Monday, March 10, 2014

Fifth Pension Lawsuit Filed: State Universities Annuitants Association, et al. vs. State Universities Retirement System, et al.

Case No. 2014 MR 207

"Membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired"  THE PENSION CLAUSE (Ill. Const., 1970, Art. XIII, §5) 

"No ex post facto law, or law impairing the obligation of contracts or making an irrevocable grant of special privileges or immunities, shall be passed"   THE CONTRACTS CLAUSE (Ill. Const., 1970, Art. I, §16)

 "Private property shall not be taken or damaged for public use without just compensation as provided by law. Such compensation shall be determined by a jury as provided by law"   THE TAKINGS CLAUSE (Ill. Const., 1970, Art. I, §15) 


Plaintiffs, STATE UNIVERSITIES ANNUITANTS ASSOCIATION ("SUAA"), et aL, by and through their attorneys, Aaron B. Maduff, Michael L. Maduff, and Walker R. Lawrence of Maduff & Maduff LLC, and John D. Carr, for their complaint against Defendants, STATE UNIVERSITIES RETIREMENT SYSTEM ("SURS"), et aL, allege as follows:

I.             INTRODUCTION

1.  The Plaintiffs in this case are current and former employees of the University of Illinois at Champaign-Urbana, and Parkland Community College. They are all members of the State Universities Retirement System (“SURS”) who are vested in their pension rights (State Universities Annuitants’ Association (“SUAA”). [SUAA] is an Illinois Corporation whose purpose is to promote the welfare of current and retired employees of the Illinois State Universities System, who are eligible to receive a pension upon their retirement from the system under the State Universities’ Retirement System (“SURS”), and as a Plaintiff in this action, represents its membership).

2.  Upon joining the State University System, these Plaintiffs entered into a contract with the State whereby they contributed (and those who are current employees continue to contribute) a substantial portion of their income to SURS and, in exchange, they were to receive a pension with certain specified benefits upon their retirement. In addition, these Plaintiffs entered into contracts with the State whereby they voluntarily contributed more money and/or voluntarily relinquished certain rights available in one pension plan for the benefits of another, benefits that are also subject to the deprivations of PA 98-599. These individuals planned their retirement around their pensions and for many it is (or will be) their only income.

3.  The Plaintiffs have all paid their contributions religiously. However, the State chose not to fully fund SURS and other State pension systems in spite of lawsuits filed by pensioners asking that the State be required to do so. The courts have repeatedly held that pensioners may have the right to the fruits of their contractual bargains (i.e. the pensions), but not until those rights come due, and they therefore cannot sue the State for failure to fund the pensions. Taking advantage of those holdings, the State continued to leave the pensions less than fully funded. The State’s past failure to fund these obligations has now created a financial crisis. 
 In an effort to resolve that crisis, on December 5, 2013, the Governor signed Public Act 98‐599 into law. The purpose of that Act, however, is not to resolve the underfunding but rather to shift the consequences of that underfunding from the State to the SURS members. (Indeed, with few exceptions, the Act shifts the burden to nearly all State employees and retirees resulting in several similar lawsuits being filed across the state. The Plaintiffs in this action, however, are limited to members of SURS, and their concerns regard the effect of this legislation on SURS members.)

4. SUAA members, including the Plaintiffs, each face having their vested pensions diminished, reduced and/or impaired. PA 98‐599 diminishes the Plaintiffs’ vested pension rights in six significant ways: (1) PA 98‐599 reduces the basis on which Cost of Living Adjustments (COLAs) are calculated; (2) PA 98‐599 deprives employees of the benefit of a compounding COLA; (3) PA 98‐599 deprives certain employees of COLAs in certain years; (4) PA 98‐599 caps the salary that may be used to calculate an annuitants’ annuity thereby impairing the vested pension benefits; (5) PA 98‐599 increases the years of service required to retire, thereby increasing the costs of benefits and reducing the value of benefits; and (6) PA 98‐599 reduces the effective rate of interest formula for members who have elected to participate in SURS’ portable retirement plan.

5.  By diminishing the Plaintiffs’ vested pension rights, the Act violates the Pension Clause, the Contracts Clause, and the Takings Clause of the Illinois Constitution. Plaintiffs bring this case asking the Court to declare Public Act 98‐599 unconstitutional, void, and unenforceable. 

6. Moreover, by laying the burden created by its underfunding of the pensions on the members of SURS themselves, the State puts many of them at substantial financial risk. Many of these annuitants are on fixed incomes and have planned their retirement around their pensions. Many SUAA members are likely to find themselves in considerable financial straits as a result. 

7. Because the Act will put a substantial financial burden on many SURS annuitants (along with many other State retirees), efforts were made to have the State stay implementation of the Act until the disputes over its constitutionality are resolved. (Specifically, the We Are One Illinois Coalition, attempted, and failed, to reach an agreement with the State to stay implementation, which is currently set for July 1, 2014. We Are One Illinois Coalition filed a complaint in Sangamon County, which specifically alleges as follows: “10. Prior to initiating this lawsuit [the We Are One lawsuit], We Are One Illinois Coalition sought to reach an agreement with the State pension systems and the State that would stay implementation of Public Act 98-0599 pending a decision on whether Public Act 98-0599 is constitutional. We Are One Illinois Coalition believes that a stay would: [1] alleviate the substantial administrative burden the pension systems face in implementing by June 1, 2014 the changes Public Act 98-0599 requires; [2] avoid the similar, if not greater, burden, expense and confusion that will ensue when the pension systems must return their members to the status quo when Public Act 98-0599 is found unconstitutional; [3] afford the systems the time they need to provide meaningful counsel to their members, a critical function the systems presently are unable to satisfy; and [4] protect pension system members from the irreparable harm that is a consequence of the State’s unlawful conduct. 11. The State, however, recently rejected We Are One Illinois Coalition’s pre-litigation efforts” (Complaint 2014 CH 00048 filed in Sangamon County, paragraphs 10 and 11.)

8. Those efforts failed and Plaintiffs herein may request injunctive relief to preserve the status quo.

9.  This Complaint for a declaration that Public Act 98-0599 is unconstitutional and seeking to have it held void follows.
10. Plaintiff STATE UNIVERSITIES ANNUITANTS’ ASSOCIATION (“SUAA”) is an Illinois Corporation. SUAA members are members of the SURS pension system in the State of Illinois. SUAA’s purpose is to promote the welfare of current and retired employees of the Illinois State Universities System. As a Plaintiff in this action, SUAA represents its members, all of whom are SURS members…

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