Could Morgan City charge future retirees an extra amount to stay on its health plan?

Plain-English summary

Morgan City asked whether it could charge an additional amount to future retirees who chose to remain on its municipal health and hospitalization plan. In Opinion 03-0119, Attorney General Charles Foti said the proposed surcharge was permissible under state law for people hired after the new guidelines began. The proposal did not alter the vested rights of current employees or retirees.

The city described retirees as already paying their full premiums. Under its proposal, future hires who later retired and stayed on the plan would pay a surcharge tied to years of active service. The city said those funds would reduce plan premiums generally. The AG found no Louisiana provision directly addressing such retiree surcharges and reasoned that the city had no duty to offer retiree coverage to newly hired workers at all. His approval was tied to the future-hire limitation and protection of existing vested rights.

Currency note

This opinion was issued in 2003. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

What the opinion meant at issuance

Morgan City and municipal benefits staff

The AG approved the proposed new-hire guideline under state law as described. He emphasized that existing employees and retirees were outside its scope and that their vested benefits could not be adversely affected.

Future city employees

For people hired after adoption, the proposal would require retirees who stayed on the plan to pay the full premium. A service-based surcharge applied to some, but retirees with at least 25 years of active service paid none under the proposed guidelines. The opinion did not guarantee the plan's future availability or decide individual benefit entitlements.

Common questions

Q: Could the city add a surcharge to retiree health coverage? A: The AG said yes for the proposal applied only to future hires who later elected retiree coverage, without impairing existing vested rights.

Q: Did the new guideline apply to people already employed or retired? A: No. The opinion's conclusion relied on the city's representation that it would affect only employees hired after adoption.

Q: Did the AG find a specific Louisiana surcharge statute? A: No. He said his research found no state provision directly addressing retiree insurance surcharges.

Background and statutory framework

The city described a plan under which current retirees paid all premiums, and future hires who retired would pay an added amount scaled by service years if they chose continued coverage. The AG said the city could even phase out retiree coverage for new hires, provided existing vested rights were not harmed. The OCR extract does not print a legible issue date; its opinion number supplies the 2003 year.

Citations and references

The opinion did not identify a controlling statute or reported case; its answer rested on the described prospective guideline and the absence of a state-law prohibition found in its research.

Source

• Landing page: https://www.ag.state.la.us/Opinions
• Original PDF: https://www.ag.state.la.us/Opinion/Download/03-0119

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain — the linked PDF is authoritative.

~t~te o~
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P.O. BOX 94005
BATON ROUGI:
70804-9005
CHARLES C. FOTI, JR.
A’rI’ORNEY GENERAL

Opinion Number 03-0119

54 - INSURANCE
90-A - POLITICAL SUBDIVISIONS - Officers, Agents
Dr. Tim J. Tregle, Mayor
& Employees

City of Morgan City
City of Morgan City can implement proposed new
P. O. Box 1218
insurance guidelines, and impose a surcharge upon
Morgan City, Louisiana 70381
newly hired employees, after retirement, if those
employee/retirees choose to continue coverage under the City’s health and hospitalization policy.
Dear Dr. Tregle:

Reference is made to your request for an opinion of this office regarding health and hospitalization insurance plan benefits for the City of Morgan City’s retirees.

It is our understanding, in accordance with your correspondence and in accordance with the undersigned’s discussions with Mr. Bart Mancuso, Chairman of the City’s Insurance Commission, that the City does not currently have any guidelines with regard to retiree’s costs toward their health and hospitalization insurance, but that retirees are responsible for paying the entire cost of same if they elect to remain on the City’s health and hospitalization plan. In spite of the fact that retirees are currently required to pay 100% of their premiums, the City is concerned that the plan is, or will become, overburdened by the retiree section of its group. As such, in accordance with your letter:

"[t]he City is trying to create guidelines in order to safeguard the plan from over exposure of the retiree section, and at the same time, be considerate of the availability of hospitalization and health insurance to retirees in general."

It is our understanding that the City would prefer to make insurance available to affected retirees, even at a high cost to the retiree, rather than cease providing coverage to such retirees upon their retirement.

Under the City’s proposed new guidelines, which we are advised will only apply to individuals employed after adoption of the new guidelines, it is our understanding that in addition to payment of 100% of their premiums, retirees who choose to remain on the City’s health and hospitalization plan after retirement will be required to pay a surcharge (calculated as percentage of premium cost) to the City, which surcharge will be based upon years of active service. Thus, in accordance with the Suggested Retiree Guidelines which you have provided to this office, a regular retiree with 25 or more years of active service would pay no surcharge, but a retiree with 10 years of service or less would pay a surcharge of 100%.

Civil ir)i~ ~sion, t.ivingston Eluildmg, 1~:~5 North 3 Street, o Floor. Baton1 Rot~ge. Louisiana 70~0,.
Telephone 225/326-6020 Facsimile: 225’326-6096

Page 2

Opinion Number 03~)119
Dr. Tim J. Tregle, Mayor
City of Morgan City
Page -2-

It is our understanding that the City will utilize all funds generated by the surcharge to reduce the premiums charged to and for all health and hospitalization plan participants. In this way, the City hopes to at least, partially offset the increase in participant’s premiums that generally occurs within health and hospitalization plans, such as the City’s, that are heavily utilized by retirees.

Specifically, on behalf of the City, you seek our opinion regarding the legality, under state law, of the imposition of the surcharge upon affected retirees who choose to continue coverage under the City’s health and hospitalization policy.

Please be advised that our research revealed no provision of Louisiana law that directly addresses the issue of the imposition of such insurance surcharges upon retirees. We also note that the proposed new guidelines will only apply to employees hired by the City after adoption of the new guidelines; the new guidelines will have no effect upon the vested rights of existing employees or retirees. Additionally, we note that the City has no obligation to provide any retiree coverage whatsoever to newly hired employees. If the City so chose, it could instead decide to eliminate or phase out the availability of health and hospitalization insurance for its retirees, as long as the vested rights of existing employees and retirees would not be adversely affected thereby.

Based upon the foregoing, it is the opinion of this office that the City of Morgan City can implement its proposed new insurance guidelines, and impose a surcharge upon newly hired employees, after retirement, if those employee/retirees choose to continue coverage under the City’s health and hospitalization policy. In our opinion, the City’s proposed guidelines do not violate any provision of state law.

We trust the foregoing to be of assistance. Please do not hesitate to contact us if we can be of assistance in other areas of the law.

Yours very truly,

CHARLES C. FOTI, JR.
Attorney General

BARHAM
General

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