* As you probably know, former appellate justice Gordon Maag sued the state over a new law that allows CMS to set public employee retiree health insurance premium rates, claiming the law is an “unconstitutional violation of the Illinois Constitution Pension Protection Clause.”
But Judge Steven Nardulli just tossed out the suit, ruling…
1) Health insurance benefits are not guaranteed pension benefits protected by the Pension Protection Clause;
2) Plaintiffs do not have a vested contractual interest in free health insurance;
The ruling is here.
…Adding… This would seem to strengthen Senate President Cullerton’s pension reform proposal, which would force folks to choose between a COLA and access to government health insurance.
…Adding More… From the decision…
If one were to accept the premise that health insurance benefits are vested rights that accrue upon retirement, one must accept the premise that those benefits cannot be reduced, regardless of changing medical technology or the willingness of insurance providers to make a particular policy of health insurance available. The fact that medical technology and contracts offered by insurance companies change, as opposed to the actuarial certainty of a pension payment, lead this court to the conclusion that health insurance benefits are not the same as a pension protected by the Pension Protection Clause. […]
This conclusion as applied to the Kanerva Plaintiffs requires special mention. The Kanerva Plaintiffs are all former Merit Compensation employees of the State, many of whom elected to take early retirement, allegedly in reliance upon promises made by the State that their medical benefits would be “sacrosanct” in retirement. Even accepting the allegation that promises by SERS and CMS were made to the effect that those retirees would not be charged premiums for health insurance, those representations cannot create a contract between the Kanerva Plaintiffs and the State.
*** UPDATE *** AFSCME responds…
“We are greatly disappointed by today’s decision,” AFSCME Council 31 executive director Henry Bayer said. “We continue to believe this law impairs the rights of men and women who retired after careers with state government or state universities to obtain health insurance coverage according to the terms in place when they retired. It also violates the constitutional clause that prevents the diminishment of retirement benefits earned by public employees. We intend to consult with the plaintiffs and our union partners about our options going forward.”
While AFSCME is not a party to the suit in question, it joined with other labor unions in support of a class action suit filed in August 2012, later consolidated along with other cases before Judge Steven Nardulli.
- Bush Twins - Tuesday, Mar 19, 13 @ 2:03 pm:
This suggests Cullerton knows what he is talking about when it comes to his pension ideas.
- 47th Ward - Tuesday, Mar 19, 13 @ 2:07 pm:
It is going to take a decision by the Illinois Supremes before Cullerton has a winning hand. But yeah, this decision surely won’t hurt his legislation.
Next stop, Maag’s former colleagues on the Appellate bench.
- Cassiopeia - Tuesday, Mar 19, 13 @ 2:08 pm:
Cullerton is “the” adult in Springfield.
- Demoralized - Tuesday, Mar 19, 13 @ 2:09 pm:
The GA just needs to pass a solution that they think is the best one and let the courts tell us what is Constitutional and what isn’t. People need to quit playing judge in this battle and realize that the ultimate decision isn’t up to them. I understand the desire to draft language that they think will hold up in court, but they will never get anything done if everybody is playing constitutional lawyer.
- Demoralized - Tuesday, Mar 19, 13 @ 2:15 pm:
I’m not sure I agree with the judge’s ruling that already retired individuals don’t deserve some sort of contractual protection given that they retired under certain parameters. Basically now the state can promise you anything at retirement and then pull the rug out from under you later. I don’t quite understand why current retirees don’t get some sort of protection, but I guess that’s why I’m not a judge.
- Michelle Flaherty - Tuesday, Mar 19, 13 @ 2:15 pm:
Demoralized. You’re close. Nothing will get done so long as people aren’t listening to the constitutional lawyers.
- RNUG - Tuesday, Mar 19, 13 @ 2:16 pm:
Wow. Didn’t see that one coming.
- RNUG - Tuesday, Mar 19, 13 @ 2:18 pm:
Guess AFSCME knew what they were doing when they negotiated the premiums.
- archimedes - Tuesday, Mar 19, 13 @ 2:19 pm:
SB1, besides the either/or choice between access to retiree health insurance and the Automatic Annual Increase (AAI), limits credible earnings for active employees if one chooses AAI over health insurance. This solves one part - ruling that retiree health insurance is not a contract for these plaintiffs.
