A Big Victory for SAANYS Retirees
After three years of litigation, SAANYS again successfully defended the rights of a group of retired Cobleskill-Richmondville Central School District (CRCS)administrators to continued health insurance at fixed premium rates for life. This attractive benefit was negotiated over 25 years ago, and was in each subsequent contract in exchange for lower salaries, and correspondingly lower pensions. The district honored its clear contractual obligation to provide health insurance in retirement at fixed rates for life until the recession. The district then breached its contract obligations and forced retirees to pay 16 percent of the premium cost of retirement health insurance, arguing that active administrators had negotiated that new rate of contribution for themselves and retirees. This article will review the appellate court’s decision upholding the retirees’ right to continued health insurance in retirement at fixed rates. It will also discuss trends in the erosion of retirement health insurance benefits caused by the recession and the enactment of the property tax cap, as well as the importance of consulting SAANYS when such battles start.
As far back as 1989, each CRCS collective-bargaining agreement (CBA) in effect provided certified administrators with the following retirement healthcare coverage:
“Individuals who retire during the term of the contract shall be covered at the rate of 100 percent of the charge for individual coverage and 75 percent of the charge for dependent coverage, as applicable. Employees hired after July 1, 1976, shall be required to satisfy 10 (10) years of service in order to be eligible to continue the health insurance program in retirement as offered by the district.”
In accordance with this clear and unambiguous language the school district provided retired administrators with free individual health insurance coverage or 75 percent district paid family coverage based on the difference in the cost of individual and family plans.
In June 2009, the administrators unit and district negotiated a new CBA that modified the terms of the retirement health insurance coverage provision prospectively to provide that employees who retired after June 30, 2010 would receive retirement health insurance coverage at only the rate of 84 percent of the charge for either individual or dependent coverage while those who retired before June 30, 2009, would continue to receive the rates of 100 percent individual coverage and 75 percent for dependent coverage. Shortly after it negotiated the successor CBA, the district notified all retirees that it was reducing the district’s share of the cost of their health insurance coverage and forcing all retirees to contribute 16 percent of the cost of their health insurance, like the active administrators.
SAANYS sued the district for breach of its contractual obligations to the retirees and for acting in an arbitrary, capricious, and unlawful manner in reducing its share of the cost of the retirees’ health insurance coverage. At the trial level, the supreme court upheld the retired administrators’ right to receive health insurance for life at the rate set forth in each successive CBA since 1989. The supreme court found that the plain language of the CBAs unambiguously obligated the district to provide lifetime health insurance coverage for those bargaining unit members who retired prior to 2010-2011 school year at a rate of 100 percent for individuals and 75 percent for dependents.
On appeal, the appellate court rejected the district’s argument that the retirees’ fixed rate of premium contribution was fixed only during the particular CBA they retired under, and that the rate could be altered subsequently. The court held there was nothing in the provisions at issue that suggested that the coverage was limited to the time period of the CBA in effect at the time of an individual’s retirement. The court concluded that each CBA at issue unambiguously provided lifetime health insurance coverage to the retired administrators pursuant to the terms of the CBA in effect at the time of their retirement.
While the Cobleskill-Richmondville CBA language was clear and unambiguous relating to retirement health insurance, many union contracts are not. As a result, school districts are aggressively attempting to erode this valuable benefit. Given the country’s slow economic recovery from the recession coupled with the property tax cap, school districts have declared war on raising health insurance costs, particularly retirement health plans.
Units must tenaciously fight back to protect their hard fought retirement health insurance benefit, especially recognizing that they sacrificed larger salaries over the years in obtaining and preserving retirement health insurance. Otherwise, they will lose this precious benefit forever. It is indeed very rare to see contracts negotiated today that provide for better retirement health insurance benefits.
In the past ten years, SAANYS has seen a number of attempts by school districts to change retirees’ health insurance coverage. One change observed is the district switching the actual health insurance plan itself, usually from a traditional indemnity plan (the Cadillac plan) to a PPO plan or from a PPO plan to a HMO plan. Such changes result in huge savings for the district. Another significant change implemented over the past several years by school districts is to change prescription drug plans. Prescription drug costs are the single most expensive component of health insurance. New prescription drug plans often result in high co-payment costs for the retirees.
Another change seen is school districts forcing retirees to pay more of the premium costs for retirement health insurance, as occurred in Cobleskill-Richmondville. Finally, many school districts have tried to stop reimbursing retirees and their spouses for the cost their Medicare Part B payments (usually a $100/month per person). This form of deferred compensation is valued at $50,000 for the retiree and his/her spouse over their lifetime, which explains why districts want to eliminate the benefit. While these changes have occurred more frequently to retirees, we have also seen districts unilaterally imposing them without negotiations on active administrators also. In either event, please immediately consult with SAANYS attorneys, labor relations specialists, or negotiators to discuss your options when your school district declares war on your retirees or active members in this area. Remember, the key to successful litigation in this area will be the clear and unambiguous language of the CBA.