Judge Strikes Down Portion of Montana Pension Overhaul, Citing Constitutional Violation

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A Montana judge has reversed a portion of a 2013 state law that mandated pension changes for all members of the Montana Teachers’ Retirement System.

The part of the law that was reversed was the portion that curbed cost-of-living adjustments for current and retired members of the System.

From the Albany Times-Union:

District Judge Mike Menahan ruled Tuesday that the Legislature’s cost-saving measure that was part of a larger 2013 pension overhaul goes against constitutional provisions that prohibit the impairment of contract obligations.

The judge ordered a permanent block to that section of the 2013 bill, saying the increases are contractually guaranteed to the workers and the bill unnecessarily affected that contract.

The law cut annual inflationary increases — known as the Guaranteed Annual Benefit Adjustment — in the Teachers’ Retirement System from 1.5 percent to 0.5 percent. Legislators seeking to fix the pension shortfall also increased contributions from employers and employees, which will remain in effect.

[…]

The state argued the changes were necessary and that employee benefits constantly change. The judge dismissed the argument, citing a previous U.S. Supreme Court decision that said the constitutional contract clause would provide no protection at all if a state could reduce its financial obligations whenever it wanted for what it considered an important public purpose.

The judge stated that the COLA cut wasn’t necessary to bring the system to “actuarial soundness”, because the same 2013 law also increased contributions required from workers and the state.

 

Photo by Joe Gratz via Flickr CC License

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