It does, however, make the retired members choice option legal.
- illinifan - Tuesday, Mar 19, 13 @ 2:24 pm:
In a way I thought this would happen, but hoped it wouldn’t. But there is a bright spot in the line “lead this court to the conclusion that health insurance benefits are not the same as a pension protected by the Pension Protection Clause” which does provide some insight that there may be a harder time changing pension and COLA.
- Killarney - Tuesday, Mar 19, 13 @ 2:26 pm:
“Even accepting the allegation that promises by SERS and CMS were made to the effect that those retirees would not be charged premiums for health insurance, those representations cannot create a contract between the Kanerva Plaintiffs and the State.”
Why doesn’t this create a contract? SERS and CMS “promises” were made according to the statute passed by the legislature.
- walkinfool - Tuesday, Mar 19, 13 @ 2:34 pm:
This finding could have even larger implications.
I’m not sure the same argument couldn’t be applied to the AAI, since it’s underlying premise is an adjustment for “cost of living”, which can be variable in reality. Its amount is not an “actuarial certainty” and therefore might also not be specifically constitutionally protected.
But there I go again, pretending to be a Constitutional expert — I agree with Demoralized and his disdain for that foolishness.
- Huggybunny - Tuesday, Mar 19, 13 @ 2:40 pm:
It does, however, make the retired members choice option legal.
But is being forced to choose between health care and COLA legal, or is it coercive? It’s already been hinted that “access” to health care means just that, you can buy from the State’s chosen providers, but no guarantee that the State will pay any of the premium.
- Revenue Retirees - Tuesday, Mar 19, 13 @ 2:41 pm:
Thank you so much for all the information that you have given . You are most appreciated
- geronimo - Tuesday, Mar 19, 13 @ 2:44 pm:
If health insurance benefits are not guaranteed as in the case of TRS, where a portion of the contribution was for TRIP, what exactly was one paying for? An illusion?
- foster brooks - Tuesday, Mar 19, 13 @ 2:45 pm:
Everyone grab a SERS book, in it you will find what are pension benefits.
- Killarney - Tuesday, Mar 19, 13 @ 2:50 pm:
The judges are included in the law at issue in the Maag case. (SB 1313; Public Act 97-695)
- Ruby - Tuesday, Mar 19, 13 @ 2:52 pm:
geronimo @ 2:44 pm:
I think we were paying for access to health care insurance, not free health care premiums.
- archimedes - Tuesday, Mar 19, 13 @ 2:52 pm:
As far as TRS and TRIP - none of the Plaintiffs were TRS retirees or insured through TRIP. The statute passed (and challenged) did not include TRS and TRIP.
The Automatic Annual Increase is contractual as it is stated as 3% in the Pension statutes (and the pension laws are, per the consititution, a contractual obligation) - it is sometimes referred to by media (and others) as a “COLA” but the statute does not do so.
- Bill - Tuesday, Mar 19, 13 @ 2:54 pm:
==what exactly was one paying for==
One was paying to subsidize the insurance of the already retired.
- Excessively Rabid - Tuesday, Mar 19, 13 @ 2:54 pm:
==those representations cannot create a contract==
I wonder what he would rule does create a contract? My thinking is that when somebody is given papers that say if you do this, that will happen, and they sign the papers, making irrevocable changes by so doing, it’s a contract. One party can’t change the terms after the fact. But the judge doesn’t think so.
- Captain Illini - Tuesday, Mar 19, 13 @ 3:00 pm:
Well, I’m no lawyer, but I see a specious ruling when I read it. The issue was not “changing technology” it was changing the guarantee of the state paying for the employee portion of health care costs after earning 20 years of employment that is codified in Illinois law. Looks like appeal to me, then off the the supremes after the score reaches 1-1.
- Arthur Andersen - Tuesday, Mar 19, 13 @ 3:04 pm:
Bill, exactly. TRIP is the last place to make the argument.
- Jim - Tuesday, Mar 19, 13 @ 3:05 pm:
If Cullerton was an adult, Illinois would not have the problems it has. good to see that he is right on the insurance issue, but the judge’s ruling is basic common sense.
