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U.S. Supreme Court ruling contradicts state protections for retiree benefits

Connecticut lawmakers face high legal hurdles if they want to reform health benefits for retired state workers, according to a new study from the Manhattan Institute.

A 2002 Connecticut Supreme Court decision set the precedent, ruling that retiree health benefits could not be changed when a collective bargaining contract ends. However, this precedent contradicts a 2015 U.S. Supreme Court ruling.

According to the report, Connecticut has “well-settled law” that contractual obligations will not extend past the expiration date of the contract. But this well-settled law does not extend to state union retirees. In 1999 the city of Waterbury attempted to change union health benefits from the traditional indemnity plan in which participants could choose their own doctors to a managed care plan. The city of Waterbury faced a financial crisis and the new contract would save the city approximately $2 million.

A group of retired firefighters sued arguing that their benefits should remain protected under the contract that existed when they retired. In 2002 the Connecticut Supreme Court ruled in favor of the retirees in its Poole v. The City of Waterbury decision.

According to the Manhattan Institute study, “the court noted that if the contract was interpreted to provide retiree medical benefits only for the duration of the agreement, the benefit would be inconsequential, lasting months or weeks, as plaintiffs no longer would be in a position to negotiate with the city over future benefits once they retired.” This decision set a precedent for the state and provides moderate protection for state retirees with health benefits, according to the study.

In 2015, the U.S. Supreme Court reached the opposite conclusion in a unanimous ruling, M&G Polymers v. Tackett. The Supreme Court ruled that unless “unambiguous language” stipulates otherwise, retiree benefits can change when contracts expire. Although, as the study notes, the U.S. Supreme Court’s ruling affects federal law, it does not extend to state law.

“The Supreme Court binds state courts only on matters of federal law, and cases involving disputes over state and local retiree medical benefits are governed by state law.”

Connecticut currently spends approximately 2.7 percent of the state’s budget on retiree health care benefits and the unfunded liability for the health benefits totals $19.7 billion.

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Marc E. Fitch

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