Retirees appeal dismissal of class action suit against PERA

Dispute continues over right to cost of living increase

A group of retirees has appealed the dismissal of a class-action lawsuit against the state of Colorado and the Public Employees’ Retirement Association (PERA). The lawsuit claimed that passage of Senate Bill 10-001 violated members’ constitutional rights to receive an annual increase or Cost of Living Adjustment (COLA).

In a June 29 ruling, Denver District Court Judge Robert S. Hyatt said, “… based on numerous and steady changes in the PERA COLA formula for retirees, Plaintiffs could not have had a reasonable expectation that the COLA formula that happened to be in place at the date of their retirement would be unchangeable for the rest of their lives.”

Hyatt said that while retirees have a “contractual right to the base PERA retirement plan benefits  … there is no contract right to a specific COLA formula frozen at retirement for life.”

The plaintiffs’ appeal is based on their original claims that the Colorado Supreme Court ruled in 1959 and 1961 police pension cases that COLA is part of a retiree’s contractual right and cannot be reduced.

“SB10-001 endangers the economic well-being of close to 100,000 retirees,” said Gary R. Justus, one of the plaintiffs in the case. “If this decision stands, then whenever Colorado wants to renege on a contract again, it can now just pass a law changing the terms of that contract.”

SB10-001 was signed into law Feb. 23, 2010, by Gov. Bill Ritter and was intended to help the beleaguered pension fund remain solvent. At the time, PERA officials said large payouts and stock market volatility had led to a nearly $30 billion decline in assets. The bill eliminated the 2010 annual benefit increases for retirees and those eligible to retire, which had been fixed at 3.5 percent per year (3.25 percent for Denver Schools). It also called for a new formula to calculate COLAs and capped any future increases at 2 percent.

Before the bill was passed, projections by PERA showed that, on its current path, the state division of the retirement plan, which includes the University of Colorado, could run out of money in as little as 16 years. PERA investment returns for 2010 exceeded actuarial assumptions, according to fund officials. The plan earned a 14 percent return on investments and ended 2010 with $38.7 billion in defined benefit assets.

The plaintiffs in the appeal are represented by Richard Rosenblatt & Associates of Greenwood Village and the Pittsburgh, Penn., firm of Stember Feinstein Doyle & Payne, which also is representing plaintiffs in a similar Minnesota pension case.

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