Update on Teacher Health Insurance Security Fund Litigation (July 2022)
Our lawsuit challenging the underfunding of the Teacher Health Insurance Security Fund is proceeding in the Circuit Court for Sangamon County. The defendants, who include the TRS Board of Trustees, the Director of the Illinois Department of Central Management Services, State Comptroller Susana Mendoza and State Treasurer Michael Frerichs, have answered our complaint, and they responded to our requests for discovery shortly before the Fourth of July holiday weekend. Our attorneys and expert witness will carefully analyze the data they have produced about the current fiscal status of the Fund. The answer and discovery responses have pointed to one key legal dispute in this case. The defendants acknowledge that “retired teachers have a constitutionally protected right to the benefits specified in sections 6.5 and 6.6 of the State Employees Group Insurance Act of 1971 (5 ILCS 275/6.5, 6.6),” but they disagree that retired teachers have a constitutionally protected right “to a particular program of benefits that CMS has established under that authority at any given time.” This appears to mean that the defendants believe you have a constitutionally protected right to participate in some type of health insurance program, but not to any particular level of benefits. We strongly disagree with that argument and will continue to advocate for the full extent of your constitutional rights in this litigation.
Retired Teachers Sue State of Illinois After Administration Decimates Healthcare
(January 24, 2022 – Springfield, Ill.) – The Illinois Retired Teachers Association (retired teachers, administrators, coaches, counselors, school nurses, et. al) filed a lawsuit Monday seeking to correct an unconstitutional move by the State of Illinois which dramatically reduced contributions made to the Teacher Health Insurance Security Fund. That move worsens the financial footing of the fund, which is already on the verge of default, and places the health benefits of retired teachers in dire jeopardy.
The lawsuit, filed in Springfield, states that more than 100,000 retired educators depend on the committed funding of the health insurance fund and that personal and family decisions have been made in justifiable reliance on the promises made by Illinois law makers and guaranteed by the Illinois Constitution.
“This is a disastrous blow to retired public servants and soon-to-be-retired public school educators,” stated Bill Funkhouser, President of the Illinois Retired Teachers Association. “Retirees have medical procedures they have planned for and long-term medical decisions that are projected. They need their healthcare as originally promised.”
Funkhouser added, “furthermore, I am shocked and appalled that the government is reducing our health insurance funding during a catastrophic pandemic. It’s unamerican, it is wrong, it’s not right and it must be reversed.”
The lawsuit details how the Department of Central Management Services reduced the contribution rates to the retirement healthcare fund from active employees and the State from 1.3% to .9% in FY2023. This decreases the funding to the teachers’ health insurance fund by $45.6M. Since the State of Illinois’s contribution is a matching amount, this automatically reduces the State’s contribution.
For FY2023, the employer’s percentage is reduced from .9% to .67%, which will represent a deficit of millions more being paid into the teachers’ health insurance fund.
Actuarially, these actions are causing the healthcare insurance fund to become rapidly insolvent. According to an independent actuarial review conducted by the Retired Teachers’ Association, the negative cash flows to the fund will result in a ‘total depletion of the Fund’s assets at some point during fiscal year 2023.’
Jim Bachman, Executive Director for the Illinois Retired Teachers Association stated: “We understand that flawed decisions made by multiple previous Governors have produced a difficult financial position for the State of Illinois. However, Illinois retired teachers do not believe that the solution to the financial situation is to poorly fund its health care insurance fund.”
Bachman added: “While the reduction may free up money for the State this year, it increases Illinois’ debt exponentially for future years to the sum of three-quarters of a billion dollars. This type of irresponsible underfunding is exactly how Illinois got into the budget situation it is in today.”
“The Illinois Retired Teachers’ Association does not believe that the State should attempt a short-term fix on the backs of Illinois’ more vulnerable retiree population,” Funkhouser concluded. “This is a population that has never failed to answer the call of this state. A population that has made sacrifices throughout their careers and who have never failed, not even once, to make their contributions for retirement and for their healthcare.”
Because the Health Insurance Security Fund is so close to default, and the health benefits to retired teachers are in immediate danger of being diminished, the Association believes the courts must and will act quickly to reverse a most unconstitutional policy, which will be detrimental to the everyday taxpayer.
According to the Terry Group, an actuarial and employee benefits consulting firm based in Chicago, the reduction in contributions reduces the expected revenues of the Fund by more than $750M, from FY2022 through FY2027.
Filed Complaint (Lawsuit) – click here
Actuarial Report – click here