Supreme Court ruling could foretell success for pension law challenges

Dollar signs with $100 bill illustration on the frontA recent Illinois Supreme Court ruling that protects retirees’ health care premiums may foreshadow the success of challenges to pension legislation, experts say.

“This is very good news for retirees,” said Brenda Russell, president of UIC-SUAA, the UIC chapter of the State Universities Annuitants Association.

“I think it’s very likely that the law is going to be massively overturned by the court,” said David Merriman, professor of economics and public administration.

The Illinois Supreme Court ruled, 6-1, Thursday that the state constitution’s pension protection clause says retirement benefits “cannot be diminished or impaired.” That protection extends to health insurance benefits promised to state retirees, the court ruled.

Last summer, retirees began paying a health insurance premium that ranged from 1 to 2 percent of their pensions if they received Medicare or 2 to 4 percent of their pensions if they did not receive Medicare, Russell explained.

“This premium deduction will almost certainly be stopped when the case is heard back in the lower courts. I also expect that any money paid in by the retirees for their own insurance since last summer will eventually be returned,” said Russell, professor emerita of physiology and biophysics.

The ruling could also impact the pension legislation signed in December, she said. A Sangamon County judge had postponed pension law’s June 1 effective date until courts can hear constitutional challenges.

The law reduces cost-of-living adjustments, increases the retirement age for some employees and caps pensionable earnings.

“I believe this bodes very well for overturning most of the new pension law because this health insurance ruling will be used to argue in favor of not cutting the benefits,” Russell said.

However, “there are some pieces of the new law that might still be upheld, especially for those people still working,” she added.

The recent ruling signals that the court is unlikely to accept the state’s argument that changing the pension system is necessary because of financial emergency, said Merriman, a faculty member in the Institute of Government and Public Affairs.

“For people already retired, it seems completely unlikely that the pension law would go through as passed because it clearly is a diminishment of benefits, which seems to be constitutionally protected,” he said.

“For employees who are currently working, there seems to be the same cut in benefits, so I assume the same logic would go through.”

It could take a year or longer for the courts to determine the constitutionality of the pension legislation, Russell said.

“I hope this new health insurance ruling will speed it up,” she said.

If the pension law is overturned, the state must still find a way to tackle its $100 billion pension shortfall, Merriman cautioned.

“In the long run, it puts the state fiscal position much more out of reach,” he said.

“The debt is going to grow quite a bit over the next 15 to 20 years unless there is some change in the pension system or a substantial change in the revenue side.”

 

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