Duso v. Groton and the Meaning of “Nature and Scope of Coverages”: Why Employer HSA Contributions Are Not “Coverage” or “Deductibles” for Retiree Health Parity

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I. Introduction

In Duso v. Groton, 353 Conn. 667 (2025), the Connecticut Supreme Court resolved a significant question at the intersection of public-sector labor law, pension and retiree health benefits, and modern health plan design using Health Savings Accounts (HSAs).

The plaintiffs were retired law enforcement personnel (four police officers and one animal control officer) of the Town of Groton. During their employment they were represented by the Groton Police Union and, upon retirement between 2012 and 2016, they became entitled to retiree health benefits under a collectively bargained 2008 pension agreement. That agreement guaranteed retirees under age 65 the same “nature and scope of coverages, including but not limited to deductibles” as those “in effect for active Police Officers,” with the understanding that those coverages could change over time.

Years later, in a subsequent collective bargaining agreement (the 2016 CBA), the Town and the union converted the active employees’ health coverage to a high deductible health plan (HDHP) linked to HSAs. The Town agreed to fund 50% of the annual in‑network deductible into active officers’ HSAs (or, for ineligible employees, via a taxable cash payment). Retirees, including the plaintiffs, were required to move into the HDHP but received no HSA contributions.

The central legal issue was whether, under the 2008 pension agreement’s promise that retirees would receive the same “nature and scope of coverages, including . . . deductibles” as active police officers, the Town was obliged to make the same 50% deductible contributions into the retirees’ HSAs (or equivalent payments) as it did for active officers.

Both the trial court and the Appellate Court answered “yes,” holding that HSA contributions effectively reduced the active officers’ deductibles and therefore altered the “nature and scope” of their coverage as compared to retirees. The Supreme Court reversed, holding that HSA contributions are neither insurance “coverage” nor “deductibles” within the meaning of the 2008 pension agreement, and thus the retirees were not entitled to those payments.

The case establishes an important precedent: under Connecticut law, an employer’s contributions to employees’ HSAs are not part of the “nature and scope of coverages” or the “deductibles” under a group health plan, but rather are a separate funding mechanism or form of compensation. Consequently, parity clauses tying retiree benefits to the “coverages” or “deductibles” of active employees do not, without more, entitle retirees to the same HSA contributions.

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II. Summary of the Opinion

A. Parties and Background

• Plaintiffs: Five retired Town of Groton employees – Donna Duso (animal control officer) and four former police officers (Menard, Gauthier, Doyle, and Herron). At all relevant times they were represented by the Groton Police Union.
• Defendant: Town of Groton.
• Key Contract: The 2008 pension agreement between the Town and the union, incorporated by reference into the CBAs in force when each plaintiff retired. Section 16(C) guaranteed retirees “the nature and scope of coverages, including but not limited to deductibles, co‑insurance, co‑pays and/or limits, . . . in effect for active Police Officers” under the Town’s group health plans, until Medicare eligibility or age 65.

Under the operative CBAs at the time of retirement, the plaintiffs had access to the Town’s self‑insured PPO or (as an option) an HDHP, administered by Anthem. After the plaintiffs retired, the Town and the union negotiated the 2016 CBA (effective 2016–2020), which:

• converted the active officers’ primary health coverage to an HDHP with a $2,000 individual / $4,000 family in‑network deductible;
• required active officers to open HSAs; and
• obligated the Town to fund 50% of the annual in‑network deductible to each active officer’s HSA (or an equivalent taxable payment if HSA‑ineligible).

Retirees under 65, including the plaintiffs, were also required to enroll in the HDHP by July 1, 2018, but the Town made no HSA contributions for them.