- Nearly Normal - Tuesday, Mar 19, 13 @ 3:11 pm:
TRS and TRIP were not part of the lawsuit since there was no negotiated agreemet for anyone to receive health insurance without paying premiums. There are some TRS members who have their premiums paid for but that was by their school district through negotiated contracts.
- unbiased observer - Tuesday, Mar 19, 13 @ 3:18 pm:
i agree with demoralized and walking fool. playing constitutinal lawyer is not the way to go. this does not imply that accordingly we should attempt to punish the state workers.
it means well informed, intelligent, compassionate adults sit down and try to find a way out of this mess, with the best interests of ALL of the people of this state at heart.
i think this judicial decision reinforces the idea that the stateworkers should not just rest confidently on their “unconstitutional” arguments. that is too risky, and it sort of precludes them from the bargaining table in a way.
lets all get together and figure out a solution that will get us back on track over the next 10-20 years.
- Meaningless - Tuesday, Mar 19, 13 @ 3:38 pm:
Does anyone know exactly which pension benefits that “shall not be diminished or impaired” seem to be constitutionally protected?
- Bill - Tuesday, Mar 19, 13 @ 3:44 pm:
Nothing is for certain. Going to court in this state is a craps shoot.
- Fred's Mustache - Tuesday, Mar 19, 13 @ 3:45 pm:
=== Does anyone know exactly which pension benefits that “shall not be diminished or impaired” seem to be constitutionally protected?===
According to the court in this case, “Pension benefits are in the nature of annuities”
- Old and In the Way - Tuesday, Mar 19, 13 @ 4:05 pm:
This is not unexpected, nor is it the last word I suspect. A careful reading of the decision leaves a lot of unanswered questions. While the decision may not be overturned it will certainly need to be clarified in several respects.
I am out of state for a while on business but look forward to talking with some of those involved when I get back. More to come on this one.
- Huggybunny - Tuesday, Mar 19, 13 @ 4:45 pm:
So upon starting employment, the paperwork stated the State would pay 5% for each year of service up to 100% for 20 years…what was that, were they just kidding around? Is that promise not a contract? So only some contracts with the State have legal protections? This will be financially devastating for some retirees, who have very modest incomes and are of an age that finding another job with health benefits is an impossibility.
- Norseman - Tuesday, Mar 19, 13 @ 4:50 pm:
I was fearful of an unfavorable ruling when I heard of the judge assignment. I certainly hope the plaintiffs appeal. I agree with Capt. that the tech thing doesn’t make sense.
- mythoughtis - Tuesday, Mar 19, 13 @ 4:50 pm:
meaningless
It appears to be the ones whose values are fixed and can be calculated when you retire. Such as the pension and the COLA because they are based upon a fixed formula. You can know now what your pension monthly amount will be 5 years from now.
- titan - Tuesday, Mar 19, 13 @ 4:55 pm:
@mythoughtis - but a set amount with an invariable 3% per year AAI is perfectly able to be calculated - I con do it with Excel in a matter of moments, and give you a real nifty little spreadsheet projection of year by year amounts
- RNUG - Tuesday, Mar 19, 13 @ 5:09 pm:
We haven’t heard the end of this by any means. I still have a problem with the finding it is not a contract. We’ll just have to see what the future holds for SERS/SURS.
But after mulling this over a bit, I still think the COLA / health insurance trade-off Cullerton supports won’t work for TRS. Yes, THIS / TRIP is designed to subsidize the teacher’s purchasing health insurance in retirement under the State Group Plan. Those THIS funds are going to CMS every month to administer.
From the TRS handbook:
As a remittance agent for the Department of Central Management Services, we collect additional contributions from active members and employers to help fund the Teachers’ Health Insurance Security (THIS) Fund. Revenues from the THIS Fund are used to finance the Teachers’ Retirement Insurance Program (TRIP). Federal law prohibits TRS monies from being placed in the THIS Fund.
…
You must also contribute a percentage of your gross creditable earnings to help fund the Teachers’ Health Insurance Security (THIS) Fund, which finances the Teachers’ Retirement Insurance Program.
…
Employers also make contributions to the THIS Fund.
…
With both the teacher and school district making contributions to THIS, it sounds like a benefit, not a gift.
- wordslinger - Tuesday, Mar 19, 13 @ 5:17 pm:
If it holds up, the decision is quite a hammer for the state. Health insurance ain’t cheap.
