Retiring employees had vested right to benefits, but required scope of benefits is jury question

Retired county workers who alleged their former employer breached its promise of cost-free retiree health coverage for life at the same level the employee enjoyed on his last day of employment will present their contract claims to a jury, a federal district court in Georgia decided. The court found the employees had a vested right to receive the same level of healthcare benefits in retirement as they received on their last day of work. However, it concluded that a jury would have to determine precisely what that level of benefits was supposed to be. Therefore, the parties’ summary judgment motions were denied.
The plaintiffs were retirees of the Unified Government of Athens-Clarke County, Georgia (ACC). Each started work as a city or county employee prior to 1991, and each had at least 15 years of combined, continuous service at retirement. They alleged that the employer breached a promise to employees hired before July 1, 2002, that, in return for a certain minimum number of years of service, it would provide cost-free health coverage for life at the same level that the employee received on his or her last day of employment, including coverage for dependents. The employer maintained that any such deal was unenforceable; alternatively, it argued that if an enforceable deal was struck, it was different than what the retirees alleged.

Separate entities, different plans.

Prior to 1991, the city of Athens and Clarke County operated as separate entities, with separate health insurance plans. In 1975, the city made assurances to employees, by resolution, that it would provide health insurance coverage for retirees who had put in at least 15 years of continuous service. In 1990, the city adopted a motion that employees hired on or after July 1 of that year would receive 100-percent coverage upon retirement but would have the option of obtaining dependent coverage at 100-percent cost to the retiree. The county, on the other hand, approved a motion in 1981 promising that it would pay the cost of the health insurance that the employees had at the time of retirement. Three years later it passed an amendment that required eligible retirees (and/or their spouses) to enroll for Medicare. Vesting would occur after 10 years of service.
Upon consolidation of the city and county, the ACC’s charter included provisions related to non-diminution of compensation, including insurance and retirement benefits, as well as provisions continuing the effect of any ordinances, resolutions, rules or regulations, as well as any contract obligations. Ordinances adopted in 2002 and 2013, however, provided that, for employees hired before 2001, the ACC-provided insurance would only be offered for free as a secondary or supplemental insurance to Medicare Part B. For retirees hired before the end of 1993, dependents would still receive premium free insurance, but only once that dependent also qualified for and enrolled in Medicare Part B. Under the 2013 ordinance, which replaced the 2002 ordinance, retirees (and dependents) were no longer enrolled in the employer’s insurance program and, instead, received monthly contributions to purchase the supplemental insurance, but only so long as they elected Medicare Parts A and B and paid for its costs.

10 years for vesting.

Looking to the plain language of the 1975 resolution and 1990 motion, the court concluded that city employees who had served for 15 or more continuous years were entitled to receive health insurance coverage during retirement, which included dependent coverage. Similarly, after reading the 1981 and 1984 county motions, the court concluded that individuals who served as county employees for at least 10 continuous years were entitled to continue in the county’s health care program without cost. Finally, under the terms of the charter for the newly merged entity, any compensation disparities between city and county employees had to be resolved by applying the more generous policy elements. Thus, the court explained, as of January 1, 1991, the rights of ACC employees to 100-percent health insurance during retirement, including coverage of dependents, would vest after 10 continuous years of service. Employees hired after the end of 1993, however, had to pay for dependent coverage. All the named plaintiffs were hired before the end of 1993.


The ambiguity arose, however, in determining what was entailed in 100-percent coverage during retirement. The employees argued that it meant they were entitled to the same level of health insurance during retirement that they had on their last day of work. In other words, they asserted that they were entitled to substantially similar coverage, limits, deductibles, and co-pays and they were not obligated to enroll in Medicare or to pay Medicare premiums. The employer contended that if the plaintiff’s plan on that date excluded services covered by Medicare (which all the insurance plans did), then those services would also not be covered during retirement. Therefore, once the retired employee became eligible for Medicare, the employer was only responsible for paying the premium for secondary coverage. Both interpretations were reasonable, the court concluded, and the ambiguity could not be resolved by the court. A jury would need to determine the intent of the parties.

Vested benefits.

The court did hold, however, that the plaintiffs’ rights to the healthcare benefits had vested. Although the employer argued that the city and county enactments were alterable (“subject to availability” of an insurer and adoption of policies) under sections of the city and county’s merit and personnel systems applicable to employees, that argument was flawed, in the court’s view, and not supported by evidence.

SOURCE: Wood v. Unified Government of Athens-Clarke County, Georgia, (M.D. Ga.), No. 3:14-CV-43 (CDL), January 22, 2018.
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