INSURANCE -- Health Insurance (authority to cover retired employees); (retirees reduction of benefits)
PUBLIC OFFICERS AND EMPLOYEES -- Retirement Benefits (reduction of health insurance benefits)
GENERAL MUNICIPAL LAW, §92-a: A town may provide health insurance coverage at town expense to retired officers or employees, or a group of retired officers or employees, including retired elected officials. A town has power under an established health plan to reduce benefits for retirees and for persons eligible to retire but not yet retired.
STATE CONSTITUTION, ARTICLE V, §7: Health insurance benefits are not within the protection of this section.
You ask several questions regarding a town board resolution establishing a personnel policy of providing health insurance at town expense to retired employees with at least five years of town service. Specifically, you ask:
(1) Whether the policy is legal;
(2) Whether the policy may apply to elected officials;
(3) Whether the policy can be changed in a manner which would reduce benefits available to (a) persons already qualified, retired and receiving benefits, (b) persons qualified and eligible to retire but not yet retired, and (c) persons qualified, but not having reached retirement age.
General Municipal Law, §92-a authorizes public corporations to provide medical, surgical and hospital insurance plans for their officers and employees, or for any group of officers and employees and their families, and to pay for the expense, or any portion thereof, of such plans. Section 92-a also provides that, subject to such conditions, limitations and eligibility requirements as may be fixed by the governing board of the public corporation, retired officers or employees, or a group of retired officers or employees, may be permitted voluntarily to subscribe to such a plan for themselves and their families. Any grouping or classification of officers, employees or retirees for health insurance purposes must comply with constitutional equal protection guarantees (NY Const, art I, §11).
Therefore, in answer to your first question regarding the town's policy of providing health insurance at town expense to retirees having atleast five years of town service at the time of retirement, it is our opinion that such a policy is specifically authorized by section 92-a of the General Municipal Law so long as the five year service requirement is determined to be reasonable (see also 34 Opns St Comp, 1978, p 163). Obviously, any determination in this regard must, in the first instance, be made by the town. It should also be noted, however, that it is our opinion that section 92-a does not authorize a town to provide coverage under a local health insurance plan to former officers or employees who have separated from service but are not eligible to receive a retirement allowance (1985 Opns St Comp No. 85-3, p 3; 1983 Opns St Comp No. 83-85, p 102).
In response to your second inquiry regarding whether such health insurance coverage may be provided to retired elected officials, it has been our opinion that the term "officer", as used in section 92-a, includes elective, as well as appointive town officers (see 15 Opns St Comp, 1959, p 234; see also Public Officers Law, §2, which defines the term "local officer" to include elective as well as appointive officers of a political subdivision). Accordingly, elected officials may be included in the town's health insurance plan.
With respect to changing the retirees' health insurance plan in a manner which would reduce benefits, this Office has previously stated that, since the authorization to provide health insurance for officers and employees under section 92-a is permissive in nature, a health insurance plan authorizing post-retirement insurance at municipal expense may be terminated provided that the termination is not inconsistent with the terms of an existing collective bargaining agreement and providing also that reasonable notice is given (34 Opns St Comp, p 163, supra; 1982 Opns St Comp, No. 82-2, p 3; NY Const, art I, §6).
In connection with the above, we note that the question of whether an established health insurance plan covering retirees may be changed in a manner which would reduce benefits available to persons already retired and receiving benefits, and persons qualified and eligible to retire but not yet retired, was addressed by the Court of Appeals decision in Lippman v Board of Education of Sewanhaka Central School District, 66 NY2d 313, 496 NYS2d 987. In that case, a currently employed teacher eligible for retirement and two retired teachers formerly employed by the District, brought an Article 78 proceeding challenging the District's determination to reduce the share of health insurance premiums it was paying to the State Health Insurance Plan on behalf of retired employees. The teachers contended that such reduction was arbitrary and capricious, and sought a declaratory judgment that it violated Article V, section 7 of the State Constitution, which prohibits the impairment of benefits arising from membership in a retirement system. Affirming the Appellate Division's decision, the Court of Appeals held that health insurance benefits are not within the protection of Article V, section 7, and that there is no contractual impediment to reduction of the District's contribution to the State Plan (see also 34 Opns St Comp, 1978, p 163, supra; Weatherwax v Town of Stony Point, 97 AD2d 840, 468 NYS2d 914, where the Appellate Division, Second Department, held that the Town had discretion to terminate a post-retirement health insurance plan). Although the Sewanhaka decision involved health insurance benefits provided to retirees pursuant to the State Health Insurance Plan (see Civil Service Law, §167), the principles would appear to apply equally to a municipality's own health insurance plan.
Finally, your inquiry raises questions concerning the applicability of two federal acts which impact on health insurance plans: the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA", Public Law 99-272) and the Employee Retirement Income Security Act of 1974 ("ERISA", 29 USC §1001, et seq.). "ERISA" contains certain provisions regulating the administration of employee benefit plans, including the termination of benefits. However, that act is not applicable to "a plan established or maintained for its employees ... by the government of any State or political subdivision thereof ... "(29 USC, §1002; see Feinstein v Lewis, 477 F Supp 1256, affd 622 F2d 573; Standard Oil v Agsalud, 633 F2d 760, affd 70 L ed 2d 75, 454 US 801, 102 S Ct 79). Therefore, it appears that "ERISA" would not apply to the town's health insurance plan.
Under "COBRA", the temporary extension of health care coverage for state and local employees covered under certain group health insurance plans is required to be provided at the employee's expense if the employment is terminated for reasons other than their gross misconduct (42 USC, §§300bb-1, et seq.). The maximum benefit extension period is generally 18 months. Although the extension of coverage under this Act would not seem to apply in the situations you pose, the town board may wish to consider the provisions of this Act in connection generally with its health program.
February 11, 1988