R.I. Retirees’ Pension Reform Challenge Moved Forward

April 17, 2014 (PLANSPONSOR.com) – A Rhode Island state court has refused to dismiss a challenge to pension reforms filed by state retirees.

In 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.

The 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.

Since the court found that a contractual relationship exists, it determined the retirees’ claims survive the motion to dismiss.

Rhode 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”).

A settlement 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.