B. Procedural History

1. Trial Court (Graff, J.): On a joint stipulation of facts and exhibits (no live testimony), the court ruled for the plaintiffs in a declaratory judgment action. It held that the Town’s payment of 50% of the deductible into HSAs for active officers was part of the “essence of the deductible,” so retirees were contractually entitled to the same benefit. The court awarded compensatory damages totaling $36,000.
2. Appellate Court: In Duso v. Groton, 228 Conn. App. 390, 325 A.3d 295 (2024), the Appellate Court affirmed. It reasoned that because active officers, in effect, paid only $1,000 (individual) or $2,000 (family) out‑of‑pocket before the Town “began paying their claims,” their effective deductibles were lower than those of retirees. The court rejected the Town’s argument that “deductible” did not encompass the source of funds used to pay it.
3. Supreme Court: The Court granted certification on two issues:
   • Whether the Appellate Court correctly determined that retirees’ “nature and scope of coverages” included the HSA contributions made to active employees.
   • Whether the Appellate Court correctly upheld the damages award.
   The Court answered the first question “no,” reversed the Appellate Court and trial court, and directed judgment for the Town. Having found no entitlement to HSA contributions, it deemed the damages issue moot and did not reach the second certified question.

C. The Holding

The Supreme Court held:

• The 2008 pension agreement’s reference to the “nature and scope of coverages, including but not limited to deductibles” is plain and unambiguous.
• Under the ordinary meaning of coverage and deductible, and in light of the legal nature of HSAs:
  • HSA contributions are not “coverage” under the health insurance policy; and
  • HSA contributions are not “deductibles” or part of the deductible term of the policy.
• Therefore, the Town’s duty under § 16(C) of the 2008 pension agreement is to provide retirees with the same insurance coverages and deductible levels as active officers (here, $2,000 individual / $4,000 family), but not to match the Town’s contributions to active officers’ HSAs.
• Even if the agreement were considered ambiguous, extrinsic evidence—particularly “note” language in the later 2016 and 2020 CBAs expressly providing that HSA funding is not “an element of the underlying insurance plan” and disavowing any obligation to fund retirees’ deductibles—confirms that the contracting parties (Town and union) did not intend HSA contributions to be within the scope of § 16(C).

Accordingly, the retirees were not entitled to HSA contributions or equivalent payments, and their claim failed as a matter of law.

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III. Detailed Analysis

A. The Contractual Framework

1. The 2008 Pension Agreement

The 2008 pension agreement—titled “An Agreement Between the Town of Groton and the Groton Police Union, Local 3428 of Council 15 AFSCME Concerning Pensions August 1, 2008–June 30, 2012”—was collectively bargained under the Municipal Employee Relations Act (MERA), General Statutes § 7‑467 et seq. It applied to “regular employees” including the plaintiffs, and it governed, among other things, continuation of health insurance into retirement.

Section 16(C), the focal provision for under‑65 retirees, states in relevant part:

“The nature and scope of coverages, including but not limited to deductibles, co‑insurance, co‑pays and/or limits, shall be those in effect for active Police Officers, as those coverages, including but not limited to deductibles, co‑insurance, co‑pays and/or limits, may change from time to time . . . . Said coverages shall be available until such time as the Retiree, Spouse and/or Dependents become eligible for Medicare or reach age [sixty‑five], whichever is earlier.”

Key features:

• Retirees are third‑party beneficiaries of this agreement.
• The agreement promises parity in the “nature and scope of coverages” between under‑65 retirees and active police officers, including parity as to “deductibles, co‑insurance, co‑pays and/or limits.”
• It expressly contemplates that coverages for active officers may change over time, and retirees’ coverages will track those changes.

2. The 2016 CBA and the HDHP/HSA Structure

After the plaintiffs retired, the Town and the union negotiated the 2016 CBA (2016–2020). That agreement, like prior CBAs, expressly incorporated the 2008 pension agreement as an attachment. For active officers, Article 22.1(A)(2) provided:

• Switch to an HDHP (or substantially similar plan) with specified in‑network and out‑of‑network deductibles and co‑insurance.
• Prescription drug benefits with specified co‑pays, cost‑of‑care edits, and utilization management.
• A requirement that employees “open and maintain” an HSA in conjunction with the HDHP.
• Town funding of “fifty percent (50%) of the annual in‑network deductible” on a non‑tax basis (for HSA‑eligible employees) or on a taxable basis (for employees who cannot lawfully have an HSA) each plan year.

