An Appellate Division panel ruled January 31 that legal claims arising out of legislation from 2010 related to pensions and benefits failed to state a claim for which relief could be granted and as such should be dismissed. The suit, filed by several unions, including the New Jersey Education Association, Teamsters, IBEW and Professional Firefighters Association argued that P.L.2010, c.1, 2 and 3 were unconstitutional. NJPSA member’s interest focus exclusively on issues associated with P.L.2010, c.2.
Chapter 2
P.L.2010, c.2 made changes to the School Employees Health Benefits Program (SEHBP) and State Employees Health Benefits Plan (SHBP). Specifically, it included the following changes:
- Required ACTIVE employees in the School Employees Health Benefit Plan (SEHBP) and local plans to begin contributing at least 1.5% of their salary “toward their benefits” upon the expiration of their current collective bargaining contract or May 21, 2010 (whichever is later);
- Requires NEW members of the pension system (those enrolled after the effective date of the enacted bill) to pay 1.5% of their pensions, upon retirement, including cost of living adjustments, toward the cost of their health insurance. Effectively, this eliminated the option of premium-free medical benefits for future employees upon 25 years of service;
- Modifies eligibility criteria for SEHBP health benefits to full time employees, defined as employees working a minimum of 25 hours a week;
- Eliminated dual coverage and the coordination of benefits between insurance plans under the SEHBP and the State Health Benefits Plan (SHBP) for those members who are entitled to coverage under more than one state plan.
- Mandated that any changes negotiated by state unions in the State Health Benefits Plan is imposed on school employees
The suit argued, among other things, that the provision that mandated any changes negotiated at the State to local participants and the provision that required the payment of 1.5 percent of salary violated the law. The Court found that the argument was moot with the enactment of P.L. 2011, c.78 as that law superseded the 2010 law by requiring the creation of the SEHBP and SHBP design committees who are vested with discretion to create, modify, or terminate a plan or its components. The Court also found that the State had the right to impose the 1.5 percent contribution statutorily as the requirement had not been set arbitrarily and was consistent with legitimate state interests.
How the suit may impact existing litigation associated with the passage of P.L.2011, c.78, to which NJPSA, is a named plaintiff remains to be seen. Certainly the Court’s finding that the State’s action ”falls well within the legislative ‘latitude to establish classifications that roughly approximate the nature of the problem perceived, that accommodate competing concerns both public and private, and that account for limitations on the practical ability of the State to remedy every ill” may have an impact on future litigation. Stay tuned for future developments.