South Lake Tahoe retirees file lawsuit against the City

When the recession hit and many cities were faced with bankruptcy and skyrocketing healthcare costs for their employees, retirees had benefits cut or renegotiated. The City of South Lake Tahoe survived those turbulent times by taking a look at the costs they could reduce or restructure, and benefits for retirees was one that took a hit.

Now, many of those employees have filed a lawsuit against the City.

A federal lawsuit was filed by Rose Law out of Roseville, Calif. on December 1 in the U.S. District Court for the Eastern District of California. It alleges the City of South Lake Tahoe is reneging on promises made to 160 retired public servants of continued health benefits during retirement.

Employee benefits and pensions are a large part of any municipal budget. The rising costs of Other Post-Employment Benefits (OPEB) cripples many communities, and with a small city like South Lake Tahoe, that figure was $48 million. 92% of that was unfunded. City Manager Nancy Kerry led the city's effort to reduce unfunded liabilities by establishing a new medical insurance plan and benefit structure that was approved by all bargaining units in the City.

When presenting the plan to the public, Kerry said that many of the retirees now quality for Medicare insurance, and switching to that plan from the old City plan would help the City save money.

The plaintiff, City of South Lake Tahoe Retirees Association, says the retirees were guaranteed the right to maintain membership in the City’s health care plan indefinitely by City Council resolutions dating back to at least 1988. The lawsuit explains retirees were granted, as a vested benefit, escalating levels of City-paid premium subsidies depending on years of service to the City. Many retirees continued in public service at wages lower than their private sector counterparts in reliance on the repeated promises of health premium assistance in retirement, says the Association.

According to the lawsuit, the City has a $4 million dollar Retiree Health Fund set aside, so the promise of lifetime health care for 160 retirees is not a burden or unfunded liability to the City.

"The City was personally served with the lawsuit on December 8," Joe Rose of Rose Law told South Tahoe Now. "Their response to be filed in the court is due December 29 and no court dates are set yet."

City of South Lake Tahoe Attorney Thomas Watson said he cannot comment on the lawsuit at this time.

Rose represented several labor organizations throughout the recent City of Stockton municipal bankruptcy process, which also involved an impairment of retirement medical benefits.