The 2016 CBA concluded this section with a crucial “Note”:

“NOTE: The Town’s fifty percent (50%) contribution toward the funding of the HDHP plan is not an element of the underlying insurance plan, but rather relates to the manner in which the deductible shall be funded for active employees. The Town shall have no obligation to fund any portion of the HDHP deductible for retirees or other individuals upon their separation from employment. Under 65 retirees must enroll in the HDHP . . . but in no case later than July 1, 2018.” (Emphasis in original.)

A materially identical note appears in Article 22.1 of the 2020 CBA (2020–2023).

These notes became pivotal in the Supreme Court’s alternative ambiguity analysis, confirming that the Town’s HSA funding was understood by the contracting parties as distinct from the insurance “coverages” and “deductibles” themselves, and explicitly non‑applicable to retirees.

B. Precedents and Authorities Cited

The Court’s opinion is grounded in established Connecticut contract‑law principles applied specifically to collective bargaining agreements, and supplemented by insurance law treatises, tax statutes, and federal guidance on HSAs. The main authorities and their roles are as follows.

1. Collective Bargaining Agreements as Contracts

• Poole v. Waterbury, 266 Conn. 68, 831 A.2d 211 (2003):
  • Reaffirmed that CBAs are construed according to ordinary contract principles.
  • Quoted for:
    • the maxim that contracts are construed to effectuate the intent of the parties, determined from the language used in light of the circumstances;
    • the rule that clear, unambiguous language must be given effect as written; and
    • the principle that courts will not “torture words to import ambiguity” where the ordinary meaning is plain.
• Gallagher v. Fairfield, 339 Conn. 801, 262 A.3d 742 (2021):
  • Cited generally for the proposition that CBAs are interpreted under standard contract law.
• Honulik v. Greenwich, 293 Conn. 698, 980 A.2d 880 (2009):
  • Cited for the idea that the mere existence of competing interpretations does not itself create ambiguity; ambiguity must emanate from the contract language, not from subjective perceptions.
• Garcia v. Hartford, 292 Conn. 334, 972 A.2d 706 (2009):
  • Used for the proposition that when definitive contract language is present, interpretation is a question of law for the court.
  • Also referenced for the court’s practice of consulting dictionaries to ascertain ordinary meaning.

2. Ambiguity and Use of Extrinsic Evidence

• Stiegler v. Meriden, 348 Conn. 452, 307 A.3d 894 (2024):
  • Cited for the approach to resolving ambiguous contractual language, including reviewing parties’ conduct, drafting history, past practice, and subsequent negotiations.
  • Also cited for the proposition that when the extrinsic evidence is undisputed and the case is submitted on a stipulation, interpretation may remain a legal question.
• Murtha v. Hartford, 303 Conn. 1, 35 A.3d 177 (2011):
  • Referenced for the principle that when language is ambiguous, the parties’ intent is ordinarily a question of fact.
• Sharper Image Corp. v. Miller, 240 Conn. 531, 692 A.2d 774 (1997); and Morton Buildings, Inc. v. Bannon, 222 Conn. 49, 607 A.2d 424 (1992):
  • Used to support the conclusion that where the parties rely on a definitive stipulation of facts and there is no need to assess credibility, interpretation can present a question of law, even when extrinsic evidence is considered.
• 11 Williston on Contracts (4th Ed.) § 30:7:
  • Cited in support of the proposition that if contract language is ambiguous, its interpretation is still a question of law when the extrinsic evidence is undisputed.
• F. Elkouri & E. Elkouri, How Arbitration Works (6th Ed. 2003), ch. 9.3.A.ii:
  • Treatise authority supporting use of subsequent negotiations to interpret existing ambiguous provisions.
• Paper, Allied-Industrial Chemical & Energy Workers International Union, Local 8‑192, AFL‑CIO v. TXI Riverside Cement Co., 244 Fed. Appx. 116 (9th Cir. 2007), cert. denied, 552 U.S. 1023 (2007):
  • Cited for the proposition that interpreting ambiguous CBA language can properly rely on parties’ subsequent conduct and on related agreements and practices.

