Wednesday, January 28, 2015

Supreme Court provides a reminder

In an earlier blog post, we commented on Gov. Brown's push to start pre-funding retiree health care.  His push relates to state employees under CalPERS but, if adopted there, there would be strong pressure on the Regents to do the same at UC. We noted that at present, UC retiree health care - from the viewpoint of the university - is a nice thing it does, but it is not a guaranteed benefit.  And we noted that if you start to pre-fund retiree health in the same manner as the pension, the nice thing is more likely to be seen by courts as guaranteed in the same way that pensions are guaranteed.  (Yes, there have been some breaches of pension promises in some jurisdictions of late, but the pension promise is much stronger than the non-guarantee of unfunded retiree health.)

On Monday, the Supreme Court unanimously seemed to undermine a lifetime promise of union-negotiated retiree health care and the distinction relative to a pension was made.*  I am, of course, giving a non-legal view here.  But it is hard even to know what pre-funding something that may or not be given even means.  Why would employees be contributing to a benefit that might be taken away at employer discretion before they retire?  Only if a promise is a promise does such a contribution make much sense.  So were UC to start pre-funding retiree health with some combination of employer and employee contributions, it would hard for the university to maintain the benefit was just a nice but not guaranteed thing it happens to do.

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