Stockton city retirees rebuffed by judge
August 7, 2012
• Bankruptcy court refuses to force city to pay full medical premiums
• Medical plans had figured prominently in city’s bankruptcy
A federal bankruptcy court has refused to force the city of Stockton to continue to pay the full medical insurance premiums of city retirees.
Chief Bankruptcy Judge Christopher Klein ruled that he lacks jurisdiction to tell the Central Valley city how it should not spend its revenues while in Chapter 9 bankruptcy.
Stockton is the largest city in the nation to declare bankruptcy, filing its papers at the end of June. As part of its bankruptcy plan, the city had sought to cut and then elimination of fully-paid medical premiums for retirees.
The Association of Retired Employees of the City of Stockton wanted a temporary restraining order and preliminary injunction to force the city to continue to pay the full premiums or, in the alternative, to allow the retirees’ association to be permitted to bring the suit against the city in another court.
The city has argued that its life-long, fully paid medical premiums for retirees helped put it into bankruptcy. The plans, approved in the 1990s, were never fully funded but were paid from the city’s General Fund, which is now insolvent.
In the city’s bankruptcy financial plan, Stockton is paying a stipend toward the premium for retirees with over 10 years of service, with retirees paying the full premium beginning in July 2013. A lower-cost Kaiser Permanente Plan has been made available to current employees, and the city is working with Kaiser to offer a similar plan for retirees by this fall, the city says.