New Jersey Supreme Court Will Hear Frozen COLA Case

Did New Jersey act illegally when it froze cost-of-living adjustments as part of a 2011 pension overhaul?

The state’s high court will soon decide — it was announced on Thursday that the state Supreme Court will hear the lawsuit, brought by retirees, that challenges the legality of the frozen COLAs.

The central question is whether cost-of-living adjustments are part of public workers’ contractual rights; a lower court in 2012 said no, but an appeals court later said yes.

More from NJ.com:

The New Jersey Supreme Court has agreed to decide whether the state violated hundreds of thousands of government retirees’ rights to pension benefits when it froze annual cost-of-living adjustments.

If the justices uphold an appellate court ruling that found retired public workers were guaranteed the bumps in retirement benefits, the state could be forced to reimburse retirees for their losses since 2011 and reinstate the COLAs.

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A plaintiff in this latest case, Charles Ouslander, said the fight over COLAs, though less “sexy,” is still important.

Retirees lost at the trial court level after the judge found that, based on a clause that gives lawmakers and governors discretion over annual state spending, the state could not be forced to pay for cost-of-living increases.

The appellate panel disagreed, saying this clause was irrelevant because “pensions are neither funded by appropriations on a pay-as-you-go basis… nor is their payment contingent on the making of a current appropriation.”

The state’s 2011 pension reform law froze COLAs until the pension systems reached a funding level of 80 percent; as of today, the plans are nowhere near that funding level.

Photo by Joe Gratz via Flickr CC License