Can a West Virginia county commission pay more than the required employer share of PEIA retiree health insurance premiums, and can a future commission later cut those extra payments back?

Plain-English summary

Lewis County had been paying 75% of its retired employees' PEIA premiums and 50% of spouse and survivor premiums, even though state law only required the county to pay a smaller minimum share. Prosecutor Hawkins asked the AG four questions about that practice.

The AG concluded:

1. A county may pay more than the PEIA minimum. W. Va. Code § 5-16-18 sets a floor, not a ceiling. A county can voluntarily contribute more toward retiree premiums.
2. A commissioner who votes for higher retiree benefits is generally not abusing public office for personal gain, as long as the commissioner is a covered "employee" under the PEIA statute (which the Legislature has already authorized to receive these benefits). The 2009 Ethics Commission opinion barring county wellness benefits for elected officials does not apply, because PEIA retiree benefits are explicitly authorized by statute.
3. A future commission may cut the extra payments back to the statutory minimum. Because the over-minimum contribution is non-contributory, recently created, and not guaranteed by statute, it is gratuitous and can be reduced or revoked. Reducing it does not violate Article 6, Section 38 of the West Virginia Constitution either, because the Supreme Court of Appeals has held that pension and retirement benefits are not "salary" within the meaning of that section.
4. A county is not required to give retirees and active employees the same benefit levels. The Supreme Court of Appeals has held that treating active and retired employees differently is rationally related to legitimate government purposes and does not violate equal protection.

Currency note

This opinion was issued in 2014. 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.

Common questions

Q: Was the AG saying counties must pay the PEIA minimum, or could they pay nothing?
A: Counties that participate in PEIA must pay at least the share the PEIA finance board sets for retirees. The opinion focused on whether they can pay more than that minimum, not whether they could pay less.

Q: Why was the Ethics Commission's 2009 wellness-program opinion not controlling?
A: The 2009 opinion turned on the absence of legislative authorization for county wellness benefits to elected officials. PEIA retiree benefits are different because the Legislature has expressly authorized counties to provide health insurance benefits to elected officials who qualify as employees under § 5-16-2(3). The AG also relied on Campbell v. Kelly's holding that retirement-system membership is not "extra compensation" for purposes of the constitutional ban on salary increases during a term of office.

Q: What test did the AG use to decide whether a benefit is contractually vested or revocable?
A: Drawing on Wagoner v. Gainer and Dadisman v. Moore, the AG framed retiree benefits as contractually guaranteed if they are (i) established at the time of employment, (ii) part of a contributory plan, and (iii) secured by statute. Benefits that fail any of those tests, like Lewis County's voluntary over-minimum contribution, are gratuitous and can be modified.

Q: Could a commissioner whose own retirement was on the line ever vote on retiree benefits without an ethics problem?
A: The AG said yes, conditionally. If the commissioner qualifies as a full-time employee under PEIA, the Legislature has already authorized the benefit, and Campbell v. Kelly says retirement plan membership is not the kind of "compensation" that triggers the public-office-for-private-gain rule. The opinion did not decide whether the Lewis County commissioners actually qualified as full-time employees on the facts.

Q: Can a county give active employees a richer health plan than retirees?
A: Yes. The AG cited State ex rel. Lambert v. County Commission of Boone County for the proposition that different treatment of retirees and active employees is rationally related to legitimate government purposes and does not violate due process or equal protection.

Background and statutory framework

PEIA, the Public Employees Insurance Agency, is West Virginia's centralized public-sector health insurance plan for state and many local government employees. Counties may participate as employers, and the PEIA finance board sets the employer's share of premium costs. The opinion turned on three connected statutes:

• § 5-16-18(c) requires non-General-Revenue-Fund employers (counties, cities, towns) to pay a "share of premium costs."
• § 5-16-18(d) says the contribution shall be "the percentage of the cost of the employees' insurance package as the employers determine reasonable and proper under their particular circumstances," wording the AG read as authorizing voluntary contributions above the minimum.
• § 7-5-20, by contrast, governs counties that buy private group health insurance, and expressly bars retirees from getting an employer-paid premium on a private plan. The AG drew the contrast with PEIA: where the Legislature wanted to bar employer-paid retiree premiums, it knew how to say so plainly.

