Kanerva v. Weems

• Decision Date: 03 July 2014
• Docket Number: No. 115811.,115811.
• Citation: 13 N.E.3d 1228
• Parties: Roger KANERVA, et al., Appellants, v. Malcolm WEEMS, et al., Appellees.
• Court: Illinois Supreme Court

13 N.E.3d 1228

Roger KANERVA, et al., Appellants

v.Malcolm WEEMS, et al., Appellees.

No. 115811.

Supreme Court of Illinois.

July 3, 2014.

Stephen A. Yokich, of Cornfield & Feldman LLP, of Chicago, for appellants Debra Bauer et al.

Edward J. Kionka, of Carbondale, and Thomas G. Maag and Peter J. Maag, of Wood River, for appellants Gordon Maag et al.

George W. Tinkham, of Springfield, and Rodney V. Taylor, of Christopher & Taylor, of Indianapolis, Indiana, for appellants Gary McDonal et al.

John M. Myers and Barbara K. Myers of Rabin & Myers, P.C., and Donald M. Craven and Esther J. Seitz, all of Springfield, for appellants Robert Kanerva et al.

Lisa Madigan, Attorney General, of Springfield (Michael A. Scodro, Solicitor General, and Richard S. Huszagh and Kate E. Pomper, Assistant Attorneys General, of Chicago, of counsel), for appellees.

Clinton A. Krislov, of Chicago, for amicus curiae Certified Classes of Participants in the City of Chicago Annuitant Healthcare Plans.

Stephen R. Patton, Corporation Counsel, of Chicago (Benna Ruth Solomon, Myriam Zreczny Kasper and Sara K. Hornstra, Assistant Corporation Counsel, and Michael B. Slade, R. Chris Heck and J. Michael Jones, of Kirkland & Ellis LLP, of counsel), for amicus curiae City of Chicago.

OPINION

Justice FREEMAN delivered the judgment of the court, with opinion.

¶ 1 At issue in this appeal is the validity of Public Act 97–695 (eff. July 1, 2012), which amended section 10 of the State Employees Group Insurance Act of 1971 (Group Insurance Act) (5 ILCS 375/10 (West 2012) ) by eliminating the statutory standards for the State's contributions to health insurance premiums for members of three of the State's retirement systems. In place of those standards, Public Act 97–695 requires the Director of the Illinois Department of Central Management Services to determine annually the amount of the health insurance premiums that will be charged to the State and to retired public employees. Plaintiffs include members of the State Employees' Retirement System (SERS), the State Universities Retirement System (SURS), and the Teachers' Retirement System of the State of Illinois (TRS), which are the three state retirement systems that are affected by Public Act 97–695. Plaintiffs brought four putative class actions challenging the constitutionality of Public Act 97–695. Each of the complaints alleged that Public Act 97–695 violates the pension protection clause of the Illinois Constitution of 1970 (Ill. Const. 1970, art. XIII, § 5 ). Two of the complaints alleged a violation of the contracts clause (Ill. Const. 1970, art. I, § 16 ), and one complaint alleged a violation of the separation of powers clause (Ill. Const. 1970, art. II, § 1 ). In addition, certain plaintiffs sought injunctive relief or damages for common-law claims based on contract and promissory estoppel. On motion of defendants, the circuit court of Sangamon County dismissed all of the complaints, and plaintiffs appealed. This court granted a subsequent motion for direct review, pursuant to Supreme Court Rule 302(b) (eff. Oct. 4, 2011), and ordered that the appeals from the four consolidated cases be transferred to us. We subsequently allowed “certified classes of participants in the City of Chicago's annuitant healthcare programs” to file a brief as amicus curiae on behalf of plaintiffs and the City of Chicago to file a brief as amicus curiae on behalf of defendants (Ill. S.Ct. R. 345 (eff. Sept. 20, 2010)). For the reasons that follow, the judgment of the circuit court is reversed, and the cause is remanded for further proceedings.

¶ 2 BACKGROUND

¶ 3 In addition to the wages they are paid, most public employees in Illinois receive additional benefits, including subsidized health care, disability and life insurance coverage, eligibility to receive a retirement annuity, and survivor benefits. Disability, retirement annuity and survivor benefits are governed by the Illinois Pension Code (40 ILCS 5/1–101 et seq. (West 2012)). For state employees, the program of group life and health insurance benefits, which is available to active employees, certain of their dependents, and certain retirees and their dependent beneficiaries, was previously governed by the State Employees' Insurance Benefits Act (Ill.Rev.Stat.1969, ch. 127, ¶ 501 et seq. ). Pursuant to that statute, the State was required to pay 50% of the health insurance premium for qualified employees and annuitants. Ill.Rev.Stat.1969, ch. 127, ¶ 509(c). The program of disability, retirement and survivor benefits and the program of group life and health insurance benefits were in effect when the provisions of Illinois Constitution of 1970 were formulated during the Sixth Constitutional Convention and approved by the voters of Illinois.¹

¶ 4 Effective January 1, 1972, the State Employees' Insurance Benefits Act was repealed (Pub. Act 77–476 (eff. Jan. 1, 1972)) and superseded by the Group Insurance Act, which also provided a program of group life and group health insurance to current state employees, retired state employees, and certain of their dependents (Ill.Rev.Stat.1971, ch. 127, ¶ 522 ).