3. Insurance Law and Deductibles

• NEMS, PLLC v. Harvard Pilgrim Health Care of Connecticut, Inc., 350 Conn. 525, 325 A.3d 196 (2024):
  • Referenced for authoritative definitions of “deductible”—as the portion of loss borne by the insured before insurer liability attaches, and the policy clause specifying that amount.
  • Supported the Court’s distinction between the structure of a deductible in the insurance policy and the source of funds used to pay it.
• 12A Couch on Insurance § 180:21 (3d Ed. Rev. 2018):
  • Used to illustrate that comprehensive health policies usually have a specified deductible amount that must be met before benefits are payable, re‑emphasizing the deductible as a contractually fixed threshold to coverage.
• Dictionaries:
  • Black’s Law Dictionary (9th Ed. 2009): Used for definitions of “coverage” (“inclusion of a risk under an insurance policy”) and “deductible.”
  • The American Heritage College Dictionary (4th Ed. 2007) and Merriam‑Webster’s Collegiate Dictionary (11th Ed. 2003): Used for definitions of “coverage,” “deductible,” “nature,” and “scope.”

4. Federal Law on HSAs

The Court extensively relied on federal tax law and IRS guidance because HSAs are “creatures of federal law,” and their legal character (as opposed to factual implementation) is a question of law appropriate for judicial notice.

• 26 U.S.C. § 223 (2018):
  • Defines HSAs and sets eligibility, contribution, and distribution rules.
  • Key points:
    • Only individuals covered by an HDHP (and meeting other criteria) may contribute.
    • HSAs are individually owned trust or custodial accounts established with a bank (or similar institution) for the benefit of the individual.
    • Contributions (subject to limits) are tax deductible or excludable; qualified distributions (for “qualified medical expenses”) are tax‑free, while nonqualified distributions are generally taxable and subject to a 20% penalty before age 65.
• 26 U.S.C. § 106 (2018):
  • Employer contributions to an employee’s HSA are excluded from the employee’s gross income.
• Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub. L. No. 108‑173, § 1201, 117 Stat. 2066, 2469 (2003):
  • Statute that created HSAs.
• IRS Publication 969 (Health Savings Accounts and Other Tax‑Favored Health Plans):
  • Quoted for the concept that HSAs are “portable” and remain the property of the account holder regardless of employment changes.
• IRS Notice 2004‑50, 2004‑33 I.R.B. 196:
  • Cited for the principle that HSA distributions can be used for any purpose; only the tax treatment changes depending on whether the expenditure is a “qualified medical expense.”

Taken together, these authorities allowed the Court to classify HSAs as individually owned, tax‑favored savings vehicles separate from the insurance contract, not as part of the “coverage” or “deductible” terms themselves.

C. The Court’s Legal Reasoning

1. Standard of Review and Methodology

The Court applied ordinary principles of contract interpretation to the 2008 pension agreement:

• Determine the intent of the contracting parties (Town and union) from the language used, viewed in context.
• If the language is clear and unambiguous, enforce it according to its terms.
• Do not “torture” clear language to manufacture ambiguity.
• Only if language is ambiguous may the court consider extrinsic evidence, such as post‑agreement conduct and later CBAs, to discern intent.

Because the case was submitted on a joint stipulation of facts and exhibits, and no credibility determinations were needed, the Court treated the interpretation issues as questions of law subject to de novo review, even in the alternative, ambiguity‑assumed analysis.

2. What Is “Coverage”? What Is a “Deductible”?

The Court first looked at the key terms in § 16(C): “coverages” and “deductibles.” Neither term was defined in the pension agreement, so it turned to standard legal and general dictionaries.