On the vested-rights question, the AG distinguished Wagoner v. Gainer (contributory pension benefits enjoyed by retired judges) and Dadisman v. Moore (statutorily guaranteed PERS benefits) from non-contributory, recently created county largesse. The Supreme Court of Appeals had already held in Campbell v. Kelly that pensions and retirement benefits sit outside the Article 6, Section 38 ban on changing officials' salaries mid-term.

Citations and references

Statutes:
- W. Va. Code § 5-16-1 et seq. (Public Employees Insurance Act)
- W. Va. Code § 5-16-18(c), (d) (employer premium share)
- W. Va. Code § 5-16-13(i) (retiree premium contribution set by finance board)
- W. Va. Code § 7-5-20 (county group insurance via private insurer)
- W. Va. Code § 6B-2-5(b)(1) (use of public office for private gain)
- W. Va. Const. art. 6, § 38 (salary changes during term of office)

Cases:
- State ex rel. Lambert v. County Comm'n of Boone County, 192 W. Va. 448, 452 S.E.2d 906 (1994) (different treatment of active and retired employees)
- Wagoner v. Gainer, 167 W. Va. 139, 279 S.E.2d 636 (1981) (contributory vs. non-contributory plans)
- Dadisman v. Moore, 181 W. Va. 779, 384 S.E.2d 816 (1988) (statutorily guaranteed retirement rights are contractual)
- Campbell v. Kelly, 157 W. Va. 453, 202 S.E.2d 369 (1974) (retirement benefits are not "salary")

Source

• Landing page: https://ago.wv.gov/media/18046/download?inline
• Original PDF: https://ago.wv.gov/media/18046/download?inline

Original opinion text

State of West Virginia
Office of the Attorney General
Patrick Morrisey, Attorney General
(304) 558-2021 / Fax (304) 558-0140

August 11, 2014

The Honorable Lea Anne Hawkins
Prosecuting Attorney
Office of the Prosecuting Attorney of Lewis County, West Virginia
117 Court Avenue
P.O. Box 686
Weston, WV 26452

Dear Prosecutor Hawkins,

Your office has asked for an Opinion of the Attorney General regarding the legality of several aspects of Lewis County's contributions toward county-retiree health insurance premiums. This Opinion is being issued pursuant to West Virginia Code § 5-3-2, which provides that the Attorney General "may consult with and advise the several prosecuting attorneys in matters relating to the official duties of their office." To the extent this Opinion relies on facts, it relies solely on the factual assertions set forth in your office's letter to the Attorney General's Office.

According to your office's letter, the County Commission of Lewis County (the "Commission") voted in 2008 to contract with a private health insurance provider for a group policy covering regular employees. For county retirees who elected to receive coverage under that private policy, the Commission voted to pay for 75% of the retiree's health coverage premiums and 50% of premiums for the retiree's spouse. The premiums for the retiree's spouse would survive the retiree's death. Your office's letter states that at least one of the three Lewis County commissioners (the "Commissioners") was to retire within two months after the vote.

In 2011, the Commission voted to change its health insurance provider to the West Virginia Public Employees Insurance Agency ("PEIA"). All regular and retired Lewis County employees were transferred to that plan. With regard to retirees, the Commission decided to continue to pay the same portion of the premiums it had under the private plan: 75% of retiree premiums, 50% of spouse premiums, and 50% of survivor premiums. The letter from your office suggests these payments exceed the County's required contribution as an employer.

Your office's letter raises a number of legal questions, each addressed in turn below: (1) May a county commission increase the premium payments for its retirees beyond the payment required by PEIA? (2) Has an elected official used a public office for personal gain by voting for an increase in retiree benefits under PEIA, if he or she would eventually benefit from that increase? (3) May a future county commission reduce the amount of retiree health benefits provided under PEIA? (4) Must a county offer regular employees and retired employees the same level of health benefits?

Question One: May a county commission increase the premium payments for its retirees beyond the payment required by PEIA?

Under the Public Employees Insurance Act, W. Va. Code § 5-16-1, et seq. (the "Act"), a county that uses PEIA as its insurance provider must pay a portion of its retirees' insurance premiums. The Act permits retired employees and their spouses and dependents to enroll in PEIA. See W. Va. Code § 5-16-13(i). In turn, Section 5-16-18(c) expressly requires that employers "not operating from the General Revenue Fund," which includes counties, cities and towns, pay a "share of premium costs from their respective budgets." Id. § 5-16-18(c) (emphasis added). PEIA's finance board is charged with "establish[ing] the employers' share of premium costs to reflect and pay the actual costs of the coverage including incurred but not reported claims." Id.

