Pension Fight Heads to State Supreme Court

Date: March 15, 2016

Tens of billions of state savings are at stake.

Pension Fight Heads to State Supreme Court

On Monday, March 14, the state Supreme Court began hearing oral arguments in a case about whether the state must reverse its freeze on retired public employees’ cost-of-living adjustments. reports that the COLA freeze was passed as part of a set of pension reforms that are needed to help stabilize the underfunded system, but the retired workers say this is in violation of their pension benefits rights. The reforms raised the retirement age for public employees, required workers to pay more into the benefits system, suspended COLAs until the system hit certain funding benchmarks and required the state to follow a payment plan contributing more into the system. Over 30 years, these reforms add up to $122 billion, but if the Court sides with retirees, the state could be on the hook for tens of billions that were expected to be saved.

Moody’s Investors Service said that if the COLA freeze is overturned, the state’s total unfunded pension liability would increase to $53 billion (from $40 billion) and the pension system would dip down to 44 percent funded (from 51 percent). It would also increase the state’s annual required contribution to $5.7 billion and move up the depletion dates for the pension funds.

This comes after an earlier public pension case that unions brought before the state Supreme Court last year, arguing that the state should be forced to pay the full share of its annual contribution. The Court ruled that Gov. Christie was allowed to make only partial contributions due to a severe revenue shortfall, a decision that was kept in place after the U.S. Supreme Court declined to hear the unions’ appeal in late February.

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