• Coverage:
  • “Inclusion of a risk under an insurance policy; the risks within the scope of an insurance policy.”
  • “The extent of protection afforded by an insurance policy.”
  The Court distilled this as: coverage refers to the risks and losses the insurer agrees to bear, subject to the policy’s terms and limits.
• Deductible:
  • “The portion of the loss to be borne by the insured before the insurer becomes liable for payment,” and the clause specifying that amount.
  • A deductible is a “fixed and structural part” of an insurance policy that defines the threshold at which coverage begins.

From these definitions, the Court drew two key distinctions:

1. “Coverage” is about what the insurer promises to pay for (and under what terms), not about how the insured finances his or her share of costs.
2. The “deductible” is a term in the policy specifying a fixed dollar amount or structure; it is independent of where the insured gets the money to pay it.

3. What Is an HSA, Legally Speaking?

The Court then analyzed HSAs under federal law:

• HSAs are individually owned bank accounts (trust or custodial accounts) established under 26 U.S.C. § 223.
• They are not part of the insurance policy; they are separate financial vehicles designed to help pay qualified medical expenses.
• Funds remain the property of the account holder; they are portable, surviving changes in employer or employment status.
• Contributions receive favorable tax treatment; distributions used for qualified medical expenses are tax‑free, but the account holder may use the funds for any purpose, with adverse tax consequences for non‑medical use before age 65.

This legal structure led the Court to conclude that:

• An HSA does not alter the health insurance policy’s coverage terms.
• An HSA does not alter the policy’s deductible amount; the deductible remains what the plan document states (here, $2,000/$4,000).
• The HSA is a funding mechanism outside the policy, even when entirely funded by the employer.

4. Applying the Definitions: Why HSA Contributions Are Not “Coverage” or “Deductibles”

Given the definitions and the legal nature of HSAs, the Court reasoned:

• Employer HSA contributions are not part of the insurance coverage because:
  • They are not terms in the health insurance policy.
  • They do not expand or limit the risks the insurer covers, nor do they change coverage limits, co‑pays, or co‑insurance obligations.
  • The policy’s “Summary of Benefits and Coverage” from Anthem makes no mention of HSA contributions, confirming that they are external to the plan document.
• Employer HSA contributions are not part of the health plan’s deductible because:
  • The deductible is the fixed amount specified by the policy ($2,000/$4,000), regardless of how the insured satisfies it.
  • Whether the insured pays from wages, personal savings, borrowed funds, or an HSA has no bearing on what the deductible “is” under the contract.
  • HSA funds may be used for non‑medical purposes or medical expenses not subject to the deductible; there is no legal requirement that they be used for that policy’s deductible at all.

Thus, the “nature and scope of coverages, including . . . deductibles” guaranteed to retirees refers to:

• what services, conditions, and risks the policy covers;
• the deductible amounts stated in the plan (and how they function within the policy); and
• co‑pays, co‑insurance percentages, and other structural terms of the insurance contract—but not to an employer’s decision to give active employees separate funds they might use toward those costs.

  5. Rejection of the Appellate Court’s “Effective Deductible” Approach

  The key error identified in the Appellate Court’s reasoning was its focus not on the deductible as a contractual term, but on the insured’s net out‑of‑pocket burden after employer funding. The Appellate Court found that because active officers effectively only had to pay $1,000/$2,000 before the Town “began paying their claims,” their deductibles were lower than the retirees’ and thus retirees lacked equal “nature and scope” of coverage.

  The Supreme Court rejected this as a misapplication of the contract language:

  • The phrase “nature and scope of coverages . . . including . . . deductibles” refers to the terms of the policy, not to the insureds’ overall financial position or the funding methods available to them.
  • The “nature” and “scope” of a deductible do not vary based on the source of funds used to pay it. Those concepts relate to:
    • the deductible’s dollar amount;
    • its structural role (e.g., whether it applies to all services or some are exempt); and
    • its place in defining the threshold of coverage.

