Federal court hands Emanuel a victory on retiree benefits

The city of Chicago has won a federal appeals court decision allowing it to proceed for now with plans to reduce subsidies for retiree health care premiums, a ruling that affects about 28,000 former city workers.

The Emanuel administration's victory comes despite an Illinois Supreme Court ruling in July in a separate case that state retiree health care benefits are protected by the Illinois Constitution.

In December, U.S. District Court Judge James Holderman dismissed a federal case brought by city retirees who challenged Mayor Rahm Emanuel's planned phase-out of health care subsidies over three years, largely based on Mr. Holderman's prediction that the Illinois high court would not extend constitutional protection to retiree health benefits.

However, the state Supreme Court ruled the opposite way. Retirees already had appealed Mr. Holderman's decision, but other legal arguments raised by the city have kept the case alive despite the state Supreme Court ruling.

While their appeal is pending, the city retirees sought to block any changes to their health care subsidies, but their request for a preliminary injunction was denied without explanation by the U.S. Court of Appeals in Chicago earlier this week. The city expects to save $27 million next year from reduced health care subsidies.

“We're obviously disappointed,” said Chicago attorney Clinton Krislov, one of the lawyers who represent the city retirees. The retirees sought the preliminary injunction after the city notified retirees that rates would go up 30 percent to 79 percent on Jan. 1, according to Mr. Krislov.

While important, there is a possibility the city's phase-out of retiree health care benefits still could be overturned when the court considers the full merits of the dispute.

City budget spokesman Carl Gutierrez did not have an immediate comment on the decision.