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Michigan Supreme Court decision on retiree health care backs Lansing City Attorney June 30, 2019
It's settled. When a collective bargaining agreement says "eligible retirees shall be covered by the same insurance as active bargaining unit members" - "retirees follow actives", for short - it does not mean the coverage in effect at the time the member retired will continue indefinitely. It means it will change to match the active member coverage provided in each subsequent contract.
That is what the Michigan Supreme Court decided May 30 in a Macomb County case. Here is that decision.
Front row: Justice Stephen J. Markman, Chief Justice Bridget Mary McCormack, Justice Brian K. Zahra. Back row: Justice Elizabeth T. Clement, Justice David F. Viviano, Justice Richard Bernstein, and Justice Megan K. Cavanagh
The majority opinion in that case was that when a contract is silent regarding the duration of retiree benefits, a court may not infer that the parties intended those benefits to vest for life. That is essentially what Lansing City Attorney Jim Smiertka said in regard to a group of Teamsters 580 retirees who were told in 2010 that the city would start deducting health insurance premiums from their pensions. In a 7/31/2017 memo, he said
Denise Estee was the most outspoken of the Teamsters 580 retirees blindsided by the deductions. I wrote a story about this a year ago.
The Supreme Court decision wasn't unanimous. The two Democrats did not agree that the Macomb contract was "unambiguous". That was also the opinion of former City Attorney Janene McIntyre in regard to the Teamsters 580 situation. They all thought the contract could be interpreted to mean that insurance coverage in effect at retirement was guaranteed for life. The fact that a lot of Teamsters 580 retirees believed they had lifetime coverage suggests that at the time they retired, plan administrators thought the same thing.
The Court's emphasis on the ambiguity issue suggests that retiree benefits can be guaranteed for life as long as it is clearly stated in the contract. On the other hand, contracts have expiration dates. What keeps a new contract from rescinding the promises in the previous contract?
In the Macomb County case, retiree health benefits were not substantially reduced. The changes were minor. However, the county acknowledged that it had right to eliminate benefits entirely if it chose to do so. (source: Detroit Free Press, 5/31/2019)
Consistency
The premium-sharing deductions imposed on Teamsters 580 retirees were only for those who retired in or after February 20, 2004. There has never been a satisfactory explanation of why they weren't applied to all Teamsters 580 retirees who retired under a contract that said "retirees follow actives". Janene McIntyre addressed this inconsistency in her 11/23/15 confidential memo to then-mayor Virg Bernero (page 8):
To be fully consistent and even-handed, all City of Lansing retirees - regardless of union - who retired under a contract that had the "retirees follow actives" provision should now have the same health insurance coverage provided active members in the current contract. To make sure they are being treated fairly, retirees need access to collective bargaining agreements. They should be on the City's website - not just the current ones, but all contracts going back 30 years or so. Since they control how a good share of city revenue is spent, they might also be of interest to other Lansing citizens.
Send comments, questions, and tips to stevenrharry@gmail.com, or call or text me at 517-505-2696. If you'd like to be notified by email when I post a new story, let me know.
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