Retiree Medical Cutbacks in Texas

[Guest mbg76]

Does anyone know if Texas restricts a municipality's ability to cut retiree medical benefits under a group health plan?

Thanks.

[Ron Snyder]

Such a provision would cut off municipalities ability to customize benefits to their employees, unions and budgets. Part of my work is to assist governmental groups in transitioning out of guaranteed medical benefits for life plans and into a reasonable and workable program that maximizes benefits to employees for dollars available in the budget of the employer. Usually I am retained by employee organizations who desire a win-win result. The appropriate result is seldom to saddle a municipality, school district or other governmental unit with an underfunded plan that they cannot fund. Now that GASB rules require a reality check for governments, they are scrambling to find a solution to a problem that has been festering for years.

While I am not a Texas attorney, I believe that no such provision exists.

[GBurns]

Such a state law would serve no useful purpose.

The conditions that apply are those imposed by the employment and retirement related contracts. What do the Pension Plan Plan Documents, SPD, Agreements and the applicable CBAs actually say about this?

[Guest mjb]

GB: The poster was asking whether TX law prevents reductions of benefits. Some states (NY,NJ) have laws which prevent reduction or elimination of benefits to employees. NY has a constitutional provision which prevent any reduction in benefit accrual to active employees. NJ law guarantees retiree health benefits after 5 yrs of service as a public employee. Plan documents and CBA will be relevant if there is no state law which prevents revoking of benefits which have been granted.

[GBurns]

mjb : It was reduction of "retiree medical benefits". Neither my post nor the OP mentioned "active employees". The posts both relate to retirees. Many retirees have their benefits arranged as part of their employment agreement as a result some are through CBAs while some employees have their benefits arranged through their retirement agreement.

[Guest mjb]

mjb : It was reduction of "retiree medical benefits". Neither my post nor the OP mentioned "active employees". The posts both relate to retirees. Many retirees have their benefits arranged as part of their employment agreement as a result some are through CBAs while some employees have their benefits arranged through their retirement agreement.

GB: Just what part of "state law" dont you understand? The original post referred to state laws that restricts a municipality's ability to cut retiree medical benefits in which I noted that state law could prohibit reduction of retiree medical benefits before an employee is eligible to retire ( i.e., municipality that offers retiree health benefits when employee is hired cannot eliminate such benefit before the employee retires.) It was not clear from the post whether the question related only to cutting back health benefits of employees who had already retired or who were active but eligible for retiree health benefits upon retirement. In either case state law/ constitution must be reviewed to determine if such a cutback is permissble before reviewing the CBA. The useful purpose of such a state law is to protect municipal employees from cutbacks of retiree benefits as is provided in other states.

[Ron Snyder]

While such purpose may be "useful" to retirees, it is certainly not useful to governmental units to handcuff them and force them into bankruptcy!

[Guest mjb]

Not exactly-Govt entities do not declare bkcy - the govt just raises taxes to cover the increased costs (NJ just increased taxes by $2B partly to cover ret and retiree health ins costs for govt employees.)

[GBurns]

mjb: Your question "Just what part of "state law" dont you understand? " makes no sense. What I have to understand is what the OP means. Each reader is entitled to their own opinion and as far as I know each reader is free to respond to any or all parts of any post as they interpret it.

No one has to interpret any post the same way that you do. And although you do not seem to realize it, an interpretation or opinion that is different from yours is just as valid as your interpretation or opinion. You have no exclusivity, you have no infallibility.

That I see the OP's wording "retiree" as pertaining to those already retired, rather than pertaining to promises of retirement benefits made to active employees, is no less valid than any other interpretation that you might have.

[Ron Snyder]

mjb-governmental entities DO declare bankruptcy.

See Orange County Bankruptcy

[Guest mjb]

True OC did declare bkcy but it was not because of its inability to pay for its govt operations/labor costs (OC is one of the 10 or so most affluent counties in the country) but because its administrator engaged in complex financial transactions involving derivatives which eventually collapsed leaving OC owing billions of $ to its financial creditors for worthless futures contracts. OC declared bkcy to prevent seizure of county property by creditors. Under Fed bkcy law assets/property of govt entities cannot be sold to pay creditors claims so the creditors had to agree to a structured settlement w/OC (OC came up with the funds by issuing a special class of bonds backed by county tax revenue). The OC bkcy is the reason why 457 plans are not subject to the claims of the govt creditors since OC had a 457b plan with 170m in employee money that was claimed by bkcy creditors since it was an asset of OC.

[GBurns]

The reason why OC declared bankruptcy is irrelevant.

The fact is that governmental entities do declare bankruptcy. OC is neither the only municipality or governmental entity to have declared bankruptcy, anyhow.

I cannot imagine that the Congress etc would have gone to all the trouble of creating Chapter 9 of the Bankruptcy Code for Municipalities etc, if there were not going to be governmental entities who would find it necessary to declare bakruptcy. And so far some have done so.