State insurance company must help retired workers

A closely divided Supreme Court ruled Thursday that Employers Insurance Company of Nevada must help more than 40 former state workers buy retirement credits.

The lawsuit stems from the 1999 decision by Gov. Kenny Guinn and the Legislature to privatize the State Industrial Insurance System. The legislation attempted to protect workers who wanted to retire from state service rather than move to the new, private company by requiring the employers insurance company to buy retirement credits for them.

But the company balked at buying those credits for a group of younger workers who wanted to retire rather than leave state service. The group sued, arguing a separate but similar section of state law qualifies them for subsidies to help buy retirement credits because they were losing their state jobs.

District Judge Mike Griffin agreed with the employers insurance company that the law wasn't intended to apply in cases where a state agency was closed down rather than just cut back. He also ruled the law states that only employees eligible to retire with full benefits were entitled to help buying added retirement credits.

On appeal, a four-judge majority, led by Justice Michael Douglas, disagreed and ruled those workers are entitled to subsidies to buy retirement credits "since they were terminated from state employ upon the privatization of SIIS." He wrote that the plain language of the privatization legislation states all SIIS employees were terminated from their state jobs. He cited interpretations by the Nevada Attorney General, the Legislative Counsel Bureau and the Public Employees Retirement System all saying "eligible to retire" means either with full or reduced benefits and, therefore, the 41 workers in the lawsuit qualify under the statute because all could retire with reduced benefits.

Douglas, joined by Chief Justice Bob Rose and justices Bill Maupin and Nancy Becker, added that EICON must put up the money to buy those credits because, in the privatization legislation, the employers insurance company agreed to assume all debts and liabilities of SIIS.

The dissent by Justices Jim Hardesty, Mark Gibbons and Ron Parraguirre argued the privatization law specifically required EICON to purchase credit for those eligible for unreduced retirement benefits. They said Judge Griffin was right in ruling privatizing a state agency is not the same as a reduction in workforce and that the group of 41 younger workers doesn't qualify for subsidies to buy more retirement credits.

The law in question, the dissent states, "applies to situations in which a state agency reduces its work force but remains in business, not as here, when the state closes the agency altogether." It also points out the group didn't actually lose their jobs, that they were transferred to jobs in the employers insurance company.

Under the ruling, EICON will have to pay 5 percent of the cost of buying retirement credits for each of the workers plus 5 percent more for each year the person was employed by the state in excess of the minimum five years to qualify for a basic pension. Using that formula, EICON would have to pay 30 percent of the total cost of credits for a 10 year veteran of SIIS, 80 percent for a 20 year employee and the entire bill for anyone with 24 years service.

The cost of retirement credits is based on the employee's salary range.

-- Contact reporter Geoff Dornan at gdornan@nevadaappeal.com or 687-8750.