- Liberty_First - Tuesday, Mar 19, 13 @ 5:21 pm:
This ruling disagrees with Marconi vs Joliet. I’m without formal legal training but reading the decision, it seems to have a narrow focus and has a different logic than the Fiat Allis employees decision which focused on contracts. This seemed to have a presumption of no contract.
- Six Degrees of Separation - Tuesday, Mar 19, 13 @ 5:26 pm:
The bottom line is this…the state does now have half a leg to stand on by proposing that retirees start paying for their health insurance, and may also increase payments for dependents, as a way of starting to make up for the pension shortfall, albeit indirectly.
This still does not offer any clarity toward the constitutionality of offering an “insurance or COLA but not both” choice to covered employees or retirees. If the COLA is challenged as a constitutionally protected benefit, and is found to be one, the degree of coercion in threatening to take away medical benefits will be an issue. If this case regarding medical benefits goes through the appeals process, and such benefits are still found to be constitutionally or contractually unprotected, the only sure thing is that the state can start charging for, and raising rates on, medical benefits for retired employees.
- kimocat - Tuesday, Mar 19, 13 @ 5:26 pm:
I’d say it is quite a hammer on retirees. I know a number of people who literally paid thousands of dollars to buy the extra time for that 2002 ERI. It wasn’t free you know. And if having your benefits as result of more than 20 years of service codified in state law at the time is not a “contract “, then what is anyway? A little white lie? Is there anything a worker can depend on for the future? This ruling disgusts me.
- RNUG Fan - Tuesday, Mar 19, 13 @ 5:34 pm:
I changed my moniker to RNUG fan because RNUG always beats me to my comment….I think you are right on the contract esp for the merit comps.
I thought for everyone else it would be the AFSCME contract. It sort of was . He seemed to say CMS was a may not a shall and thus it did not interfere with collective bargaining so the AFSCME contract will set the rates.
That causes the same problem for Cullerton he has with the teachers.
Also we still have the Obamacare Medicaid and Subsidies to fall back on
- Anotherretiree - Tuesday, Mar 19, 13 @ 5:48 pm:
The ruling foccuses on the annuity aspect. Im afraid the COLA may not be protected either !
- Liberty_First - Tuesday, Mar 19, 13 @ 5:49 pm:
Good summary Six-
- Bill - Tuesday, Mar 19, 13 @ 5:51 pm:
I sympathize but it is not the end of the world thanks to AFSCME. If Part B passes muster, there is no way the systems will get this choice stuff set up before ACA is in effect. So retirement will be a lot less lucrative. Let’s just hope it doesn’t get any worse.
- Old and in the Way - Tuesday, Mar 19, 13 @ 6:02 pm:
Liberty….
Good call on the Marconi vs Joliet ruling. While the suit was against the city of Joliet, as opposed to the state, the basics of the suit were the same. The 3rd Appelate cited the pension clause in finding against the city for raising insurance premiums and deductibles for retired firefighters and police. BTW plaintiff Marconi was running for mayor at the time as I recall.
Narduli’s ruling will certainly be challenged.
- Former Merit Comp Slave - Tuesday, Mar 19, 13 @ 6:18 pm:
I said it before and I’ll say it again….there is a foul smell in the air and timing is all very interesting. My next prediction? AFSCME contract will be announced as ratified very shortly. Hope an appeal is announced just as quickly, we’ll see.
- Mouthy - Tuesday, Mar 19, 13 @ 6:18 pm:
I wonder if Judge Narduli is related to the former state Rep of the same name?
- Former Merit Comp Slave - Tuesday, Mar 19, 13 @ 6:26 pm:
just looking at the live feed and imagine that!!! AFSCME contract is ratified!
- Six Degrees of Separation - Tuesday, Mar 19, 13 @ 6:32 pm:
Anotherretiree…
Have hope. When Blago was gov, he tried to take the judges’ COLA (which judges salaries are protected by almost identical language in the state constitution as the pension clause) and the judges won the case on the basis that the COLA was part of their compensation that could not be constitutionally diminished.
- the Dark Horse - Tuesday, Mar 19, 13 @ 6:51 pm:
Keep this in perspective. The view of one trial court judge doesn’t mean a lot. The case will reviewed by 3-10 reviewing court judges, none of whom need to give any deference at all to what Judge Narduli thinks. Most likely, this decision will be made by 7 people who have not weighed in at all.
