State Supreme Court rules against public sector retirees



102413aThe state Supreme Court upheld the Legislature’s elimination of the gainsharing benefit in the PERS 3 retirement system and the uniform cost-of-living adjustment in the PERS 1 pension system.

The Federation, the Retired Public Employees Council of Washington (another AFSCME affiliate) and other public employee groups had sued the state over the repeals. Lower courts upheld the unions.

But not the state Supreme Court.

However, there was one bright spot that clears up a lot of uncertainty for state employees nearing age 62. The earlier retirement for those in the PERS 2 system added as a “tradeoff” when the Legislature repealed gainsharing in 2007 remains. The Legislature had placed a little known proviso that if courts or later Legislatures reinstated gainsharing, the earlier PERS 2 retirement would be cut.

But with the repeal of gainsharing upheld by the high court, public employees will continue to have access to the earlier retirement option allowing PERS 2 enrollees to retire at age 62 (instead of age 65) with 30 years of service with no benefit reduction.

Gainsharing referred to the incentive given public employees to switch to the new hybrid PERS 3 plan that started in 1998. While gainsharing was in place, PERS 3 retirees would share extraordinary investment gains based on a set period of time and exceeding a certain percentage.

For more details and background, here is the text of the press release sent out today by the Retired Public Employees Council:

Retired Public Employees Council of Washington
FOR IMMEDIATE RELEASE

Washington State Supreme Court Rules Against Public Sector Retirees

Olympia, Washington – August 14, 2014 – Today the Washington State Supreme Court ruled that the legislature had the right to eliminate COLA protections and gainsharing rights for Washington’s public employees.

The Retired Public Employees Council of Washington (RPEC) and other public employee groups had sued the state after the legislature acted to repeal these benefits and lower court decisions overturned the cuts. The Supreme Court decisions today, however, mean that Plan 1 members will have no future cost of living adjustments.

“The court’s decisions mean that retirees will face a future of stagnant benefits while the cost of living and medical costs continue to escalate” said Maria Britton-Sipe, Executive Director of RPEC. She noted that the average benefit for Plan 1 members is $1,892 per month and the average benefit for Plan 2 members is $1,256 per month. “These benefit cuts are a slap in the face to retirees who are struggling to maintain their standard of living and dignity as they age” she said.

The only bright spot in the rulings was that some Plan 2 members will continue to have access to earlier retirement under some circumstances. That benefit would have been jeopardized if the court had overturned the COLA and gainsharing repeal.

Britton-Sipe said that the rulings today should motivate retirees and active public employees to push legislators to reinstate the lost benefits through the political process. She noted that retirees are a growing segment of the electoral process and are more than willing to hold legislative candidates accountable for their positions on pension security.

The full text of the decisions can be found here: http://www.courts.wa.gov/opinions/index.cfm?fa=opinions.recent, then click on Case Info/File 88546-0.

2 Comments

  1. Bill says:

    I do believe there is a strong case for reconsideration. When the legislature created the “replacement benefits” they also created an excluded class: ERF replacement benefits were only for employees with 30 years of service retiring @ 62. Gainsharing on the other hand was available to all PERS 3 members (prior to the repeal). By only offering replacement benefits to members with 30 years of service, it created a separate and negatively impacted class of existing PERS 3 members who will not have the ability to retire at age 62 with an unreduced benefit. The remedy would be to extend the “replacement benefit” to all vested members to retire at 62 without a reduced benefit: 30 years @ 62 =full Pers 2 or 3 benefit…20 years @ 62= full Pers 2 or Pers 3 benefit etc.

    • Bill says:

      The argument would be based on the replacement benefits not being sufficient, and benefiting some but at the expense of others.The most surgical remedy would be to extend the benefit of early retirement at 62 (not limited to 30 years) to those who were Plan 3 members prior to the repeal of gain sharing. This would be a very specific and currently negatively impacted group. I’m afraid the early argument would be too broad.

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