Connecticut Supreme Court Rules HSAs Aren’t Retiree Health Coverage

The Connecticut Supreme Court just handed down a decision that’s shaking up how towns and unions look at retiree health benefits. In a case that’s got people talking from Groton to Hartford, the Court ruled that health savings accounts (HSAs) aren’t the same thing as retiree health coverage under collective bargaining agreements (CBAs).

This case, Duso v. Groton, focused on whether retired police officers deserved the same HSA contributions as active officers. The outcome’s a big deal for public employees, unions, and HR departments in cities like New Haven, Bridgeport, Stamford, Norwalk, Waterbury, and New Britain.

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Connecticut Supreme Court Clarifies HSAs Versus Retiree Coverage

The dispute started with a 2008 pension agreement for Town of Groton police officers. Retirees said the agreement promised them the same health benefits as active officers, and they figured that meant HSA contributions too.

The Supreme Court made a clear distinction between actual insurance coverage and the tools used to help pay for it. That difference is going to echo through municipal negotiations everywhere in Connecticut.

The Duso v. Groton Case: What Was at Stake?

The plaintiffs, retired Groton police officers who left before turning 65, found themselves in a tricky spot. Under the agreement, both active officers and non-Medicare-eligible retirees had to enroll in the same high-deductible health plan (HDHP).

Here’s how Groton set it up:

Active officers got the HDHP and HSA contributions from the town.

The Town funded 50% of active officers’ deductibles by putting money into their HSAs.

Retired officers under 65 had the same HDHP and deductible amounts as the actives.

But the retirees didn’t get any HSA funding from the town.

The retirees argued that the pension agreement’s promise of comparable health benefits meant they should get the same HSA funding as active officers.

Lower Courts Backed the Retirees—At First

At first, the retirees won in the lower courts. Judges there figured that by funding half the deductible for active officers, Groton made their out-of-pocket deductible smaller than what the retirees had to pay.

From that angle:

Active officers ended up with a lower actual deductible because of the town’s HSA contributions.

Retirees had to cover the full deductible themselves.

The lower courts thought this went against the promise of parity in the agreement.

The lower courts looked at what people actually paid, not just what the insurance contract said on paper.

Supreme Court Reversal: Funding Is Not Coverage

The Connecticut Supreme Court took a more technical approach. The justices zeroed in on the written terms of the HDHP and the CBA, not on how much employees actually spent.

The ruling draws a hard line between the insurance plan itself and the financial tools that help pay for it.

Deductibles Versus HSAs: A Critical Distinction

The Court explained that deductibles are built into the health insurance policy. HSAs, on the other hand, are separate, tax-advantaged accounts owned by employees and funded by either the employer or the employee.

The Court laid out its view:

Deductible amounts were the same for both active officers and retirees.

HSA contributions don’t change what the insurance contract says about deductibles.

HSAs are just a funding mechanism, not part of the insurance coverage itself.

Since both groups had the same high-deductible plan and the same deductible, the Court said the retiree “coverage” matched what active officers had—even if the town didn’t contribute to retirees’ HSAs.

Contract Language Favored the Town of Groton

The Supreme Court also pointed to specific language in the CBA. It clearly stated that the Town of Groton didn’t have to fund HDHP deductibles for retirees.

That detail made the difference:

It showed the parties discussed retiree funding directly.

It weakened the retirees’ argument that general promises of parity could override clear exclusions.

It suggested that broad talk of “same benefits” can’t overcome specific carve-outs in the contract.

Lessons for Municipalities, Unions, and HR Leaders

This ruling’s going to ripple out far beyond Groton, from Hartford to New Haven and along the coast to places like Stamford and Norwalk. Lots of Connecticut municipalities have already moved, or are thinking about moving, employees into HDHPs with HSAs to deal with rising health care costs.

If you want retiree benefits—especially HSA funding—to match what active employees get, you’ve got to spell it out in the contract. Otherwise, it’s not guaranteed. Simple as that.

What Employers and Unions Should Do Next

HR professionals and union negotiators in places like Bridgeport, Waterbury, and New Britain should take a close look at their CBAs and pension agreements after this decision. It’s time to dig into the details with fresh eyes.

Spell out retiree benefits clearly: Don’t just say “same coverage as active employees.” Define exactly how HSA contributions, premium shares, and deductibles will work for retirees.

Distinguish coverage from funding: Be specific. Does parity mean just the insurance plan, or does it cover funding tools like HSAs or HRAs too?

Address HDHP transitions: If you’re moving people into HDHPs, negotiate and write down what support—if any—retirees will get for deductibles.

Audit existing agreements: Municipalities and unions should sit down together and review current CBAs. Look for any fuzzy language that could spark legal trouble.

For retirees and active public safety employees, this case shows that contract details—not just ideas about fairness or what’s been done before—really shape their benefits. For local governments in Connecticut, Duso v. Groton sends a strong message: in the world of HDHPs and HSAs, you can’t afford to be vague. Precision in contract language matters, maybe more than ever.

Here is the source article for this story: Connecticut Supreme Court says HSAs are not retiree coverage

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