An Ohio appeals court has ruled that Cincinnati was within its rights to reduce the medical benefits of a group of early retirees.
Medical benefits of retirees are not considered vested and thus can be changed, the 1st Ohio District Court of Appeals said in its ruling on a lawsuit brought by a group of 49 former city employees who had taken an early retirement deal.
The retirees were promised full health benefits as part of their early retirement deal, which was offered as a way for the city to cut costs. The city council subsequently reduced the benefits.
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Originally, the early retirees had 96 percent of their health costs covered. The change reduced the coverage to 80 percent. Neither other retirees nor current employees had their benefits reduced at that time. (The benefits of all current and retired employees were subsequently changed.)
The early retirees won their case in a trial during which the court ruled that the language in the agreement signed by those accepting the deal was ambiguous. The appeals court ruled the trial court had erred and the language was not ambiguous.
That ruling led the appeals court to conclude the city had not broken the agreement.
The lawyer for the retirees, Donald Hardin, told Cincinnati.com he planned to appeal to the state supreme court.
The city has been looking for other ways to reduce benefits costs. In November, voters rejected efforts to change its public pension system, which has unfunded liabilities of nearly $862 billion. Other cities, such as Detroit, have considered such changes to reduce the strain payments to pension plans put on budgets.
Congress has heard testimony from groups on both sides of the debate on whether cutting medical benefits promised to current retirees is fair.
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