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State Pension Sagas’ Continue with Lawsuits

Here’s the story so far. During the 1980s and 1990s states allowed “pension benefit creep” to turn public retirement plans into out-of-control budget monsters. By the time 2012 rolled around, many state governments were caught in the throes of fiscal crisis that could in large part be attributed to financial promises made, that could no longer be kept, to retirees. In government speak, this is called “unfunded,” which, in layman terms, means that there is not enough money in the state budget to pay out pension benefits at the level previously promised.

In a desperate attempt to rein in costs, state legislators have stepped in across the nation and passed laws paring back retirement benefits. As you might guess, reaction to these laws – called pension reforms by lawmakers – has been a landslide of litigation. Challengers claim that this “changing horses in mid-stream” approach is a violation of state law, contracts, and the Constitution. Private investment firms charged with overseeing pension funds haven’t escaped unscathed either, finding themselves frequent lawsuit targets as well.

Literally dozens of court cases related to pension benefits are working their way through various judicial systems, a few of which are:

Alabama – Mobile County Circuit Judge James Woods is suing the Retirement Systems of Alabama based on a state law enacted last year that increases the amount that judges must pay toward their pensions from 6% of their salary to 8.5%, claiming that the increase violates a state Constitution prohibition against diminishing a judge’s pay during his term of office. The RSA counters that the pension increase is not a pay reduction, but a retirement benefit.

Florida – Whether the legislature violated contractual and/or collective bargaining rights when imposed a 3% mandatory employee contribution and eliminating COLA for future services. The lawsuit centers on a 1974 law that halted employee contributions to the retirement system and dictates that the rights of the retirement system are contractual in nature and cannot be altered in any way.

Illinois – Whether the Board of Education violated its legal duty under the Illinois Pension Code submitting a contribution that was $40,635,883 short of the requirement with unilateral authority.

The Heroic Investing Team






Flickr / Vironevaeh


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