Judge: City may change retirees’ health coverage

• Don Ness

Duluth Mayor Don Ness in his office. News Tribune file photo

Talk about it

Duluth Mayor Don Ness said Tuesday that a judge’s decision to allow the city to modify retirees’ health-care benefits will save millions of dollars and give his administration “the ability to save Duluth from financial ruin.’’

In a 16-page order and memorandum, State District Judge Kenneth Sandvik ruled that the city may modify the retirees’ benefits whenever and however benefits for active employees are modified, because the collective bargaining agreements in effect on the retirees’ retirement dates don’t prohibit the city from doing so.

“The plaintiffs’ health benefits are not fixed and governed by the plan in place on the dates of their retirements,” Sandvik wrote. “As former employees of the city, the retirees were aware, at the time of their respective retirement dates, that the city often modified the health-care benefits of active employees.’’

Sandvik, who has chambers in the Lake County Courthouse in Two Harbors, was assigned the case after the Duluth judges recused themselves because of a potential conflict of interest.

Ness said that, based on previous actuarial studies, he estimates the city would save between $60 million and $100 million over the next 30 years, including $1 million the first year, by moving retirees to the current employee plan. He based that savings in part on increased co-pays and deductibles, and lower administrative costs.

Before he became mayor, Ness pledged to move all retirees and their dependents to the same health-care plan as current employees to reduce costs.

Minneapolis attorney John “Mac’’ Lefevre Jr. represented the city. He called Sandvik’s decision “strong and well-reasoned.’’

“It seemed to me that the judge really agreed with what I felt was the strongest part of our case — just the clear contract language. It was clear on its face: The city can make changes in retiree health-care benefits as it makes changes in benefits for active employees,’’ he said.

Two city retirees and a retiree’s spouse filed a complaint in May 2008 seeking a restraining order against the city, claiming that the free health care they’d enjoyed had been taken away unlawfully. The complaint asked the court to bar the city from reducing health-care benefits for city retirees and their dependents.

Duluth attorney Don Bye, who represented the retirees, had argued that the contracts they retired with should continue. He said that retirees earned the right to health-care coverage because they gave up sick days and wage increases during contract negotiations that would have amounted to hundreds of thousands of dollars.

“It was an unpleasant surprise that will certainly be a disappointment to the city’s retirees,” Bye said of Sandvik’s decision. “I say congratulations to the city — for now.’’

Paula Savela, one of the plaintiffs, said she was very disappointed in the decision. “We’re going to appeal it,’’ she said. “As far as I know, that’s the plan.’’

Ness said the city will contact retirees and their attorneys over the next month or two in an attempt to start the transition to the new benefit plan in a transparent way.

“Clearly, this was the largest remaining strategy that needed to fall into place if we had any ability to create a sustainable benefit for the long term,’’ Ness said.

Tags: news, courts, health