As we read the statute, these required payments are merely minimums, and participating employers may make additional voluntary contributions on behalf of a retired employee. Section 5-16-18(d) expressly provides that an employer who participates in PEIA may, in its discretion, pay part of its employees' costs: "The contribution of the other employers (namely: A county, city or town) in the state . . . shall be the percentage of the cost of the employees' insurance package as the employers determine reasonable and proper under their particular circumstances." (emphasis added). Although this section does not specifically reference retired employees, we find nothing in the statute that would otherwise suggest the Legislature intended to prohibit a county employer from similarly choosing to pay part of its retired employees' PEIA premiums. To the contrary, other parts of the statute evidence the Legislature's specific desire to allow financial accommodations for retired employees.

This reading of the PEIA statute is further bolstered by language in the separate statute concerning the authority that county commissions have to enroll in private health insurance plans. West Virginia Code § 7-5-20 authorizes county commissions to "negotiate for, secure and adopt for the officers and regular employees thereof a group health insurance policy from a private insurer." With respect to active employees, a county commission is "authorized and empowered to pay the entire premium cost, or any portion thereof of said group policy or policies." Id. But counties are more restricted when it comes to retirees' private health plan premiums. In sharp contrast to the Public Employees Insurance Act, this statute concerning private insurance expressly requires any retired employee who wishes to remain on the insurance to "pay[] the entire premium for coverage involved." Id. (emphasis added). That language suggests that the Legislature could similarly have limited employer contributions to retired employees on PEIA insurance, if it wanted to do so. It did not.

Question Two: Has an elected official used a public office for personal gain by voting for an increase in retiree benefits under PEIA, if he or she would eventually benefit from that increase?

As your office's letter recognizes, state law prohibits a public official from using his or her office for private gain. Specifically, West Virginia Code § 6B-2-5(b)(1) states: "A public official or public employee may not knowingly and intentionally use his or her office or the prestige of his or her office for his or her private gain or that of another person." W. Va. Code § 6B-2-5(b)(1).

Notwithstanding this law, we conclude that there are circumstances under which an elected official could permissibly vote for an increase in retiree benefits under PEIA, even if he or she would eventually benefit from that increase. In a separate but related context, the West Virginia Ethics Commission has considered whether the restriction on using public office for private gain prevents county commissioners from establishing and enjoying the benefit of county wellness programs for county employees. A.O. No. 2009-02, W. Va. Ethics Comm'n (Mar. 5, 2009) (the "2009 Ethics Opinion"). In a 2009 advisory opinion, the Ethics Commission opined that commissioners could not vote for, and then participate in, wellness programs. Concluding that only the Legislature can increase the compensation of county elected officials, the Ethics Commission explained, "[s]ince the Legislature has not authorized Counties to spend public monies on wellness programs from County elected officials, we find that it would violate W. Va. Code § 6B-2-5(b)(1) for the County to extend the benefits of its wellness program to its elected officials." Id.

But the Ethics Commission recognized that the answer would be different if the Legislature authorized the additional benefits. In particular, the Ethics Commission noted that the Legislature had "specifically increased the compensation of County officials by providing for health insurance benefits to be paid by the County." Id.

This same rationale could permit a county commissioner to vote for an increase in the amount that the County pays toward retiree health premiums under PEIA. Under the Public Employees Insurance Act, the Legislature has specifically authorized counties to contribute to the retiree insurance premiums of at least some county officials. Section 5-16-2(3) of the Act defines "Employee" broadly, and includes within its definition "an elected officer, who works regularly full time in the service of . . . a county." The Act does not define the term "full time," and your letter does not explain whether the Commissioners work regularly full-time in the service of Lewis County. If the Commissioners are "employees" within the meaning of the Act, however, then the Legislature has authorized them to be treated the same as other County retirees and benefit from any increased compensation allowed under the Act. As such, a vote by a Commissioner to increase the amount that the County pays toward retiree health premiums under PEIA would not constitute an impermissible use of public office for personal gain.

Furthermore, the reasoning of the Ethics Commission in its 2009 advisory opinion turned on its belief that wellness programs constitute additional "compensation" for county officials. That concern is not present here. The Supreme Court of Appeals has recognized that "membership in a retirement system does not constitute extra compensation." Campbell v. Kelly, 157 W. Va. 453, 473, 202 S.E.2d 369, 381 (1974).

