Timing is everything for retirement benefit, supreme court holds.

An employer’s offer of free retiree health care is a unilateral contract that did not become binding until the employee completed 15 years of service, attained at least the age of 60 and retired, the Wisconsin Supreme Court held Dec. 30 in Loth v. City of Milwaukee, 2008 WI 129.

In 1973, the City of Milwaukee adopted a resolution pledging to give no-cost health care to its management employees with at least 15 years of service who retire between the ages of 60 and 65. Albert Loth was hired as a city accountant in 1984. In 2002, the city adopted a new resolution to require these retirees to pay the same portion of premiums paid by active management employees.

Loth had been a city employee with 15 years service in 1999 but he only turned 60 on April 12, 2005 and retired on April 23, 2005. After retirement, the city continued to deduct the same health insurance premium as it had while Loth was an active employee.

Loth filed suit, claiming breach of contract. Loth argued that once he completed 15 years of service, the city was obligated to extend the promised benefit. The Wisconsin Court of Appeals agreed, but the supreme court reversed, holding that Loth’s 15 years of service was just one of three parts of the performance necessary to turn the city’s unilateral offer into a binding contract. Without having obtained the age of 60 and retiring prior to 2002, the city owed nothing to Loth.

By Alex De Grand, Legal Writer, State Bar of Wisconsin