Retirees' suit against PERA dismissed

Judge: Expectation of permanent COLA not 'reasonable'

A Denver District Court has dismissed a lawsuit against the Colorado Public Employees' Retirement Association (PERA) by a group of retirees who claimed passage of Senate Bill 10-001 had violated their constitutional rights to receive an annual increase or Cost of Living Adjustment (COLA).

The bill, signed into law Feb. 23, 2010 by Gov. Bill Ritter, was intended to help the beleaguered 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 law modified employer/employee contributions, placed a cap on cost of living increases, created new contributions for working retirees, and increased the age and service requirements of certain groups of employees for payment eligibility.

Specifically, the law changed the annual increase of 3.25 percent or 3.5 percent to an annual amount calculated using a different formula and capped the increase at 2 percent. The plaintiffs argued that a specific increase in the cost of living was their vested right.

In the 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."

In addition, Hyatt said, "The Court finds, based upon statutory provisions of the last 40 years, as well as legislative history and DPS (Denver Public Schools) plan language, that the General Assembly's most recent change to retiree COLA does not alter the fundamental mechanism for payment of pension benefits for PERA retirees. That has always been and remains to this day, a base benefit set at retirement. There has also been a separately calculated cost of living adjustment based on a formula that has always been fluid and repeatedly changed. For 40 years, the COLA formula has been subject to significant change without ever unconstitutionally altering the base pension payment to retirees."

Meredith Williams, PERA executive director, said, "We are pleased with the court's ruling. Senate Bill 1 was painful but necessary to make sure that PERA would be able to pay benefits in perpetuity. It put PERA on track to be funded within 30 years, the same amount of time as it takes to pay off the typical home mortgage."

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.

Colorado Attorney General John Suthers also applauded the court's decision. "More than 441,000 public employees are counting on the pension's financial integrity. This ruling represents a step toward long-term solvency for the PERA retirement fund."

The retirement plan comprises five separately funded divisions: state, judicial, schools (excluding higher education institutions), local government and Denver Public Schools.

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 – represented by Gary R. Justus, Kathleen Hopkins, Eugene Halaas and Robert Laird – and their attorneys are evaluating the decision, according to their website, Save PERA COLA. The group has 45 days to file an appeal.

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