- RNUG - Tuesday, Mar 19, 13 @ 6:59 pm:
According to the SJ-R, one of the group’s lawyers has already said they will appeal.
- mythoughtis - Tuesday, Mar 19, 13 @ 7:04 pm:
titan
I don’t understand your point to me. I said that both the original pension amount and the COLA would be determinable at time of retirement, and hense would fall under the ruling as protected.
Health insurance/premiums are changable and unknown in advance, which is why the court ruled they were unprotected.
- RNUG - Tuesday, Mar 19, 13 @ 7:21 pm:
Old and in the Way,
I think this decision has opened more cans of worms as opposed to really deciding much of anything. I just had an interesting thought. I’m pretty sure the State signed the Obamacare Cadillac Tax waiver that requires them to maintain the same level of health insurance benefits through the end of the waiver period (2017 or 2018). Does that mean if Cullerton gets his way with the COLA / insurance access choice and people no longer have insurance access under the State Group Health plan, will the State have to pay a fine to the Feds because the retirees decided to keep the COLA? Or will the Federal agreement over-ride the State choice option, making it null and void? Gee, a whole new basis for a lawsuit …
- RNUG Fan - Tuesday, Mar 19, 13 @ 7:40 pm:
Also How would this change Republican minds,Cullerton would elevate Health Care ..
No Harm in an appeal.
- RNUG Fan - Tuesday, Mar 19, 13 @ 7:46 pm:
http://www.southsidesox.com/2013/3/19/4124224/reinsdorfs-opposition-not-enough-to-save-mlb-pensions
This is sad My Fathers compnay provided an annuity and had a union and did very well with it and sold it to someone everyone on this list would know. This stuff just makes me sick
- county chairman - Tuesday, Mar 19, 13 @ 7:46 pm:
a lot of state workers live in sangamon county im sure judge nardulli will be up for retention some day lets see if he retains retention when we get to vote
- T.O. - Tuesday, Mar 19, 13 @ 7:54 pm:
RNUG or anyone with more experience than me…does the agreement between AFSCME and the state violate the IL constitution on taxing? The state is going to impose a tax, based on income, on employees and retirees to pay for health insurance. I thought only the general assembly could enact taxes. If the state and union agreed to a flat fee for insurance it’s one thing, but when you start, as a government entity, charging a fee for service based on income, isn’t that an income tax?
- Old and in the Way - Tuesday, Mar 19, 13 @ 8:03 pm:
RNUG
You raise an interesting question. Again, this ruling leaves much to be answered and in fact may well challenge some existing contract law as well. It is not a strong ruling, but it is clever and we will see if the ISC concurs.
- RNUG Fan - Tuesday, Mar 19, 13 @ 8:03 pm:
T.O No its not a tax . Its a collective bargaining agreement and the employees have agreed to pay so much for their share of health care and the retiress and dependants helthcare is set by it too.
Cullertons choice plan as I see it would run interfere with the collective bargaining agreement and thus ebe illegal. It clearly is in the case of the teachers. The SERS and SURS would be so small that those alone would look like spite
County Chair went where I was thinking…you know to be really cynical I would say hes planning on retiring and wrote sort of a strange upholding of the law so it would be struck…but that would never happen in our Illinois
- ejhickey - Tuesday, Mar 19, 13 @ 8:10 pm:
” The view of one trial court judge doesn’t mean a lot. ” very true, Dark Horse.
personally i like any court decision that diminshes or reduces benefits for state retirees because it means that my potential tax burden could be less. however , i am not convinced that Illinois has the right to do this.
- Roadiepig - Tuesday, Mar 19, 13 @ 8:34 pm:
I may be the only one, but by using the excuse:
The fact that medical technology and contracts offered by insurance companies change, as opposed to the actuarial certainty of a pension payment, lead this court to the conclusion that health insurance benefits are not the same as a pension protected by the Pension Protection Clause.
Judge Nardulli seems to me to be punting on this decision . Rather than citing previous rulings that would agree that even though the state agreed to provide premium free insurance to retirees who put in 20+ years of service, he ignores the fact that the 20 year rule was part of a previous contract agreement between the unions and the state, and was added to include non-union employees at the time. Leaves plenty of room for the next level to override his ruling on appeal IMHO.