¶ 5 The Group Insurance Act increased the health insurance benefit that had been granted under the prior statute. Initially, it called for the State to pay the full cost “of the basic non-contributory group life insurance and group health insurance on each eligible employee and annuitant” (Ill.Rev.Stat.1971, ch. 127, ¶ 530(a) ), but that provision was later qualified. Effective July 1, 1992, the General Assembly amended the law to authorize the Director to require most members who were employees to begin contributing up to $12.50 per month for their basic group health benefits (5 ILCS 375/10(a) (West 1992)), a cap which was removed in 1995 (5 ILCS 375/10(a) (West 1996)). With respect to retired members, the 1992 amendment provided as follows:

“The State shall pay the cost of the basic program of group health benefits only after benefits are reduced by the amount of benefits covered by Medicare for all retired members and retired dependents aged 65 or older who are entitled to benefits under Social Security or the Railroad Retirement system or who had sufficient Medicare-covered government employment * * *.” 5 ILCS 375/10(a) (West 1992).

The reach of this modification in annuitant benefits was prospective only, where the amendment expressly provided that:

“such reduction in benefits shall apply only to those retired members or retired dependents who (1) first become eligible for such Medicare coverage on or after the effective date of this amendatory Act of 1992; or (2) remain eligible for, but no longer receive Medicare coverage which they had been receiving on or after the effective date of this amendatory Act of 1992.” Id.

¶ 6 In 1997 and 1998, the General Assembly made further changes with respect to the program of group health benefits for SERS, SURS and TRS annuitants, retired members and survivors. It did so through Public Acts 90–65 (eff. July 7, 1997) and 90–582 (eff. May 27, 1998). As with the 1992 changes affecting retiree health benefits, the 1997 and 1998 legislative acts were prospective. They applied only to “new SERS, SURS and TRS annuitants,” “new SURS retirees,” or “new SERS, SURS and TRS survivors,” a group limited to persons who first became annuitants, retired employees, or survivors under the three retirement systems on or after specified dates in 1998. Existing retirees and survivors continued to have the cost of their basic program of group health benefits paid in full by the State, subject to the Medicare-related modifications that were enacted in 1992. With respect to new SERS, SURS and TRS annuitants, retired members and their survivors, the law instituted a system under which the retired member or member's survivor would be responsible for the cost of the basic program of group health benefits offered by the State, but the State would contribute toward that expense based on the length of the member's service. Specifically, the law provided that:

“[T]he State shall contribute toward the cost of the annuitant's coverage under the basic program of group health benefits an amount equal to 5% of that cost for each year of creditable service upon which the annuitant's retirement annuity is based, up to a maximum of 100% for an annuitant with 20 or more years of creditable service.” 5 ILCS 375/10(a–1) to (a–7) (West 1998).

The remainder, if any, of the cost of coverage under the basic program of group health benefits was the responsibility of the annuitant or the survivor. Id. The terms of these provisions were disseminated to affected state employees, annuitants and survivors through, among other things, a benefit handbook published by the Illinois Department of Central Management Services.

¶ 7 In 1998, the American Federation of State, County, and Municipal Employees, Council 31 (AFSCME), the labor union that serves as the exclusive bargaining representative for approximately 40,000 state employees, negotiated a new collective bargaining agreement with the State on behalf of its members. That agreement addressed the health insurance benefits that would be provided to former employees who had retired and to then-current employees when they retired in the future. Its substantive provisions were consistent with section 10 of the Group Insurance Act, as amended by Public Acts 90–65 and 90–582. With respect to new annuitants and their survivors, the agreement adopted the same service-based schedule of graduated premium percentages set forth in section 10. The collective bargaining agreement did not alter the State's obligations regarding annuitants who had retired prior to January 1, 1998, or their survivors. As to those individuals, the State remained obligated to pay the cost of their basic program of group health benefits in full, subject to the 1992 Medicare-related modifications, just as it was with respect to annuitants and survivors not covered by the collective...