Monday, July 7, 2014

Illinois Supreme Court: Pensions Protected By State Constitution

In Kanerva v. Weems (July 3, 2014), the Illinois Supreme Court ruled health-insurances subsidies for retired state workers are protected under the Illinois Constitution. The ruling poses a challenge to Illinois’ recent pension reform legislation and may force the State to consider raising revenue rather than cutting benefits.

Recently, the State attempted to reform the pension system by imposing healthcare insurance premiums on its retired workers, reducing cost-of-living increases for pensions, raising retirement ages, and limiting the salaries on which pensions are based. Retirees challenged a recent amendment to the State Employees Group Insurance Act, arguing it violated pension protection clause of the Illinois Constitution. The high court agreed, finding the pension protection clause applies to an Illinois public employer’s obligation to contribute to the cost of health care benefits for employees covered by one of the state retirement systems.

In a similar case, David E. Mastagni and Isaac S. Stevens, obtained a decision in the Los Angeles County Superior Court for the Los Angeles City Attorneys’ Association (LACAA). They argued the City of Los Angeles’ freeze ordinance, which capped retiree medical premiums at $1,190 with no increases, unconstitutionally impaired a contractual obligation to LACAA’s members because a maximum medical plan premium subsidy is a vested right. The court agreed, finding the freeze ordinance was an impairment of a vested right to a substantial or reasonable benefit and issued a writ of mandate directing the City to compute and provide the health insurance premium to LACAA’s members without regard to the City’s freeze ordinance.