Fla. High Court Green-Lights Pension Reforms

January 18, 2013 (PLANSPONSOR.com) – The Florida Supreme Court ruled that recently enacted state pension reforms are not in violation of the state’s constitution.

The court’s discussion centered around a preservation of rights provision in section 121.011(3)(d) of the Florida Statutes (1974) and a previous decision by the state Supreme Court in Florida Sheriffs Association v. Department of Administration.  Plaintiffs in the case—which include The Florida Education Association, other public employee unions and several individual workers—argue the preservation of rights statute creates a binding contractual relationship between employees and the state, barring the state from requiring employees to contribute 3% toward their retirement accounts and eliminating previous cost-of-living adjustments (COLAs).  

The high court said the plaintiffs and a previous trial court judge’s decision (see “FL Judge Challenges State Pension Contribution Change”) are incorrect in concluding that it intended its decision in Florida Sheriffs to apply only to prospective changes within a noncontributory plan.The court concluded in that case that the preservation of rights statute was enacted to give contractual protection to those retirement benefits already earned as of the date of any amendments to the plan.The court recognized the authority of the Legislature to amend a retirement plan prospectively, so long as any benefits tied to service performed prior to the amendment date are not lost or impaired.    

In its previous decision, the Florida Supreme Court said: “To hold otherwise would mean that no future legislature could in any way alter future benefits of active employees for future services, except in a manner favorable to the employee. This view would, in effect, impose on the state the permanent responsibility for maintaining a retirement plan which could never be amended or repealed, irrespective of the fiscal condition of this state. Such a decision could lead to fiscal irresponsibility.”  

In the present case, the court held that the 2011 amendments requiring a 3% employee contribution as of July 1, 2011, and the elimination of the COLA for service performed after that date are prospective changes within the authority of the Legislature to make.The preservation of rights statute does not create binding contract rights for existing employees to future retirement benefits based upon the Florida Retirement System (FRS) plan that was in place prior to July 1, 2011. In reversing the trial court’s decision, the court held that the actions of the Legislature have not impaired any statutorily created contract rights.  

The decision in Scott v. Williams is at http://www.floridasupremecourt.org/decisions/2013/sc12-520.pdf.