By: Brittany Flaherty Theis
On July 3, 2014, the Illinois Supreme Court published its decision in Kanerva v. Weems. In this consolidated appeal, the court held that Illinois’ provision of health insurance premium subsidies for retirees is a “benefit of membership” in a pension or retirement system, as that term is used in the Illinois Constitution, and therefore, the Illinois legislature cannot diminish or impair that benefit. It thus reversed the Circuit Court of Sangamon County’s order granting the defendant’s motion to dismiss and remanded the cause.
In Kanerva v. Weems, and the cases with which it was consolidated, the plaintiffs challenged the validity of Public Act 97-695 (the “Act”). The Act 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. In place of those standards, the Act required the Director of the Illinois Department of Central Management Services to determine annually the amount of the health insurance premiums that would be charged to the State and to retired public employees. Application of the Act was not limited to those who were to become annuitants or survivors on or after the statute’s effective date. The Act did not impose caps on the amount the Director could require annuitants, retirees, or survivors to pay. The plaintiffs challenged the Act on numerous grounds, but the Illinois Supreme Court reversed and remanded to the circuit court based on its analysis of the pension protection clause of the Illinois Constitution.
All four cases assert that the obligations under the law before the Act required the State to make specified contributions toward the health insurance premiums for annuitants and survivors in the State’s retirement systems, and that those obligations constitute a “benefit of membership” in those systems within the meaning of Article XIII, Section 5 of the Illinois Constitution of 1970. Article XIII, Section 5 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 plaintiffs contend that by amending the law and authorizing a system under which the annuitants and survivors are required to contribute additional amounts toward the cost of their health care diminished or impaired that benefit.
The court held that although some of the benefits are governed by a group health insurance statute and others are governed by the Pension Code, “eligibility for all of the benefits is limited to, conditioned on, and flows directly from membership in one of the State’s various public pension systems.” Further, “[g]iving the language of [A]rticle XIII, [S]ection 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 found that there is nothing in the text of the Illinois Constitution that warrants a more limited reading, such as that proposed by the defendants, who claimed Article XIII, Section 5 is confined to the retirement annuity payments authorized by the Pension Code. It also stated that no principle of statutory construction supports a contrary view.
Ultimately, the court explained, “[w]hether a benefit qualifies for protection under [A]rticle XIII, [S]ection 5, turns simply on whether it is derived from membership in one of the State’s public pension systems. If it qualifies as a benefit of membership, it is protected. If it does not, it is not. How the benefit is actually computed plays no role in the inquiry.” The State’s provision of health insurance premium subsidies for retirees is a benefit of membership in a pension or retirement system, and the General Assembly was precluded from diminishing or impairing that benefit for those employees, annuitants, and survivors whose rights were governed by laws in effect prior to the enactment of the Act. The Circuit Court of Sangamon County erred in dismissing the plaintiffs’ claims, its judgment was reversed by the Illinois Supreme Court, and the cause has been remanded.
The attorneys at Whitt Law follow the developments in a multitude of topics impacting government bodies and school districts, including the Pension Code and Illinois pension reform. Please feel free to contact Whitt Law Partner Stuart Whitt if you have questions about how the attorneys at Whitt Law can assist you or your unit of local government.
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