Wednesday, March 27, 2013

PSPRS lawsuit update: Arizona Judges 2, EORP 0

The results of the latest skirmish in the battle to reverse the pension reforms enacted by SB 1609 are available in this article, Arizona judges mostly victorious in pension plan dispute, by Howard Fischer of Capitol Media Services and appeared in the Arizona Daily Star.

This lawsuit, Hall v. EORP, involves the constitutionality of changing both the cost of living allowance (COLA) formula and raising the contribution rates of sitting judges who are members of the Elected Officials' Retirement Plan (EORP).  A quick explanation is necessary about EORP, the Corrections Officer Retirement Plan (CORP), and the Public Safety Personnel Retirement Plan (PSPRS).  While EORP, CORP, and PSPRS are three separate Arizona public employee retirement plans and have features that are unique to each, they are all managed under PSPRS.  PSPRS is far and away the largest plan, and the funds of the other two plans are lumped in with it to save investment and management costs.  However, each plan's financial condition is reported separately with no sharing of funds or liabilities between plans.  SB 1609's reforms affected PSPRS, EORP, and CORP, so any legal decisions affecting one has great implications for the other two.  Arizona has three other large public pension plans: Arizona State Retirement System (ASRS) and the pension systems operated by the cities of Phoenix and Tucson.  None of these plans were affected by SB 1609.

The success of this latest lawsuit is the second victory for Arizona judges.  Last year, retired judges were successful in their lawsuit, Fields v. EORP, that challenged SB 1609's change to the system used to calculate COLA's for retirees.  The same constitutional argument was used successfully in Fields as the most recent decision.  The change in COLA's violated both the contracts clause and the amendment that prohibited the impairment of retirement benefits.  The Hall lawsuit deals with the increase in employee contributions of active judges, as well as the COLA's that they would receive after they retire.  The article states that only judges hired in 2000 or before can see their contribution level drop since a law in 2000 changed the vesting of benefits from hire date to retirement date.  I do not know if this vesting law affected PSPRS employees as well but will try to research it.

For PSPRS members, these lawsuits will have enormous impact on their pensions.  There are two lawsuits against PSPRS making the same constitutional arguments to overturn the SB 1609 reforms to PSPRS regarding contribution rates and COLA's.  PSPRS' latest status regarding these lawsuits can be found here: Latest update to lawsuits against PSPRS, and the implications of these lawsuits on PSPRS' financial condition can be found here: PSPRS lawsuits: Sacrifice is for the other guy.

These cases will all end up before the Arizona Supreme Court, but the decisions now could indicate what the final outcomes will be.  Stay tuned

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