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August 29, 2017

Reducing or discontinuing a NYSHIP participating employer's contributions towards a retired employee's health insurance premium


Reducing or discontinuing a NYSHIP participating employer's contributions towards a retired employee's health insurance premium
Weaver, et al, v Town of N. Castle, 2017 NY Slip Op 05960, Appellate Division, Second Department

On June 27, 2012 the Town Board of the Town of North Castle adopted a resolution establishing a "Compensation and Benefits Manual" [Manual]. The Manual provided that, effective July 1, 2012, the Town would not contribute towards the cost of health insurance benefits on behalf of current or former Board members enrolled in the Town's health insurance plan, the New York State Health Insurance Program [NYSHIP],* although such elected officials could continue their coverage in the NYSHIP by paying 100% of the total cost of the premium for their participation in NYSHIP.

Following the Town's informing the affected individuals of the increased premium rates they would be required to pay in order to continue their participation in NYSHIP, a number of such persons [Petitioners] initiated an Article 78 action challenging the Board's action, seeking a court order declaring the Board's resolution "null and void."

Supreme Court dismissed the Petitioners' complaint, affirmatively declaring that the Town Board's resolution "was not null and void," and, in effect, held that the Petitioners [1] did not have a vested contractual interest in retirement health insurance benefits, [2] that the doctrine of promissory estoppel did not bar the reduction of Town's contribution to the Petitioners' health insurance premiums and [3] the Board's resolution, "insofar as it provides that the Town of New Castle will not contribute toward retirement health insurance benefits of former members of the Town Board of the Town of New Castle who retired prior to July 1, 2012, does not violate Civil Service Law §167(2)."

The Petitioners appealed and the Appellate Division modified the Supreme Court's judgment "on the law," declaring that the resolution, insofar as it provided that the Town of New Castle "will not contribute toward retirement health insurance benefits for former members of the Town Board of the Town of New Castle who retired prior to July 1, 2012, violates Civil Service Law §167(2)."

The Appellate Division said that although Supreme Court properly determined that [1] the Board was entitled to reduce the Petitioner's retirement health insurance benefits granted by its October 13, 1983 resolution,* as "A municipal resolution is, in general, a unilateral action that is temporary in nature and, thus, does not create any vested contractual rights" and [2] the Town was not barred by the doctrine of promissory estoppel from reducing the appellants' retirement health insurance benefits,** Supreme Court erred in determining that the Town was not required to contribute any amount for the retirement health insurance benefits of former Board members who retired prior to July 1, 2012."

The court noted that Civil Service Law §167(2) provides, in relevant part, that participating employers, such as the Town, are required to contribute 50% of the cost of premiums for retired employees, and 35% of the cost of coverage for their dependents. The Appellate Division then ruled as Petitioners were individuals who has become enrolled in [NYSHIP] as an employee and whose coverage is being continued after his or her withdrawal from the active service within the meaning of 4 NYCRR 73.1[e], the Town may not reduce its contribution rates "below the legally mandated minimums set out in §167(2) of the Civil Service Law."

The matter was then remitted to Supreme Court for a determination as to damages for the amounts paid by the retired appellants "which were part of the legally mandated minimums and for the entry of an appropriate amended judgment thereafter."

* Civil Service Law §167(2), in pertinent part, provides that "Each participating employer shall be required to pay not less than fifty percentum of the cost of premium or subscription charges for the coverage of its employees and retired employees who are enrolled in the statewide only or the statewide and comparable supplementary health benefit plans established pursuant to this article. Such employer shall be required to pay not less than thirty-five percentum of the cost of premium or subscription charges for the coverage of dependents of such employees and retired employees. Such employer shall contribute toward the premium or subscription charges for the coverage of each employee or retired employee who is enrolled in an optional benefit plan and for the dependents of such employee or retired employee the same dollar amount which would be paid by such employer for the premium or subscription charges for the coverage of such employee or retired employee and his or her dependents if he or she were enrolled in the statewide health benefit plan, but not in excess of the premium or subscription charges for the coverage of such employee or retired employee and his or her dependents under such optional benefit plan. Such employer shall not be required to pay the cost of premium or subscription charges for the coverage of unpaid elected officials, or unpaid board members of a public authority, or their dependents, provided, however that no unpaid board member of a public authority shall be eligible to participate in such benefit plan until he or she has served in such position for at least six months. Subject to such regulations as the president may prescribe, any participating employer may elect to pay higher rates of contribution for the coverage of employees, retired employees and their dependents ...."

** The Town's 1983 resolution proved that it would pay "either 100% or 85% of the NYSHIP premium for health insurance depending on the amount of years of service set forth in current collective bargaining agreements for retirees."

*** The Appellate Division noted that to establish promissory estoppel, a party must prove a clear and unambiguous promise, reasonable and foreseeable reliance by the party to whom the promise is made, and an injury sustained in reliance on that promise.

The decision is posted on the Internet at:

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