Judge Upholds RI Retiree Health Cuts

April 16, 2010 (PLANSPONSOR.com) – A federal judge in Rhode Island has rebuffed union efforts to challenge the state’s right to change retiree health benefits two years ago.

U.S. District Court Judge William E. Smith of the U.S. District Court for the District of Rhode Island said in the decision that in light of the state’s fiscal crisis, the state took necessary steps to “tighten its belt by enacting legislation that reduced the amount the state would spend on retiree health benefits.” Rhode Island Council 94, AFSCME, AFL-CIO had raised a series of challenges, insisting that the new provisions violated the Contract Clauses of both the U.S. and Rhode Island Constitutions, claims Smith rejected.  

According to a statement from Rhode Island Governor Donald L Carcieri, the 2008 law imposed tougher criteria for early retires to be eligible for state-subsidized health care benefits. Under the law, to be eligible for an 80% payment by the state for the cost of coverage, an early retiree would need to have reached the age of 59 and worked at least 20 years.

The new rules became effective October 1, 2008 and replaced the provisions of the old law for early retirees that paid 90% of the cost for those with 28 or more years of service regardless of age and 100% of the cost for those with at least 28 years of service who had reached age 60.

Carcieri applauded Smith’s ruling.“This decision by Judge Smith is historic, and reinforces the authority of the State to rein in financially unsustainable employee benefits,” Carcieri said in the statement. “As elected officials, we are obligated to the taxpayers to enact laws that are fiscally responsible; we are pleased that the judge acknowledged that we have the legal authority to amend benefits to bring them in line with what the state and the taxpayers can afford. This decision is a victory for all taxpayers.”