Appellate Division Finds c.78 Health Benefits Contributions Requirements Do Not Apply to Public Sector Disability Retirees

Last month, in Brick Twp. PBA Local 230 v. Twp. of Brick, the Appellate Division of the Superior Court of New Jersey confirmed that N.J.S.A. 40A:10-21.1, P.L. 2011, c. 78, § 42, more commonly known as Chapter 78, does not require ordinary disability or accidental disability retirees of public employers to make premium payments for health insurance benefits.

Chapter 78, concerning public employee pension and health care benefits, was passed in recognition of “serious fiscal issues” confronting the State and the underfunding of the pension system. It implemented various changes to pension and health care benefits such as increased required contributions from public employees and suspension of cost-of-living adjustments.  Among these reforms included requirements for certain retirees to pay contributions toward their health benefits in retirement.

In Brick, the Township had required a former police employee, who had retired due to a disability he had sustained while on duty in 2011, to continue making health insurance premium contributions in order to maintain his retiree health benefits coverage. The trial court concluded that Chapter 78 exempted only those employees with 20 or more years of service on its effective date from having to make contributions toward health benefits in retirement. Due to the fact that the employee had served only 19 years, the trial court believed that his obligation to make contributions was required by Chapter 78.

On appeal, the Appellate Division considered “whether Chapter 78 applies to government employees who receive disability retirement benefits.” The Appellate Division opined that the clear language of Chapter 78 does not require that contributions be made by those who retire on disability pensions even if they have less than 20 years of pensionable service. The Court found support for its conclusion based on the fact that the Legislature had designated different statutory sections for employees disabled while at work, which was further supported by the legislative history of Chapter 78. Thus, the Court reasoned that while ordinary retirement is linked to a member’s age or years of service, disability retirement is not predicated on length of service or age, but awarded because of an employee’s disability.

Thus, the opinion suggests that Chapter 78 contributions requirements apply with respect to active public employees and those who retire based on meeting the service requirements. In contrast, those who are forced to retire on an ordinary disability or accidental disability retirement are exempt from making premium payments for health insurance benefits.

If you have any questions or for more information regarding Chapter 78 health benefits or the impact of other laws affecting public employers, please contact Joseph M. Hannon, Esq., jhannon@nullgenovaburns.com or Brett M. Pugach, Esq., bpugach@nullgenovaburns.com in the Firm’s Labor Law Practice Group.

Affordable Care Act Update: IRS Issues Proposed Rule-Making Clarifying Employer Coverage Requirements

The IRS recently proposed new rules regarding the shared responsibility provisions of the Affordable Care Act (ACA) and a set of questions and answers to clarify coverage requirements.  Effective January 1, 2014 an employer with 50 or more full-time employees or full-time equivalent employees will be required to offer at least 95% of its full-time employees and their dependents minimum essential health benefit coverage, or in the alternative pay a penalty if any full-time employee receives a federal subsidy to purchase insurance through a health exchange.  A covered employer will pay a penalty when the coverage it offers is not affordable and the new rules clarify that coverage is affordable generally only when the cost of coverage is no more than 9.5% of the employee’s household income. Because of the practical difficulty of determining an employee’s household income, the employer’s safe harbor will be providing coverage that costs no more than 9.5% of the employee’s wages paid by the employer as reported in Box 1 of Form W-2. 

Additionally, the proposed rules clarify that a covered employer must offer coverage to an employee’s children under the age of 26 but need not offer affordable coverage to dependents, or any coverage at all to the employee’s spouse unless the spouse is also an employee of the employer.  The new rules create a strong incentive for a covered employer to direct money into health insurance coverage for its employees rather than their dependents. 

Covered employers may rely on the new rules for guidance until a final rule or other materials are issued. If you have any questions or for more information about ACA and its impact on your organization or your employees’ benefit plans, please contact Patrick W. McGovern, Esq.pmcgovern@nullgenovaburns.com, Gina M. Schneider, Esq., gmschneider@nullgenovaburns.com, or Phillip M. Rofsky, Esq., profsky@nullgenovaburns.com, in the Firm’s Employee Benefits Practice Group.

 

The Evolving Law and the Static Public Sector Collective Negotiations Agreement

When was the last time you had your public sector collective negotiations agreement reviewed to determine whether your contract contains non-negotiable items?  Too often contractual provisions that were negotiated years ago survive contract after contract without this basic question even being considered.  This basic question should be regularly raised concerning every Article of your collective negotiations agreement to ensure you are not negotiating away managerial prerogatives nor providing greater benefits than need to be provided.

It is likely your collective negotiations agreement contains a provision that is not negotiable.  That means it is a topic that the public employer has complete discretion on and cannot be subject to a grievance.  There are various examples, but take for instance, work schedules and shift changes.  Work schedules and hours that individuals work are generally a negotiable issue.  However, the hours and days in which services are to be provided are non-negotiable issues.  Such nuances in public sector labor law occur with many topics from health insurance to sick leave to promotional practices and procedures, etc.  Knowledge of the negotiable and non-negotiable aspects of these items is vital in ensuring your collective negotiations agreement is not giving away any of these important managerial prerogatives.

Decisions as to negotiability of issues are constantly being rendered by the Public Employment Relations Commission.  These decisions may have changed a provision in your collective negotiations agreement that was previously negotiable to be a non-negotiable subject.  Or, you simply may have been operating with a collective negotiations agreement that contains non-negotiable items and simply haven’t noticed.  These items do not need to be bargained out of the collective negotiations agreement.  Rather, they may be removed through a process called a Petition for a Scope of Negotiations Determination.  This is an effective tool which should be utilized when necessary to remove such non-negotiable issues from a collective negotiations agreement.  However, a discussion with the applicable unions explaining that the issue is not negotiable, may obviate the need for resorting to the filing of a scope of negotiations petition.

The first step in the process though is to know what should and should not be in your collective negotiations agreement.  When was the last time you undertook this review?

For further information or advice on this topic, please contact Joseph M. Hannon, Esq., jhannon@nullgenovaburns.com, in the Public Sector Labor Law Practice Group.