Opinion ID: 1293438
Heading Depth: 1
Heading Rank: 6

Heading: mud's ability to modify ltd policy

Text: In his first assignment of error, Livingston argues that the district court erred in concluding that MUD had the right to modify the 1965 LTD policy. In support of his position, Livingston relies on Halpin v. Nebraska State Patrolmen's Retirement System, 211 Neb. 892, 320 N.W.2d 910 (1982), and Miller v. City of Omaha, 260 Neb. 507, 618 N.W.2d 628 (2000). Both Halpin and Miller were decided under the Contracts Clause of the U.S. Constitution; thus, we interpret Livingston's first assignment of error as arguing that MUD's modification of the LTD policy was a violation of that clause. Livingston's claim essentially argues that at the time he was offered and accepted employment with MUD, he was promised that he would have the option to obtain lifetime LTD coverage. He claims that he relied upon that promise in accepting employment with MUD and that he, in fact, applied for lifetime LTD coverage as soon as he was eligible. Livingston argues that his contractual rights were interfered with when MUD eliminated the portion of the LTD coverage which provided for lifetime benefits. In response, MUD argues that Livingston's reliance on the 1965 LTD policy was not reasonable and that Livingston suffered no detriment as a result of his reliance. MUD further argues that it had the right to modify the policy and that it provided sufficient notice to Livingston that modifications had been made. Livingston's claim presents three issues: (1) whether the LTD policy at issue is akin to a pension or deferred compensation such that Livingston had a contractual right for the purposes of the Contracts Clause; (2) if Livingston did have such a right, then when did this right vest; and (3) whether MUD's modification violated the Contracts Clause. We first turn to the issue of whether the LTD policy at issue is a pension. In Halpin, which Livingston cites in support of his argument that his contractual rights were unconstitutionally modified, we held that Nebraska has long recognized that pensions are not gratuities. In Halpin, the court held that a pension plan offered to officers of the Nebraska State Patrol was not a gratuity, but instead was deferred compensation, earned in exchange for services rendered [and creates] in the employees reasonable expectations entitled to legal protection. Halpin v. Nebraska State Patrolmen's Retirement System, 211 Neb. at 898, 320 N.W.2d at 914. As a result of the finding that the plaintiffs had expectations in the pension plan entitled to legal protection, this court went on to conduct a Contracts Clause analysis. In doing so, we concluded that the State Patrol's modification of the plaintiffs' pensions unconstitutionally interfered with the plaintiffs' contractual rights. In Calabro v. City of Omaha, 247 Neb. 955, 531 N.W.2d 541 (1995), this court was asked to determine whether a supplemental cost-of-living benefit offered by the city to its firefighters was a pension. In concluding that it was a pension, we noted that the benefits were fixed when conferred, and only the payment of those benefits was deferred to a later date. (Emphasis in original.) Id. at 963, 531 N.W.2d at 548. In response to the city's argument that the supplemental benefit plan was not a pension but a gift, we noted further that if the city wanted to classify the supplemental benefit as a gift, it could have stated such in the ordinance enacting the supplemental benefit. Nothing in the enacting ordinance puts employees or potential employees on notice that the supplemental benefit could be taken away with the stroke of a pen. . . . . . . We find that due to the lack of information from which an employee could ascertain that the supplemental benefit plan was a mere gratuity from the city, the city treated the supplemental benefit plan like a pension. As noted above, if the city wanted to limit the scope of the supplemental benefit plan to that of a mere gratuity, it could have plainly stated so in the enacting ordinance. Id. at 963-64, 531 N.W.2d at 548-49. Deferred compensation, again, is defined as compensation which is earned in exchange for services rendered. See, Calabro v. City of Omaha, supra ; Halpin v. Nebraska State Patrolmen's Retirement System, 211 Neb. 892, 320 N.W.2d 910 (1982). Unlike the pension plan in Halpin and the supplemental benefit plan in Calabro, the LTD policy at issue does not meet this definition. Enrollment in this LTD plan was purely voluntary on the part of MUD employees. The accrual of coverage under this policy was not contingent upon the rendering of services, but instead depended upon the payment of premiums and the occurrence of an injury. We determine that the LTD policy in this case is not a pension. Further supporting our conclusion that the LTD plan is not a pension is Neb. Rev. Stat. § 14-1022 (Reissue 1962) (now codified at Neb. Rev. Stat. § 14-2111 (Cum. Supp. 2004)). That section provides, in relevant part: The board of directors of any metropolitan water or metropolitan utilities district may also provide benefits for, insurance of, and annuities for the present and future employees and appointees of the district covering accident, disease, death, total and permanent disability, and retirement, all or any of them, under such terms and conditions as the board may deem proper and expedient from time to time. (Emphasis supplied.) § 14-2111(1). This section has remained substantively unchanged from 1962 to the present. Generally, the word may when used in a statute will be given its ordinary, permissive, and discretionary meaning unless it would manifestly defeat the statutory objective. When the word may appears, permissive or discretionary action is presumed. Spaghetti Ltd. Partnership v. Wolfe, 264 Neb. 365, 647 N.W.2d 615 (2002). Thus we conclude that the use of the word may in this statute implies that the MUD board of directors has discretion with regard to whether any LTD plan is implemented. We further conclude that the use of the word may, as well as the phrase as the board may deem proper and expedient from time to time, gives the board the discretion to modify those terms of employment enumerated in the statute, should the board see fit to do so. Also relevant when analyzing the impact of former § 14-1022 is Calabro v. City of Omaha, 247 Neb. 955, 531 N.W.2d 541 (1995). There, this court noted that the supplemental benefit plan was a pension and not a gratuity due in part to the lack of language in the enacting ordinance informing employees or potential employees . . . that the supplemental benefit could be taken away with the stroke of a pen. Id. at 963, 531 N.W.2d at 548. The language required by Calabro regarding notice to employees and potential employees was provided by § 14-1022, which stated that a board of directors may provide benefits under such terms and conditions as the board may deem proper and expedient from time to time. Thus, the board of directors retained the discretion to modify the terms of MUD's LTD coverage. Having found that the LTD policy at issue was not a pension or deferred compensation, we conclude that Livingston had no contractual right in that policy for Contracts Clause purposes. For the sake of completeness, we note that Omer v. Tagg, 235 Neb. 527, 455 N.W.2d 815 (1990), appears to hold, with little analysis, that health insurance is akin to deferred compensation. To the extent that Omer is inconsistent with this opinion, it is disapproved. Given the above conclusion, we need not undertake a Contracts Clause analysis in determining whether MUD unconstitutionally impaired Livingston's contractual rights. Such a conclusion does not end our inquiry, however. We must still determine whether MUD was otherwise prohibited from modifying the terms of the LTD policy. As noted above, § 14-1022 (now codified at § 14-2111) provided that the MUD board may provide disability insurance to its employees and that the terms and conditions of such insurance may be set and modified by the board as the board deems proper. A review of the record shows that such terms and conditions were modified periodically throughout Livingston's employment, including, significantly, the elimination of the lifetime LTD benefits. We conclude that MUD was within its statutory authority in modifying the terms of the LTD policy it offered to its employees. The district court did not err in finding that MUD had the right to modify the 1965 policy. Livingston's first assignment of error is without merit.