Kanerva v. Weems: Health Insurance
Benefits Are Protected
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This was a constitutional challenge to an
amendment to the State Employees Group Insurance Act which reduced State
contributions toward health insurance costs for retired public pension system
members and their survivors.
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The Court held that this amendment was
unconstitutional.
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The Pension Protection Clause protects more
than the pension annuity. It protects
all “benefits” of membership in a pension system, including health insurance
benefits.
•
If there is any doubt about the scope of a
constitutional protection for pension rights, those doubts are resolved in
favor of the pensioner.
Kanerva and your
health insurance benefits
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In Kanerva, the Supreme Court ruled
that the Pension Protection Clause protects not only pension annuities but also
“health insurance subsidies.” (Kanerva,
par. 49.)
•
In Kanerva, the Supreme Court
invalidated amendments to the State Employees Group Insurance Act that “altered
the State’s obligation to contribute toward the cost” of coverage by increasing
retirees’ premiums and reducing the State’s contributions. (Kanerva, par. 12-13.) Importantly, the amendments challenged in Kanerva
didn’t abolish a health insurance program.
They just made the benefits more expensive and pushed more costs onto
retirees.
Doris Heaton v. Pat Quinn: Crisis is
no excuse to violate the Constitution
•
The IRTA’s own Doris Heaton and Pamela Keller
were plaintiffs in this challenge to Senate Bill 1.
•
Senate Bill 1 reduced automatic annuity
increases (AAIs), placed caps on pensionable salaries, increased the retirement
age and made other changes that diminished pensions.
•
The Court unanimously ruled that Senate Bill 1
was unconstitutional.
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“The General Assembly may find itself in
crisis, but it is a crisis which other public pension systems managed to avoid
and . . . it is a crisis for which the General Assembly itself is largely
responsible.”
•
“Crisis is not an excuse to abandon the rule
of law. It is a summons to defend it.”
Jones v. Municipal Employees’ Annuity
& Benefit Fund of Chicago
•
The Supreme Court unanimously invalidated
other amendments to the Pension Code that were similar to the amendments
contained in Senate Bill 1, but which affected members of a public pension fund
for City of Chicago municipal employees.
•
Take home lesson: It means nothing that a union gives political
support to legislation affecting pension rights, if that support did not result
from collective bargaining.
Matthews v. CTA: Collective bargaining
does not bind retirees
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The Supreme Court held that constitutionally
protected pension rights can be waived through collective bargaining.
•
But collective bargaining does not bind
retirees.
•
The plaintiff in the Matthews case who was
already retired when changes to pension rights were approved in collective
bargaining was not bound by that decision and kept his pre-existing pension
rights.
City of Harvey Firefighters Pension
Fund Case: First court ruling that mandates funding
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The Illinois Supreme Court has repeatedly held
that the Pension Protection Clause guarantees benefits but does not require any
particular level of funding -- unless a pension fund is on the verge of
default or imminent funding.
•
For the first time, the Illinois Appellate
Court held that a public pension system was on the verge of default and
mandated a certain level of funding.
•
See Board of Trustees of City of Harvey
Firefighters’ Pension Fund v. City of Harvey, 2017 IL App (1st) 153074 (August
4, 2017).
•
As of May 2015, Harvey had 47 active
firefighters and 67 retirees or beneficiaries.
•
2005-2013: The City was required to contribute
about $11.6 million to the fund, but only contributed $1.4 million. During that time, the fund paid $13.6 million
to beneficiaries.
•
The fund was only 27.18% funded as of May 1,
2014. By comparison, TRS has a funded
ratio of 39.8% and its fiduciary net position is 36.4% of total pension
liability. (See TRS Annual Financial
Report for FY ending 6/30/16.)
•
Experts testified the fund would go bust in
approximately 5 years. Harvey, an economically distressed city of 25,000,
offered no plan to solve the problem.
•
The trial court judge said Harvey’s situation
was a “sort of microcosm of what’s going on with the pensions throughout the
state.”
•
Appellate Court: “In essence, Harvey is
robbing Peter to pay Paul, but what happens when Peter retires?”
•
The Appellate Court affirmed an order
requiring the City to:
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pay the Fund about $11.6 million;
•
comply with statutory funding formula; and
•
annually approve a line-item property tax levy
ordinance for the benefit of the fund.
City of Harvey: The Bottom Line
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This area of law is developing rapidly.
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The Courts are taking their constitutional
role very seriously.
•
We must continue to carefully monitor the
fiscal health of TRS and also monitor the development of this area of law.
•
The State should be on notice that funding can
be mandated by court order.
Future Challenges: Threats to Health
Insurance Benefits
•
The current governor, the previous governor
and our legislative leaders have repeatedly taken aim at your health insurance
benefits.
•
Our Supreme Court stopped similar efforts in
Kanerva v. Weems.
•
This is where the fight to protect your
pension rights will likely continue.
The path forward
•
For the reasons explained in Kanerva,
we believe any attempt to take away your health insurance benefits will
ultimately fail.
•
We are ready, willing and able to fight any
further efforts through litigation if necessary.
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“Crisis is not an excuse to abandon the rule
of law. It is a summons to defend it. How we respond is the measure of our
commitment to the principles of justice we are sworn to uphold.” (Heaton v. Quinn, par. 87.)
•
You should be proud of how your Association
has responded and will continue to respond to the crisis.
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