Benefits February 7, 2012

Arizona Judge Rules Pension Contribution Law Unconstitutional

February 7, 2012 (PLANSPONSOR.com) – An Arizona judge ruled a state law that increased the amount state employees needed to contribute toward their pensions is unconstitutional.

Reported by

Tara Cantore

According to the Associated Press, Maricopa County Superior Court Judge Eileen Willett said the state law that went into effect on July 1, 2011, illegally changed the contract between the state and its employees. State law, she said, forbid laws “impairing the obligation of a contract.”

The law increased the portion of contributions state employees must make to their pension from 50% to 53%, while lowering the state’s portion to 47%.

Key Republican lawmakers have anticipated the ruling and have proposed rescinding the hike. That could be done through the budget, which lawmakers are still crafting, or via legislation. (Also see Arizona Senate Leaders Looking to Repeal Pension Payment Legislation).

House Bill 2264 would return to the previous funding system of a 50-50 split between the state and its workers. It also would require the state to refund to public employees any contributions made this year in excess of 50%, stated the news report.

The bill passed the House Employment and Regulatory Affairs Committee, but it still needs a hearing before the House Appropriations Committee.

A similar ruling was made in New Hampshire earlier this month (see N.H. Court Says Increasing State Employee Pension Contributions Illegal).