Question Three: May a future county commission reduce the amount of retiree health benefits provided under PEIA?

Although a county commission may elect to contribute more to PEIA than the County's required payment as an employer, we conclude based on two decisions of the Supreme Court of Appeals of West Virginia that no law prohibits a commission from returning that payment to the minimum required payment. In the first decision, the Supreme Court of Appeals considered whether retired state judges were entitled to judicial pay raises that had been given to active judges. Wagoner v. Gainer, 167 W. Va. 139, 279 S.E.2d 636 (1981). The Court recognized that contributory plans, that is, retirement plans by which the employee makes monetary contributions during his or her employment, are contractual obligations. If the employee satisfies the requirements of the plan and becomes vested, the Legislature's ability to modify those benefits is significantly limited. But the Court also acknowledged that non-contributory plans, that is, plans in which the employee does not contribute, are simply gratuitous and may be altered. Id. at 146, 641. Seven years later in a second decision, the Court affirmed that statutory retirement rights constitute a portion of a state employee's compensation and are thus a contractual right. Dadisman v. Moore, 181 W. Va. 779, 384 S.E.2d 816 (1988). This holding relied on two particular factors: employees contribute toward their retirement benefits during their active employment, and those retirement benefits are secured by statute.

While these cases do not address the particular circumstance in question, they offer a useful framework. Retiree benefits are contractually guaranteed if they are established at the time of employment, are part of a contributory plan, and are secured by statute. Conversely, benefits are gratuitous if they are created after the time of employment, are not part of a contributory plan, and are not guaranteed by statute. Under this framework, county-provided premium payments to PEIA that exceed an employer's required payment are not a contractually vested property right. The extra premium payments are relatively new, non-contributory, and not guaranteed by statute. See W. Va. Code § 5-16-18(d) ("The contribution of the other employers (namely: A county, city or town) in the state . . . shall be the percentage of the cost of the employees' insurance package as the employers determine reasonable and proper under their particular circumstances." (emphasis added)). As such, the increased payments are gratuitous and can be reduced at any time. Indeed, even the retired employee's premium contributions are not guaranteed and are subject to revision. See W. Va. Code § 5-16-13(i) ("The retired employee's premium contribution for the coverage shall be established by the finance board.").

Additionally, with regard to elected county officials, we do not believe that reducing the extra county-paid benefits would violate the constitutional prohibition against reducing the salaries of public officers during their term in office. W. Va. Const. art. 6 § 38 ("Nor shall the salary of any public officer be increased or diminished during his term of office[.]"). As noted above, the Supreme Court of Appeals has recognized that "membership in a retirement system does not constitute extra compensation within the meaning of Section 38." Campbell, 157 W. Va. at 473, 202 S.E.2d at 381. The issue in Campbell was whether state legislators could constitutionally benefit from increases in retirement benefits that they had approved. The relator had argued that such an increase violated Article 6, Section 38 because it constituted an increase in salary. But the Court rejected this argument, explaining that "pensions are not traditional 'salary,' . . . but rather are things sui generis which were not contemplated within the constitutional structure established in 1872." Id. at 464, 202 S.E.2d at 376 (discussing State ex rel. Patteson v. Sims, 136 W. Va. 106, 65 S.E.2d 730 (1951)). Under this reasoning, retiree health benefits are similarly not part of a county commissioner's "salary." A reduction in those benefits would thus not contravene Article 6, Section 38.

Question Four: Must a county offer regular employees and retired employees the same level of health benefits?

No authority requires that a county commission give regular employees and retired employees the same health insurance benefits. The Supreme Court of Appeals has recognized that regular employees and retired employees are subject to inherently different treatment, and that different treatment does not violate equal-protection principles. State ex rel. Lambert, 192 W. Va. at 456, 452 S.E.2d at 914. Lambert, for example, considered whether PEIA was unconstitutional because it treats retired employees differently from regular employees. Without considerable discussion, the Lambert Court explained simply that treating current and retired employees differently was "reasonably related to . . . a legitimate governmental purpose." Id. As a result, any different treatment did not violate due process and equal protection principles. Similarly, the County does not violate equal protection or due process by providing different levels of health benefits to retirees as compared to regular employees.

Sincerely,

Patrick Morrisey
Attorney General

Elbert Lin
Solicitor General

Christopher S. Dodrill
Assistant Attorney General