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.