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Appeals panel: IL constitution doesn't force cities to keep paying retiree health insurance, even if benefit paid to current workers

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By Jonathan Bilyk | Oct 17, 2019

Fourth district appellate courthouse
Illinois Fourth District Appellate Court, Springfield | Jonathan Bilyk

Illinois’ state constitution doesn’t force cities and other local governments to pay for retirees’ health insurance premiums, just because the municipality pays a portion of premiums for current employees, a state appeals court has ruled.

On Oct. 16, a three-justice panel of the Illinois Fourth District Appellate Court in Springfield upheld the ruling of Coles County Judge Steven L. Garst, who had dismissed much of the lawsuit brought by a group of retirees against the city of Mattoon, in downstate east central Illinois.

The opinion was authored by Justice Craig H. DeArmond. Justices Robert J. Steigmann and Thomas H. Harris concurred.

Illinois Fourth District Appellate Justice Craig DeArmond |

“This was a part of the City’s employment policy and not the State’s pension system,” Justice DeArmon wrote in the decision. “The City was free to change its employment policy and reduce its contributions toward health insurance as long as it did not charge plaintiffs more, in overall cost, than current employees.”

The legal action underlying the decision dates back to 2012, when a group of 59 retired Mattoon city workers first filed suit. The lawsuit claimed Mattoon city hall had violated state insurance law, breached a contract and violated the Illinois state constitution’s so-called pensions protection clause, among other violations, by charging retirees their full health insurance premiums, while paying a portion of the premiums for current city workers.

The allegations stem from actions the city took after the retiree plaintiffs took advantage of an early retirement incentive offered by the city in the early 2000s. That early retirement program had offered employees whose pensions would be funded through the Illinois Municipal Retirement Fund, and who were at least 50 years old with 20 years of “creditable service,” to retire five years early with full retirement benefits.

In the lawsuit, the retiree plaintiffs contended an IMRF representative – but not any city officials – “informed them at an informational meeting about the (early retirement) program” that their “health insurance contributions would remain at the same level as active employees.”

Mattoon’s city government, however, later would require the retirees to pay the full cost of their premiums, while still paying a portion of the premiums for current employees.

After months of briefing and arguments, however, Judge Garst sided with the city, finding the plaintiffs could not sue the city under the state’s Insurance Code; the city did not violate any written contract with the retirees; and the city did not violate the Illinois state constitution’s pension protection clause by altering how much retirees were required to pay for their health insurance, relative to those currently providing city services.

On appeal, the Fourth District justices also sided with the city.

The justices found the Illinois Insurance Code does not grant the retirees the ability to sue. The justices noted the retirees “have ignored the plain language” of the law, which exempts cities and other municipalities from paying “any group insurance premium other than one that may be negotiated in a collective bargaining agreement.”

The justices said retirees “are not covered by the collective bargaining agreements” held by current employees.

“After careful review of the statutes and collective bargaining agreements, the trial court correctly noted neither contained language obligating the City to pay any portion of insurance premiums for retirees,” DeArmond wrote in the appellate opinion. “The court found plaintiffs were entitled to continued coverage that is ‘equivalent’ to that provided active employees at the same total premium cost.

“Nothing in the Insurance Code or any writing upon which plaintiffs rely entitles them to the same employer share or percentage contribution provided by the City to current employees.”

The justices further found the retirees’ claims fell short under the Illinois pensions protection clause, as well. That clause forbids the state or other Illinois governmental pension provider from “diminishing” or “impairing” earned retirement benefits for public workers.

In this case, though, the justices said the “promise” the Mattoon retirees relied upon regarding their health insurance costs does not qualify for such protections. Since the Mattoon retirees’ pensions are paid through the IMRF and not the city of Mattoon, the city is allowed to change its “employment policy” for current and past employees,  so long as the total premiums for retirees don’t exceed the “overall cost” for current workers’ premiums.

“In this case, the City, as a municipality employer, created an ordinance allowing for early retirement in exchange for the ability to purchase up to five years of extra credit in the State’s IMRF pension plan,” the justices wrote. “According to plaintiffs, the City also promised to provide health insurance contributions at the same rate as active employees. However, … these changes were all part of the terms of employment between the City and plaintiffs, not something which involved their IMRF pensions directly.

“Under this set of facts, a plaintiff cannot properly state a claim against a defendant municipality based on a violation of the pension protection clause.”

The retirees have been represented in the action by attorneys Jennifer Stuart and H. Kent Heller, of Heller, Holmes & Associates P.C., of Mattoon.

The city has been represented by attorneys Julia A. Proscia, Michael D. Wong and Michael Resis, of SmithAmundsen LLC, of St. Charles and Chicago.

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Organizations in this Story

Illinois Fourth District Appellate CourtCity of MattoonHeller Holmes & AssociatesColes CountySmithAmundsen

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