  The Court illustrated this point with a hypothetical: if the Town had simply agreed to pay each active officer a flat $1,000 stipend to help with rising health costs, no one would plausibly argue that this was part of “coverage” or “deductibles.” The mere fact the Town, in the actual CBA, ties the stipend amount to the size of the deductible (50% of $2,000 or $4,000) does not transform that contribution into a change to the deductible itself.

  Thus, retirees’ contractual right is parity in insurance terms, not parity in every form of compensation or financial support linked in some way to health costs.

  6. The Role of “Nature and Scope”

  The plaintiffs and the lower courts leaned heavily on the phrase “nature and scope” as potentially enlarging the concept of “deductible” to encompass not only the formal deductible amount but also the financial context in which it is paid (i.e., with or without employer HSA contributions).

  The Supreme Court acknowledged that “nature” can mean “essence” or “fundamental quality” and “scope” can mean the “extent” or “area” covered, but it concluded that these words cannot be used to change the core meaning of clearly understood technical terms such as “coverage” and “deductible.” Rather, they:

  • emphasize that retirees get the full configuration and breadth of coverage features that active officers enjoy, and
  • require parity in the key structural features of the insurance plan (deductible, co‑pays, co‑insurance, limits), as those may evolve in future CBAs.

  They do not, however, convert external funding mechanisms or separate forms of compensation into “coverage” or “deductibles.”

  7. Alternative Holding: Even If Ambiguous, Extrinsic Evidence Favors the Town

  The Court then proceeded in the alternative, assuming arguendo that the language of § 16(C) is ambiguous in the way plaintiffs propose. Under that assumption, it turned to extrinsic evidence—principally the 2016 and 2020 CBAs—to discern the contracting parties’ intent (Town and union) about what “coverages” and “deductibles” meant in the retiree‑parity clause.

  Key points in this analysis:

  • Both the 2016 and 2020 CBAs:
    • incorporate the 2008 pension agreement unchanged;
    • contain the explicit note stating that:
      • the Town’s 50% contribution toward the HDHP deductible “is not an element of the underlying insurance plan”; and
      • the Town “shall have no obligation to fund any portion of the HDHP deductible for retirees or other individuals upon their separation from employment.”
  • The parties stipulated that the 2008 pension agreement remained in effect (without modification) as of the time they filed the joint stipulation (October 19, 2022).
  • There is no evidence that the note in the 2016 or 2020 CBAs was intended as, or functioned as, a modification of the 2008 pension agreement under its own contract‑reopening procedures; rather, the note is an interpretive statement about the current parties’ understanding of the insurance/HSA relationship.

  From this, the Court drew two conclusions:

  1. The Town and union jointly understood and agreed that HSA funding is not “coverage” or part of the “underlying insurance plan,” and that retirees have no entitlement to that funding.
  2. Interpreting the 2008 pension agreement to give current and future retirees HSA contributions would produce an irrational result: retirees who left under earlier CBAs would receive more generous benefits than later retirees (despite all being governed by the same 2008 pension agreement), even though the very parties to that agreement (Town and union) have explicitly disclaimed any obligation to fund retirees’ deductibles.

  The Court thus held that, even if ambiguity were assumed, the extrinsic evidence makes the Town’s reading clearly more reasonable. The HSA contributions and equivalent taxable payments are understood by the contracting parties as a separate element of active employees’ compensation, not part of the retiree health coverage parity promise in § 16(C).

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  IV. Complex Concepts Simplified

  A. HSAs vs. Health Insurance Coverage

  A simple way to understand the distinction central to the case:

  • Health insurance policy: A contract under which the insurer (or self‑funding employer) agrees to pay for covered medical expenses after certain conditions (like meeting a deductible) are met, subject to co‑pays, co‑insurance, and limits. “Coverage” describes the universe of what the insurer will pay for.
  • Deductible: The amount a patient must pay out of pocket for covered services before the insurance coverage “kicks in.” It’s a fixed number in the policy (e.g., $2,000/year).
  • Health Savings Account (HSA): A personal bank account with tax advantages. Money in the HSA:
    • belongs to the individual;
    • can be used for qualified medical expenses tax‑free;
    • can be used for anything else, subject to income tax (and sometimes a penalty); and
    • exists independently of any particular health insurance policy.
    Employer contributions to an HSA are conceptually like putting extra money in your personal savings account—earmarked for health care by tax rules, but still legally distinct from the policy terms.