Wonder how quickly my election form to choose either 3% COLAs or access to state insurance (from SB 1313 )will be arriving in my mailbox?
- Lost in the Weeds - Tuesday, Mar 19, 13 @ 9:11 pm:
=ill the State have to pay a fine to the Feds because the retirees decided to keep the COLA=
Not sure that penalty applies to retirees. If the employer does not provide employee healthcare than I believe there is a penalty. Some state will probably test that employee penalty provision.
I think the retiree then is mandated to have healthcare which means that retiree has to pay for it unless eligible for subsidy to pay part of it depending on income.
There could be some quirk I suppose if some retirees are eligible.
- Former Merit Comp Slave - Tuesday, Mar 19, 13 @ 9:31 pm:
Roadie the choice between cola and health ins is in SB1. SB1313 is the law just upheld that says retirees health care is not protected pension benefit.
- county chairman - Tuesday, Mar 19, 13 @ 10:48 pm:
afscme members or any union member of a municipality etc. need to be reminded when these judges come up for retention or these same faces will still be there next time around if these cases are not won you might be next pensioners are going to be and endangered species all todo over there non leadership
- xxtofer - Tuesday, Mar 19, 13 @ 10:49 pm:
I am more bother right now by the undermining of contract law to the benefit of an employer than some of the specifics. This state has already declared its intention to negative the original AFSCME contract. The GA has thrown an opinion around that governor-negotiated contracts may be undermined by legislation or under-funding or other nefarious actions.
I live in STL now, but work in IL. Here, there is discussion about how Peabody Coal spun off a company to assume it pension liabilities. Peabody is now “profitable.” Its supposedly independent spin-off is trying to declare bankruptcy and eliminate its pension responsibilities.
It’s hard not to feel that contractual law is being bent to the benefit of large companies and employers. But if I try to negate a contract with some business entity, I am still expected to maintain my responsibilities.
If corporations are people, and if state government is some sort of sovereign entity that is able to engage in corporate-like behaviour, then we must hold them to the same responsibilities and legalities that the rest of us are.
- FinallyRetired - Tuesday, Mar 19, 13 @ 11:01 pm:
As far as I see it,State of Illinois can not be trusted.Say one thing,then when things are not going so well,they change and what happens to retirees who are on fixed incomes and can’t change?Say one thing then renig and expect people to TRUST politicians? NOTTTTTTTTTTTT
- Soccertease - Tuesday, Mar 19, 13 @ 11:16 pm:
Remember everybody, this is Illinois. We can shop around for a different judicial opinion, can’t we? Seriously, though, this ruling will be appealed and we’ll see if a concensus of judges tosses aside this judge’s ruling.
- county chairman - Tuesday, Mar 19, 13 @ 11:54 pm:
this is the same judge who drug his feet in the divorce trail of the millioniar j parsons the federales went notttttttt and ordered every thing sold for back taxes
- facts are stubborn things - Wednesday, Mar 20, 13 @ 7:03 am:
The judges ruling seems to imply a very high regard for the pension clause of the IL constitutaion — he is however conclduding the health care premium is not protected under that clause. I certanily feel that those that took early retirement acted “to their detrament” based on a promise of free health care premiums.
- Anonymous - Wednesday, Mar 20, 13 @ 10:07 am:
I can appreciate that premium free health care may not fall under the pension clause of the IL constitution, but seems a bit weak that it would not constitute a contract. I belive those that retired under the premium free healh care law should be entitled to that benifit. Much more to come I am sure on appeal. I actualy think this ruling may point to how the courts will look at pension benifits. The judge seems to say essentialy that if the free health care premium was coverd by the pension clause then we would have a much different ruling.
- facts are stubborn things - Wednesday, Mar 20, 13 @ 11:12 am:
I can appreciate that premium free health care may not fall under the pension clause of the IL constitution, but seems a bit weak that it would not constitute a contract. I belive those that retired under the premium free healh care law should be entitled to that benifit. Much more to come I am sure on appeal. I actualy think this ruling may point to how the courts will look at pension benifits. The judge seems to say essentialy that if the free health care premium was coverd by the pension clause then we would have a much different ruling.