February 16, 2015
By:  Alan M. Levy and Oyvind Wistrom

On February 12, 2015 the Wisconsin Supreme Court held that Milwaukee County could eliminate its payment of Medicare Part B premiums for otherwise eligible employees who retired more than three months after its adoption of ordinance amendment to that effect. Wisconsin Federation of Nurses and Health Professionals, Local 5001, AFT, AFL-CIO, et al. v. Milwaukee County, 2015 WI 12. This decision comes after the decision in Stoker et al. v. Milwaukee County et al., 2014 WI 130, argued the same day, which allowed prospective reduction of a pension multiplier.

The retiree health benefit required 15 years of credited service, a minimum retirement age and (originally) a date of hire prior to July 31, 1989. In 2010 the ordinance was amended to provide that the benefit would no longer be paid to otherwise qualified employees who retired on or after April 1, 2011, with extensions of the date for existing union contracts which would expire later. The WFN sued (after its contract expired) on the basis of ordinances and session laws which allegedly treated retiree health benefits as vested like pensions and prohibited the diminishment of any pension benefit by subsequent amendment.

The Court’s 5-2 majority emphasized that pensions and health insurance are two different kinds of benefits, and that “by their nature, health insurance benefits have always been fluid opportunities available for a limited period of time . . . .” The County had argued that health benefits are never frozen at the time of retirement because retirees expect to receive the improvements in medicines and treatments which occur later, and premium costs change to pay for those changes. Therefore, benefits and premiums can be changed prospectively.

This opinion takes the same position as Loth v. City of Milwaukee, 2008 WI 129, 315 Wis. 2d 35, 758 N.W.2d 766, which allowed a prospective reduction in retiree health benefits, and it declined to apply pension and disability decisions which had contrary results. ( Stoker has allowed the County to reduce the pension multiplier applicable to future years of service.) Most important, the distinction between pensions and health benefits allows the employer to adapt its benefits and costs to the reality of modern circumstances, and its own ability to pay inherent in a public entity’s relationships with its employees (a topic discussed in Justice Prosser’s concurrence).

The magnitude of the authority sustained here depends on the number of employees on retirement in future years who were originally subject to the premium subsidy. If this change were to affect as few as 1000 retiring employees and their spouses, the savings to taxpayers will be approximately $2,500,000.00 per year. Other public employers which offer retiree health care benefits will be able to rely on this analysis to achieve similar savings if the language of their benefit plans and ordinances allows a similar approach to claims of unchangeable vested benefits.

Alan Levy of Lindner & Marsack, S.C. represented Milwaukee County throughout this litigation, as well as the City in Loth and the County in Stoker. If you have any questions about this, please contact him at alevy@lindner-marsack.com.

December 29, 2014

By:  Alan M. Levy

On December 19, 2014, the Wisconsin Supreme Court issued its decision in Stoker v. Milwaukee County and Milwaukee County Pension Board.  In 2011, the County had amended its previous ordinance to reduce the multiplier used to calculate the amount of a person’s pension payments from 2% to 1.6% for years of service which began after January 1, 2012.  The employees challenged this on the theory that they had a vested right to contributions at the higher multiplier because of state law and County ordinances which, they argued, gave them vested rights to benefits when they were hired, and that these vested rights could “not be diminished or impaired” thereafter.

By a 5-2 majority, the Court reversed the decisions of both lower courts and ruled that the employees’ vested benefit was what had been earned prior to the effective date of the amendment.  Because subsequent benefits were earned by the performance of subsequent service, the prospective change could be made.  This position relied on Loth v. City of Milwaukee and several other decisions in which Lindner & Marsack represented the municipal employer.  While not overruling the earlier cases (Welter v. City of Milwaukee and Rehrauer v. City of Milwaukee), the Court limited them to disability benefits, distinguishing them from benefits based on periods of service, such as pensions, paid sick leave, and retiree health insurance.  In short, a benefit based on years of service can be modified and reduced in regard to service not yet performed.

Should there be any questions about these rules and the impact of the Stoker decision, please contact Alan Levy, who is the Lindner & Marsack attorney who represented the employers in these cases.

By: Alan M. Levy

On October 1, 2013 the Wisconsin Court of Appeals held that Milwaukee County could eliminate the reimbursement of Medicare Part B premiums for employees who had not retired before that modification took effect on April 1, 2011. Reversing the decision below, the Court held that the Supreme Court’s decision in Loth v. City of Milwaukee, which was “at odds” with two earlier Court of Appeals decisions, supported the County’s application of a less generous retiree benefit to those who were still actively employed. Although the Courts of Appeal in Welter v. City of Milwaukee and Rehrauer v. City of Milwaukee, had ruled that a city employee had a vested right immediately upon being hired to the highest level of retiree benefit in effect at any time during his/her active career, Loth held that a benefit due upon retirement for employees who already met age and service requirements did not vest until actual retirement. In turn, that benefit could be reduced for an employee who had achieved the necessary age and service, but not yet retired and become vested. As a result, Milwaukee County could eliminate the premium reimbursement benefit for “retired members of the County Retirement System” who were still active employees on the effective date of the new rule.

This rejection of Welter and Rehrauer suggests that retiree benefits for public employees whose benefits have not yet vested are open to modification by the municipal employer, an important option in this time of severe limits on revenue and ever increasing retirement costs. The majority opinion in the Milwaukee County case also said that collective bargaining agreements which had provided the same retiree benefits as in the County’s ordinances, did not bar these modifications if those agreements had expired before the amendment was applied to the bargaining unit.

There are a number of cases pending at all levels of the Wisconsin courts which involve reductions in retiree benefits. This decision will undoubtedly be an important precedent favoring the employer in similar litigation. The case is Wisconsin Federation of Nurses and Health Professionals, Local 5001, AFT, AFL-CIO, et al. v. Milwaukee County; Court of Appeals Case No. 2012AP002490; Milwaukee County Circuit Court Case No. 2012CV001528.

Lindner & Marsack attorney Alan Levy represented Milwaukee County in Wisconsin Federation of Nurses and the City of Milwaukee in Loth. Please contact him directly if you have any questions about these matters.