  B. Deductible vs. How the Deductible Is Paid

  The Court drew a bright line between:

  • the existence and amount of the deductible (a term of the insurance contract); and
  • the source of funds the insured uses to pay it (a matter of personal or employer financing).

  Think of it this way: if the policy says “$2,000 deductible,” that is your required threshold. Whether you:

  • write a check from your checking account,
  • swipe a credit card and pay it off over time,
  • use money gifted by a relative, or
  • use HSA funds that your employer partly contributed,

  the deductible amount remains $2,000. The policy does not change; only your personal financial picture does.

  C. “Plain Meaning,” “Ambiguity,” and “Extrinsic Evidence”

  • Plain meaning: Courts start with the text. If ordinary definitions make the meaning clear, they enforce that meaning without looking at outside evidence.
  • Ambiguity: Language is ambiguous if reasonable people could read it more than one way based on the words themselves. Competing desired interpretations are not enough.
  • Extrinsic evidence: If language is ambiguous, courts may look beyond the four corners of the document—e.g., prior drafts, later CBAs, bargaining history, and parties’ conduct—to determine what the parties actually intended.

  In Duso, the Court found the text unambiguous, but still showed that, even if it were not, the outside evidence (especially the 2016/2020 CBA notes) supported the Town’s view.

  D. Third-Party Beneficiaries and the Limits of Retirees’ Rights

  Retirees like the plaintiffs are third‑party beneficiaries of the 2008 pension agreement—they can enforce rights given to them under that contract, even though they were not signatories. But their rights are limited to:

  • what the contract actually grants them, as properly interpreted, and
  • do not extend to new rights bargained in later CBAs for active employees, unless those rights are expressly made applicable to retirees under the pension agreement or some other binding instrument.

  In this case, the 2016 and 2020 CBAs granted active officers HSA funding while simultaneously stating that retirees had no such entitlement. Because the 2008 pension agreement did not classify HSA contributions as “coverage” or “deductibles,” the retirees could not bootstrap an entitlement to those contributions through the retiree‑parity clause alone.

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  V. Impact and Implications

  A. For Connecticut Public-Sector Labor Relations and Retiree Health Benefits

  Duso v. Groton has immediate consequences for how municipalities and unions in Connecticut allocate costs and design benefits for active employees versus retirees.

  1. Retiree parity is limited to insurance terms, not all health-related compensation.
     When a pension or retiree health agreement promises parity in the “nature and scope of coverages, including . . . deductibles,” that parity extends to:
     • the types of services covered,
     • the level of deductibles, co‑pays, and co‑insurance, and
     • plan limits and structure.
     It does not automatically extend to:
     • HSA or HRA contributions,
     • cash stipends to offset health costs,
     • wellness bonuses, or
     • other compensation mechanisms, even if tied to health‑plan features.
  2. Municipalities retain flexibility to enhance active employees’ compensation without triggering retiree claims.
     Towns and cities can negotiate HDHP/HSA arrangements or other health‑related payments for active employees without necessarily increasing retiree obligations—provided their retiree‑parity clauses resemble Groton’s and do not expressly include such contributions as “coverage.” This provides fiscal and bargaining flexibility while maintaining promised retiree coverage parity.
  3. Retirees may experience higher net out-of-pocket exposure even with formal coverage parity.
     Legally, retirees receive the same formal deductible and coverage terms; practically, they may face higher effective out‑of‑pocket costs if they do not receive equivalent HSA or cash contributions. While this decision confirms that such disparities are permissible under similar contract language, it also highlights the need for unions to address retiree support explicitly in bargaining if parity of economic impact is desired, not just parity of formal coverage terms.

