The second suit, filed by the Association of Montana Retired Public Employees and four retirees, alleges a 1.5% reduction in annual inflationary benefit increases granted to Public Employees’ Retirement System (PERS) beneficiaries represents an unconstitutional contract change, according to an Associated Press news report.
Such a reduction cuts in half the 3% annual inflationary increase for retirees who joined the system during or before 2007, as defined by earlier changes to the system. Current and future retirees joining the system after 2007 already receive inflationary increases of 1.5%.
The state’s House Bill 454 reform measure—the second suit’s principal target—reduced the inflation-related rate for everyone in the system, and allows for further cuts if the system doesn’t balance, according to the news report.
The move comes after a separate suit filed by the Montana Education Association/Montana Federation of Teachers to stop changes to the underfunded PERS and Teachers’ Retirement System (TRS).
Both suits have been considered likely since Montana’s Governor Steve Bullock signed two bills into law taking measures to shore up funding gaps in the PERS and TRS (see “Lawsuit Challenges Montana Pension Reform”).
Specifically, the prior lawsuit asks the state’s courts to declare the benefit-cut provision of Montana House Bill 377 unconstitutional and requests a preliminary injunction to stop the reduction in certain cost-of-living payments.
According to the AP news report, the average Montana PERS retiree in 2012 was about 60 years old and had earned a $1,159 monthly benefit after almost 20 years of service. The 3% inflationary adjustment would increase that benefit to $2,356 over the next 25 years of expected lifespan, compared to $1,657 if the adjustment is cut to 1.5%.