Ill. High Court Says Public Retiree Health Benefits Protected

The court noted that Article XIII, section 5 of the Illinois constitution provides that “[m]embership in any pension or retirement system of the State … shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.” The court concluded that eligibility for all of the benefits at issue in the case “is limited to, conditioned on, and flows directly from membership in one of the State’s various public pension systems,” and said, “Giving the language of article XIII, section 5, its plain and ordinary meaning, all of these benefits, including subsidized health care, must be considered to be benefits of membership in a pension or retirement system of the State and, therefore, within that provision’s protections.”

The court also found, in light of the constitutional debates it reviewed, the provision was aimed at protecting the right to receive the promised retirement benefits, not the adequacy of the funding to pay for them.

Illinois pension reform, Public Act 97-695, which was effective July 1, 2012, amended section 10 of the State Employees Group Insurance Act of 1971 by eliminating the statutory standards for the state’s contributions to health insurance premiums for members of three of the state’s retirement systems. The State Employees’ Retirement System (SERS), the State Universities Retirement System (SURS), and the Teachers’ Retirement System of the State of Illinois (TRS) filed lawsuits alleging the pension reform violated the Pension Protection Clause of the state constitution as well as the contracts clause. Labor unions also filed suit on behalf of state retirees.   

The state filed a combined motion to dismiss all four complaints, challenging the sufficiency of the pleadings. The state argued that plaintiffs failed to state a cause of action for violation of article XIII, section 5, because that provision protects only traditional pension benefits and does not encompass the state’s obligations to contribute toward the cost of health care benefits for retired state employees and their survivors. The state also asserted that plaintiffs failed to state a claim for violation of the contracts clause in article I, section 16, of the state constitution because state employees, retirees and survivors have no contractual right to the health care benefit subsidies that were abolished by Public 97-695.

On March 19, 2013, a circuit court judge dismissed all four claims on the grounds asserted in the state’s motion to dismiss.

The high court found the circuit court was wrong to dismiss the claims and remanded the case back to the lower court for further proceedings.  Its decision is here.