  B. For Drafting Pension Agreements and CBAs

  Duso is essentially a drafting lesson:

  • If the parties intend retirees to receive the same employer HSA contributions as active employees, they must say so explicitly.
    Language limited to “coverages” and “deductibles” will be construed as referring to the insurance policy’s terms, not to ancillary funding arrangements.
  • Broad phrases like “nature and scope” do not automatically capture all economic consequences.
    “Nature and scope of coverages” will not be judicially stretched to include every financial tool employers use to mitigate employees’ health costs. If parity of total health‑related economic support is the goal, that should be spelled out—e.g., “including any employer contributions to HSAs or similar accounts.”
  • Subsequent CBAs can affect interpretive context.
    Although later CBAs did not modify the 2008 pension agreement in this case, their explicit notes were powerful evidence of the parties’ shared understanding. Drafters should recognize that interpretive statements, even if not labeled as amendments, may influence how courts read standing pension agreements.

  C. For Insurance and Employee Benefits Law More Broadly

  While Duso is a Connecticut public‑sector case, several aspects of its reasoning have broader relevance:

  • Clarification of the legal meaning of “coverage” and “deductible.”
    The Court’s insistence that “coverage” is about insured risks and that “deductible” is a fixed structural element of the policy—and not the net out‑of‑pocket burden after employer support—could influence how similar terms are construed in other contexts (e.g., private insurance disputes, policy interpretation questions).
  • Separation of plan design from funding mechanisms.
    The distinction between what the health plan is (its terms) and how an employer funds or subsidizes employee costs (HSAs, HRAs, stipends) is likely to be persuasive in other jurisdictions analyzing similar arrangements.
  • Integration of federal tax law into state contract interpretation.
    The Court’s reliance on 26 U.S.C. § 223 and IRS guidance stands as an example of how federal tax classifications and mechanics can shape the legal characterization of benefit structures in state contract disputes.

  D. Litigation Strategy and the Use of Stipulated Records

  The case also offers procedural insights:

  • Stipulated facts can focus appeals on pure legal interpretation.
    By stipulating to facts and exhibits, the parties allowed the Supreme Court to treat interpretation—even of arguably ambiguous language—as a pure question of law, increasing predictability and reducing deference to lower fact‑finding.
  • Raising legal characterizations (like the nature of HSAs) can be appropriate even without trial‑level factual evidence.
    The Court noted that the nature of HSAs is a question of law grounded in statutes and IRS guidance, and that such legal materials may be considered on appeal even if not introduced via testimony below, particularly where flagged in stipulated facts.

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  VI. Conclusion

  Duso v. Groton provides a clear and consequential rule: under Connecticut law, an employer’s contributions to employees’ Health Savings Accounts are not part of the “nature and scope of coverages” or “deductibles” provided under a health insurance plan, as those terms are used in a pension agreement guaranteeing parity between active employees and retirees. HSAs are separate, individually owned, tax‑advantaged savings accounts; although they may be used to pay deductibles, they do not change what the deductible is or the risks and services the insurance policy covers.

  On the face of the 2008 pension agreement, and reinforced by later CBAs’ explicit notes, the Town’s obligation to retirees is to maintain equal insurance coverage and equal deductible amounts, not equal employer subsidies or funding mechanisms. Retirees are entitled to the same HDHP design and deductible levels as active officers, but not to the 50% deductible funding that active officers receive in their HSAs (or as taxable equivalents).

  This decision will shape future public‑sector retiree‑benefit disputes and collective bargaining in Connecticut. It underscores the importance of careful drafting: if unions and employers wish to lock in parity not only of coverage but also of employer funding instruments—such as HSA contributions—they must do so expressly. For courts, Duso reaffirms a disciplined approach to contract interpretation that respects technical meanings of insurance terms and the legal architecture of federal tax‑favored accounts, resisting efforts to conflate policy structure with broader questions of economic impact.