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PERA responds to retiree lawsuit

The Public Employees’ Retirement Association has filed its first formal response to the lawsuit challenging this year’s pension reform law, asking a Denver judge to dismiss six of the plaintiffs’ eight claims.

A class-action lawsuit seeking to overturn Senate Bill 10-001 was filed against the state and PERA in Denver District Court on Feb. 26, just three days after Gov. Bill Ritter signed the bill into law. The named plaintiffs were Gary Justus, a retired Denver Public Schools math teacher, and retired Department of Labor employee Kathleen Hancock.

Lawyers representing PERA on Monday filed a motion to dismiss six claims that are based on state constitutional provisions about modification of state obligations, takings law, due process and federal civil rights law.

The filing argues the only claims that should remain are two alleging that SB 10-001 violates the contracts clauses of the state and federal constitutions.

At issue is the law’s provision that reduces retirees’ annual benefit increases from 3.5 percent to 2 percent starting in 2011. There’s no increase for this year, and future increases could drop below 2 percent under certain conditions.

The PERA filing says, “In fact, plaintiffs have no vested right to a particular COLA formula and to claim that a cost of living adjustment can never be adjusted defies law and logic.”

The document provides a detailed history of past legislative changes in annual increases for retirees and notes, “The COLA level from 2000 to 2009 was consistently higher than inflation. … In particular, in 2008 and 2009, despite deflation of 1.2 percent due to the recession, retirees’ pensions rose by over 7 percent because of COLA.”

It continued that since the annual increase was set at 3.5 percent in 2000, it “contributed to PERA’s liabilities increasing by 115 percent since 1999 while its assets only increased by 45 percent.”

Its investments hollowed out by the recession, PERA’s net assets available for benefits dropped from $43.1 billion at the end of 2007 to $30.8 billion at the end of 2008, a loss of more than 25 percent. The system pays about $3.1 billion in benefits a year and receives about $1.7 billion in contributions from covered employees and their employers. PERA overall was about 70 percent funded at the end of 2008. The new law is intended to restore it to solvency in 30 years.

PERA’s condition made passage of a solvency plan the first order of business for the 2010 legislature. Ritter and the bipartisan group of legislative leaders behind the bill wanted it passed and signed before March 1 to head off the scheduled annual 3.5 percent increase for retirees. SB 10-001 passed the Senate 25-10 and the House 36-29.

The issue is of vital interest to Colorado educators, because PERA membership is dominated by employees and retirees of schools and colleges.

Justus and Hancock are represented by Stember Feinstein Doyle & Payne, a Pennsylvania firm that has brought employee-benefit suits in other states, and Greenwood Village lawyer Richard Rosenblatt.

Among those representing PERA are two well-known Denver governmental affairs lawyers, Mark Grueskin and Edward Ramey of the Isaacson Rosenbaum firm.

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Copy of PERA’s motion to dismiss