DENVER (Legal Newsline) - Colorado Attorney General John Suthers heralded a decision Wednesday by a Denver district court upholding legislation that places a cap on cost-of-living increases for current and future retirees.
The measure, Senate Bill 1, was signed into law by former Gov. Bill Ritter in February 2010.
The bill was designed to allay the state Public Employees' Retirement Association's severe underfunding.
Under the legislation, employee/employer contributions were modified, new contributions for working retirees were created, the age and service requirements of certain groups of employees before they are eligible to receive retirement benefits was increased, and a cap was put on cost of living increases for retirees.
At issue in this case were Sections 19 and 20 of the bill, modifying the cost of living adjustments.
Depending on the sub class, the adjustments were modified from an annual increase of 3.25 percent or 3.5 percent to an annual increase to be calculated under a different formula and capped at 2 percent.
The plaintiffs in the case argued that the two sections of the bill were in violation of the Contract Clause of the Colorado Constitution and the Contract, Takings and Substantive Due Process Clauses of the U.S. Constitution.
"While Plaintiffs unarguably have a contractual right to their PERA pension itself, they do not have a contractual right to the specific COLA formula in place at their respective retirement, for life without change," Denver District Court Judge Robert S. Hyatt wrote.
"Plaintiffs' takings and due process claims likewise are premised on the existence of a constitutional right to an unchangeable COLA formula and necessarily fail because no such right exists."
The plaintiffs, Hyatt said, could not have had a "reasonable expectation" that the formula would be unchangeable for the rest of their lives.
In fact, the judge notes, the plaintiffs and other retirees have signed documents that acknowledge that the cost of living adjustment was subject to change during retirement.
The district court ruling, Suthers said, is a "significant step" toward long-term solvency for PERA.
More than 441,000 public employees are counting on the pension's financial integrity, the attorney general said.
"This ruling will help place the PERA retirement fund on a sounder fiscal footing," he said.
From Legal Newsline: Reach Jessica Karmasek by e-mail at email@example.com.