City retirees face health-care hike
BY FRAN SPIELMAN City Hall Reporter firstname.lastname@example.org November 28, 2012 7:15AM
Laurence Msall, president of the Civic Federation appears before the Budget hearing after the City Council meeting. File Photo. Brian Jackson/Sun-Times
Updated: December 29, 2012 6:28AM
Thousands of retired city employees are being warned to brace for a costly change to their city-subsidized health care plan tied to an $800 million unfunded liability for Chicago taxpayers.
Jim Mohler, executive director of the Municipal Employees Annuity and Benefit Fund, sounded the alarm in a letter to retirees and the widowed spouses of deceased city employees.
Mohler noted that a court-approved “ten-year settlement agreement” that calls for the city to share costs with retirees expires June 30, 2013.
A commission has been created to decide what to do after that but no recommendations have yet been made with time running out, he said.
“Without a further agreement being entered into between the parties or some legislative action being taken, the provision of retiree health care services on the basis of shared funding will be lost,” Mohler wrote.
“Each retiree should therefore take whatever steps he or she deems prudent to prepare for the possibility that, after June 30, 2013, the city will not provide a health care plan for retirees or, alternatively, that the terms and costs of any future health care plan for retirees may differ significantly from the health care plan now in existence.”
Civic Federation Laurence Msall said city retirees are well-advised to brace for the worst.
He noted that under-funded city pension funds saddled with their own funding crisis contribute 13 percent to retiree health care while the city pays 55 percent and retirees contribute 32 percent.
“Because of great uncertainty about the future of pension funds impacting the city’s financial condition, it’s not reasonable to plan as if these retiree health benefits are gonna continue after they’re no longer court-ordered,” Msall said.
“It is very hard to see how current city retirees will not be forced to pay significantly more — if they even have the benefit. In the private sector, those companies that offer retiree health care generally require that retirees pay 100 percent of the premium cost.”
Msall noted that the city could “walk away” from its health care obligation to retirees because there is “no state constitutional requirement” that the city provide it.
“If they decide to continue it, they have to find a lot of money the city doesn’t have,” he said.
“One [option] is to cut city services or raise taxes to continue to pay this benefit or further reduce pension benefits to free up money going forward. The city could also follow the CTA model and establish retiree health care trust fund. But, it all hinges on your ability to find some revenue or asset you’re not using.”
Clinton Krislov, an attorney representing retirees in the marathon case, said he is prepared to seek a court injunction preventing the city from “diminishing or impairing” health benefits for the oldest group of retirees.
“We expect both the city and the pension system to fulfill these benefits. They’re gonna have to figure out a way between now and June 30,” he said.
“Everybody’s gonna say it’s your problem to pay for it. The one group whose problem it isn’t is the retirees. They paid for their benefits by working for the city. While there may be differences in entitlement among different retirees, the core group are people for the most part who did not by city employment qualify for Social Security or Medicare. These are people who have nowhere else to go. You cannot leave them out in the cold.”
Mayoral spokesman Kathleen Strand said the city is “aware of the letter and terms of the settlement” and the Retiree Health Benefits Commission chaired by City Comptroller Amer Ahmed has been meeting since the summer “to assemble a set of options for Mayor Emanuel to consider by year’s end.”
The warning letter is the latest twist in a long-running legal dispute over retiree health care.
In 1990, then-Mayor Richard M. Daley proposed a health care “safety net” after an Illinois Appellate Court ruling curbed the city’s required contribution to retiree health care. Under the agreement, retirees in a financial bind over soaring health care premiums contributed no more than 15 percent of their monthly pension checks to medical care.
The guarantee continued until April, 2003, when the two sides crafted a settlement designed to save taxpayers $8 million-a-year.
It nearly doubled monthly health insurance premiums 22,000 retirees and deprived those who retire after 2013 of any guaranteed coverage at all. At the time, City Hall agreed to cover 55 percent of the cost of retiree health care but only for current retirees and those who left the payroll before July, 2005.
The retiree health care controversy coincides with the city’s pension crisis.
In 2016, the city is required by state law to make a $700 million contribution to stabilize under-funded police and fire pension funds. That’s why Chicago aldermen called Emanuel’s no-new-taxes, 2013 budget the “calm before the storm.”