SD Retirees Sue to Preserve COLAs

June 21, 2010 ( – Four South Dakota retirees are suing the state to protect their annual cost of living increases.

According to the Rapid City Journal, former judges Merton Tice, Jr., and Marshall Young are joined in the class action lawsuit by retired South Dakota School of Mines & Technology professors Boots Newstrom and Dean Bryson.  However, their attorneys estimate that they could represent approximately 20,000 public employees or their survivors who first received benefits on or after July 1, 1982, and who retire before June 30, 2010.

The retirees claim that individuals drawing benefits from the system will lose between $40,264.62 and 477,414.68 in pension benefits over the next 20 years because of a change in state law enacted by the 2010 Legislature.  Under the law, which is scheduled to take effect on July 1, pension recipients are not going to get the 3.1% cost of living increase they have received every year since 1993, according to the Journal.

The Rapid City Journal reports that, at the request of the retirement systems’ board of trustees, the state legislature passed Senate Bill 20 tying the cost of living increase to the consumer price index and the system’s assets.  As a result, for the coming fiscal year, benefits will go up by only 2.1%, and the next year, the annual cost of living raise would fluctuate between 2.1% and 3.1%, depending on those two key variables (the financial health of the retirement system and the consumer price index).

The annual combination of members’ contributions and investment revenue must equal 100 percent of the benefits paid out before the cost of living increase returns to 3.1%, something the plaintiffs claim is unlikely.

The plaintiffs have asked for a permanent injunction to prevent the implementation of SB 20. They argue that the state has violated state and federal law by breaching their contracts with the state by changing their benefits.