Monday, March 31, 2014

Providing health insurance benefits to employee upon retirement

Providing health insurance benefits to employee upon retirement
2014 NY Slip Op 01496, Appellate Division, Third Department

A series of collective bargaining agreement (CBA) in effect from July 1996 to June 2002 provided that employees who retire with fifteen or more years of service to the District shall be entitled to District provided individual or family health insurance coverage, as applicable, at no cost to the retiree. The two successive CBAs contained that same provision with regard to retiree health insurance coverage, as well as a separate provision expressly addressing Medicare reimbursement that stated, "as of July 1, 2003, those who retire from Northeastern Clinton [Central School District] with 25 years of consecutive service in the [D]istrict shall be entitled to Medicare reimbursement for themselves and their spouse[s], while the retired employee is still living."

In 2010, after plaintiffs had retired, a successor CBA was executed between the District and the relevant collective bargaining unit which, among other things, provided that employees retiring on or after July 1, 2010 shall not be provided with Medicare reimbursement upon retirement. Shortly thereafter, defendant Board of Education, Northeastern Clinton Central School District adopted a resolution which, among other things, eliminated Medicare reimbursements for District retirees who were not already in receipt of such reimbursements as of July 1, 2010.

After receiving notice of the resolution, plaintiffs sued for breach of contract and for a declaratory judgment, claiming that they are entitled to Medicare Part B reimbursement under the CBAs in effect at the time of the employees' retirement.

One of the arguments advanced by the school district contended that, regardless of any contractual right to Medicare Part B reimbursements, the Insurance Moratorium Law (Chapter 594, Laws of 2009, Part B, §14) authorizes the school District to modify the retirees' coverage because a corresponding modification was made for active employees in the 2010-2014 CBA. 

The Appellate Division noted that this contention was rejected by the Court of Appeals in Kolbe v Tibbets, 22 NY3d 344.

In Kolbe the Court of Appeals said that “This case calls on us to decide whether certain collective bargaining agreements* conferred upon plaintiff-retirees a vested right to the same health insurance coverage they had when they retired and, if so, whether unilateral modifications to that coverage are nonetheless permissible under either the contract terms or the New York Insurance Moratorium Law.”

The court held that the contracts establish a vested right to a continuation of the same health coverage under which plaintiffs retired, until they reach age 70, and that the Insurance Moratorium Law does not provide a basis for abrogating retirees' vested contractual rights.

In the words of the Court of Appeals, “we reject the District's argument that, regardless of plaintiffs' contractual right to the "same coverage," the 2009 Insurance Moratorium Law allows the District to modify plaintiffs' coverage because a corresponding modification was made in the 2007-2012 CBA for active employees.

“The statute provides, in relevant part, that, "From on and after June 30, 1994 a school district board of cooperative educational services, vocational education and extension board or a school district . . . shall be prohibited from diminishing the health insurance benefits provided to retirees and their dependents or the contributions such board or district makes for such health insurance coverage below the level of such benefits or contributions made on behalf of such retirees and their dependents by such district or board unless a corresponding diminution of benefits or contributions is effected [sic] from the present level during this period by such district or board from the corresponding group of active employees for such retirees" (L 1994, ch 729, as extended by L 2009, ch 30).

“The District's interpretation of the statute relies on the erroneous conclusion that the Legislature's silence regarding contracted-for health coverage should be read as an intention to abrogate contractual rights. However, the Insurance Moratorium Law's primary purpose was to prevent school districts from eliminating or reducing retiree health insurance benefits that were voluntarily conferred as a matter of school district policy, not rights negotiated in the collective bargaining context (see New York State Assembly Memorandum in Support of L 1996, ch 83). The 1994 final report of the Temporary Task Force on Health Insurance for Retired Educational Employees, which originally recommended the legislation, proposed amending the then-temporary law to apply to contractually vested rights. Specifically, the Task Force proposed that the Legislature "mak[e] it clear that any negotiated health insurance benefits for present employees upon retirement can be affected in the same manner as any retiree's health benefits can be under the present temporary legislation; i.e., once retired a retiree's health insurance benefits may be diminished in a similar manner as negotiated for active employees without violation of the negotiated provision covering future retirees" (Final Report of the Temporary Task Force on Health Insurance for Retired Educational Employees, December 1, 1994, at 6 [emphasis supplied]). Significantly, the Legislature never adopted this proposal, or any of the Task Force's proposed amendments to the temporary statute then in effect, but instead enacted it into permanent law unchanged.

“In light of this legislative history, as well as the statute's plain language, Supreme Court correctly concluded that the statute only prescribed "a bottom floor, beneath which school districts and certain boards were forbidden to go in diminishing benefits. It was not meant to eviscerate contractual obligations and decades of contract law."

* The Court of Appeals commented that “despite the fact that the successor CBA was retroactively effective to 2007, it is undisputed that even those plaintiffs who retired in 2007 and 2008 effectively retired under the 2003-2007 CBA, since the subsequent CBA was not executed until 2010. This stipulation accords with the reality that these plaintiffs were not represented by the CSEA in the portion of the negotiations that took place after their retirement, and that the bargains struck in the 2007-2012 agreement would thus not be enforceable by them.”

The decision is posted on the Internet at:

Handbooks focusing on State and Municipal Public Personnel Law continue to be available for purchase via the links provided below:

The Discipline Book at

Challenging Adverse Personnel Decisions at

The Disability Benefits E-book: at

Layoff, Preferred Lists at


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