April 17, 2014 (PLANSPONSOR.com) – A Rhode Island state court has refused to dismiss a challenge to pension reforms filed by state retirees.
its opinion, the court rejected the state’s argument that no contractual
relationship existed between it and the plaintiffs at the time the pension
reform was enacted. The court noted that under Rhode Island law, retirees are
provided benefits and cost-of-living adjustments (COLAs) which may not be
altered retroactively. The court conceded that the language of the law does not
express a “clear contractual commitment not to change benefit levels or other plan
variables by legislation”; however, the context implies an employer-employee
relationship and provides support for finding that the language should be
considered an offer.
court found that in exchange for the offer, the retirees had fully performed
their duties as public-sector employees for the required number of years and had
already retired before the reform was enacted. “Plaintiffs’ pension benefits
constitute part of their compensation for the services which they have already
rendered to the state,” the opinion says.
the court found that a contractual relationship exists, it determined the retirees’
claims survive the motion to dismiss.
Island’s pension reform was passed in November 2011, and it included, among
other things, a suspension of COLAs for retirees, with reinstatement depending
on the financial improvements of the retirement system. The reform sparked
several lawsuits by both unions and retirees (see “Unions Challenge R.I. Pension Changes with Lawsuits”).
agreement on the lawsuits was reached earlier this year (see “Rhode Island Pension Revision Lawsuits Settled”), but a report by Reuters says
police union members rejected the deal, prompting the judge last week to order
the parties back to mediation.
The court’s opinion on the motion to dismiss is here.