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Health Trust Case Goes To Nation's Top Court

By Mark Guydish, The Times Leader, Wilkes-Barre, Pa.
McClatchy-Tribune Information Services

Feb. 20--Two local school districts are taking a long and obscure legal battle to the U.S. Supreme Court. At stake: $7 million or more, and -- the districts' attorney argues -- the right of employers to choose insurance providers.

Attorney Howard Levinson filed a petition for a request to have the Supreme Court review a lower court decision regarding the efforts of Pittston Area and Dallas school districts to recoup millions they claim is owed by the Northeast Pennsylvania School District Health Trust.

The trust is a consortium of area districts formed in 1999 to help lower insurance costs. Pittston Area and Dallas withdrew in 2007 contending a surplus that had topped $20 million was excessive. The two districts have been in a legal battle to get what they contend is their share of the surplus at the time of their withdrawal.

A Luzerne County judge ruled in favor of the districts in December 2011, ordering some $7 million of the trust surplus be set aside for payment to the districts, including interest. But an appeals court overturned the ruling and the state Supreme Court let that decision stand.

While the venue has changed, the core legal argument has not: The trust operates not as a "pooled trust" treating all members the same, but as a "segregated trust."

Dallas and Pittston Area note the Trust allows member districts to choose their own benefits plans, tracks district contributions and costs separately, and uses that information to set separate rates for each district. As a segregated pool, Dallas and Pittston Area argue, the trust must return a district's share of any surplus upon withdrawal.

The trust has always countered that the wording in the agreement signed by member districts is clear: Any money paid into the trust stays there unless the trust is dissolved.

The district's argument before the U.S. Supreme Court must focus on a federal question, and the 109-page petition centers on the federal Employee Retirement Income Security Act or ERISA.

The districts argue the "sole and exclusive benefit rule" of ERISA prevents the trust from using money contributed by Dallas and Pittston Area for expenses incurred by other member districts, and that the rule is explicitly part of the trust agreement.

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Pittston Area and Dallas argue that allowing the trust to retain surplus paid by a withdrawing district sets a precedent upending ERISA, creates a "devil's alternative" forcing members to stay in a trust for fear of losing millions already contributed and makes taxpayers from the withdrawing districts see their money spent to benefit other districts.

No one is likely to deny Dallas and Pittston Area have slim hopes in this final appeal.

According to the U.S. Supreme Court's website, the court receives about 10,000 such petitions a year and agrees to hear oral arguments in about 75 to 80 cases.


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