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Was it constitutional for Proposition 124 to replace PSPRS' permanent benefit increases with a capped 2% COLA?

In this blog I and multiple commenters have broached the subject of the suspect constitutionality of PSPRS' replacement of the old perma...

Thursday, March 9, 2017

*** Arizona Supreme Court denies EORP's motion for reconsideration in Hall ***

This just came down from PSPRS:
Supreme Court sends Hall lawsuit to trial court
EORP refund method to be determined, impact on PSPRS lawsuit still unknown
ARIZONA – The Arizona Supreme Court today declined to address a motion for reconsideration of the Hall v. Elected Officials Retirement Plan filed by attorneys for EORP and the state of Arizona. The motion was filed in response to the court’s November ruling that several 2011 pension reforms were unconstitutional.

The decision remands the lawsuit to the trial court level to determine how and when excess employee contributions and retroactive pension increases to impacted members of EORP must be made. The court also must decide whether Hall-style refunds will be applied to public safety employees impacted by the Parker v. Public Safety Personnel Retirement System.

Last year, the Arizona Supreme Court determined that 2011 legislative reforms that increased EORP employee contribution rates and created modest conditions to pension benefit increases were unconstitutional. The court’s ruling impacts EORP-covered employees who were already hired but not yet retired by the effective date of the 2011 law.

In response to the ruling, EORP must return excess contributions to impacted members who under the contested law had their retirement contribution rates rise above the existing 7 percent level. Likewise, those who retired after the effective date of the 2011 legislation may be owed retroactive benefit increases calculated under the previous permanent benefit increase (PBI) formula.

The motion for reconsideration filed by EORP and the state sought an expanded explanation of the high court ruling for the purposes of receiving clear guidance on future legislation. The Hall lawsuit does not directly impact members of PSPRS or the Corrections Officers Retirement Plan.
In November, Brian Tobin, chairman of the PSPRS Board of Trustees, said the reforms deemed unconstitutional in the Fields and Hall lawsuits were the results of “good faith efforts to put Arizona public safety retirement plans on a stable and sustainable path forward.”

PSPRS urges members of its plans to avoid making major financial decisions based on expectations of refunds related to the Hall and Parker lawsuits.

It is not immediately clear when impacted members of EORP can expect to receive refunds of excess contributions or retroactive pension increases. In the event the same full refund and retroactive payment remedy is applied to the Parker lawsuit that impacts PSPRS-covered public safety employees, PSPRS estimates combined expenses of roughly $200 million.

However, pension reforms passed in 2016 that impact PSPRS would still offset potential losses from the Parker lawsuit and save an estimated $475 million in long-term costs. Reforms have not been implemented for EORP, which remains the least funded of three retirement plans managed by PSPRS. 

The combined assets of the PSPRS, Corrections Officer Retirement Plan (CORP) and the Elected Officials Retirement Plan (EORP) are currently valued at $9.1 billion.
The gist of this is that we are back to where we were in November.  The case will have to go back to the Maricopa County Superior Court where the implementation, as referenced in the press release, will have to be finalized.

The passive tone of this press release gives the impression that the helpless PSPRS is at the mercy of the court, as to the timeline of future events.  PSPRS has had plenty of time to prepare for this eventuality, years in fact, and has known that it was a happening for certain since last November.  The Superior Court judge will likely say to PSPRS, "Where's your implementation plan and give me the day you will be issuing refunds."  PSPRS should be ready to issue checks, with pre-judgment interest, now.  Excess contributions from current checks should be stopped immediately.  Any delay in getting excess contributions back to members will be PSPRS' responsibility, not the Court's.

If there is something more complicated here, utilizing other options for refund payouts, PSPRS should already be informing members.   I have heard rumors about other options, such as direct transfers into 457(b) accounts, an alternative retirement contribution into a 401(a), or service time purchases, but nothing has come directly from PSPRS.  Of course, these are all just rumors and perhaps just wishful thinking.  Regardless, the onus is on PSPRS to be ready with a plan, whether simple or complicated, when they return to trial court.

This matter should be resolved quickly with PSPRS members kept up-to-date as to what is happening.  Anything else is unacceptable.  It will be interesting to see how PSPRS performs.


  1. I pray to god they offer service time credit..I would gladly tell them to keep my money to shorten the last 2 years I have left.

    1. Pretty lousy exchange since you are talking about 4 months of credit at the high end.

  2. Did you notice how PSPRS almost eludes to the notion that this is only about EORP and therefore they may not have to pay at all. I believe it was already decided that the cases will follow each other, correct me if I'm wrong Drop Zone. It seems like they are merely prolonging the pain and plan to drag their feet. Very disappointing. Any idea if the superior court moves faster than supreme court?

    1. The Parker was stayed pending the decision in Hall. This was done so that two cases involving the same issues were not running concurrently, wasting time and money. My recollection is that the parties to Parker agreed to abide by the result in Hall. PSPRS seems to be making preemptive excuses for delays in paying the refunds. I don't know how fast the Superior Court will move. I just hope the Superior Court judge holds PSPRS' feet to the fire.

  3. so psprs members are getting paid?

  4. The big issue seems to be interest, if they have to pay it and how much. If PSPRS can avoid paying interest then they will be in no hurry to refund anything. It will be up to the court to try and get them to comply expeditiously. Thank you Drop Zone for being on top of this as always.

  5. I believe the pre-judgment interest that was originally disallowed by the Superior Court was reversed by the Supreme Court. Drop Zone, do you know if the lower court can reverse the Supreme Court or is this all a done deal, refunds are coming with pre judgment interest ?

    1. The lower court cannot reverse the superior court.


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