson, who represented the county. “They have a very high burden to prove that
the county intended to do this forever.”
The California Supreme Court says there MIGHT be
a such a thing as an implied contract but stopped short of deciding whether the
retirees had one with the County of Orange. The Ninth Circuit will make the
call and the Watchdog will let you know what it decides.
http://taxdollars.ocregister.com/2011/11/21/retiree-medical-benefits-fight-heads-back-to-court/136563/
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Pension Battle
Pits 'Haves' Versus 'Have Mores'
By
Steven Greenhut on November 21, 2011
The Marin
Independent-Journal reported earlier this month that "The
soaring cost of Marin
County's pension program
is driven in large part by plump benefits for a few hundred retirees at the
top, a new study indicates. Some 30 percent of the Marin County Employee
Retirement Association's pension payroll goes to just 9 percent of retirees who
get checks of more than $80,000 a year -- including ranking officials, safety
officers and others who retired at top pay after long tenures."
That's crazy. It also offers a "divide and conquer" strategy for
pension reformers. When I discuss the problems with the current system with
public employees, they don't typically seem to care. Arguments about depleted
public services and pension liabilities rarely resonate with these
well-pensioned folks, who usually just accuse me of being jealous of them. But
show them that other public employees will receive far more than they will
receive, and that gets their interest. The public sector unions have exploited
envy. Perhaps we can exploit it, too.
Article located at http://www.publicsectorinc.com/forum/2011/11/pension-battle-pits-the-haves-versus-the-haves.html
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