Illinois governments do not have an obligation under the
Illinois constitution to continue to pay certain benefits to retirees if those
benefits had been secured under a negotiated agreement that included "an expiration date," a state appeals court has ruled.
On Sept. 21, a three-justice panel of the Illinois First
District Appellate Court determined a Cook County judge was correct in
determining the city of Chicago was not required under the so-called Pensions
Clause in the state constitution to continue paying for much of the health
insurance for former city workers who had retired after 1989 under the terms of
an agreement, which had a defined end date in 2013.
Justice John B. Simon authored the appellate court’s
opinion, with justices Maureen E. Connors and Sheldon A. Harris concurred.
The case arose in 2013, when a group of retired city workers
filed a class action lawsuit in Cook County Circuit Court against City Hall,
alleging the city had run afoul of a provision in the Illinois constitution,
prohibiting governments from taking actions which could cause retirement
benefits for pensioned government workers to be “diminished or impaired.”
The case centered on the city’s plan, given its difficult
financial circumstances, to phase out health insurance coverage by 2017 for
city workers who had retired after 1989. The city’s Retiree Health Care
Benefits Commission had determined in 2013 that “continuing the existing
healthcare arrangements for the retirees was not viable given the City's
financial circumstances, industry trends, and market conditions.”
The issue had a lengthy legal history, dating back to the
1980s, when the city asked a court in 1987 to declare it had the right to stop
paying the city’s four worker pension funds to cover retiree health care. The
pension funds and two classes of retirees countersued. That litigation resulted
in a settlement in 1988 under which the city agreed to pay half of retiree
health insurance costs through 1997. Those settlement terms were then extended
to 2003, and again to 2013.
The amendment extending the deal to 2013 also approved the
creation of the Retiree Health Care Benefits Commission, which was empowered to
“make recommendations concerning the state of retiree health care benefits, the
costs of those benefits, and issues affecting the retirees benefits to be
offered after July 1, 2013.”
In June 2013, acting on the commission’s recommendations,
the city notified retirees of its intent to eliminate its participation in
funding retiree health care benefits by 2017. The city at that time said retirees
who had been among the classes under the original 1988 settlement agreement
would continue to receive health insurance coverage through the city, with the
city agreeing to pay 55 percent of the premiums for that plan for life.
But those who retired after 1989, the city would begin “adjusting
premiums and deductibles and modifying benefits” to “phase out the plan
entirely over a 3-year period.”
That prompted the retirees to file suit. They have been
represented in the action by attorney Clinton A. Krislov, of Chicago.
The city of Chicago was represented in the lawsuit by
attorney David R. Kugler, of Chicago, according to Cook County court records.
In 2015, Cook County Circuit Judge Neil H. Cohen granted the
city summary judgment, finding the retirees would most likely not be able to demonstrate
the city had an obligation under the state constitution’s Pensions Clause to
continue paying the post-1989 retirees’ health benefits, as its agreement to do
so included a defined end date. While that date had been pushed back three
times, those decisions did not entitle the retirees to lifetime benefits, Cohen
He clarified the decision in 2016 to indicate state law
required the pension funds to continue paying a portion of the retirees’ health
insurance costs. But the city’s only obligation under the Pension Code, Cohen
said, was to continue collecting the “pre-existing tax levy imposed by the
The retirees then appealed. They particularly cited the Illinois
Supreme Court’s 2014 decision, docketed as Kanerva v. Weems, in which the state
high court had determined in a 6-1 decision that health insurance premium subsidies for retirees
is a benefit of membership in a pension system that the legislature cannot
diminish or impair.
In light of that decision, the post-1989 city retirees said
there can be no time limit imposed on the city’s obligation to fund retiree
health insurance under the settlement terms.
But the appellate justices said that interpretation
misunderstands the Kanerva decision.
“The relevant constitutional provision and case law do not
create benefits - they protect them,” the justices wrote. “In Kanerva, the benefit recipients already
had the enduring right. The Court just explained that, based on our constitution,
it could not be taken away.
“But here, the benefit always came with an expiration date.”
The justices also brushed aside the retirees’ claims under
other legal doctrines, including estoppel, relying on assertions allegedly made
by the city that workers “would have lifetime healthcare by the City.”
“Perhaps the retirees can meet their burden on a claim of
this nature at trial, but they have not done so here,” the justices said. “At
this stage they have not shown that they can overcome the statute of frauds nor
have they shown any express act by the City or any authorized representative to
bind itself to such a commitment. They have not even produced evidence from a
witness who might have heard these promises.”