[Of Special Note: New Hampshire's legal basis for protection of past
and present public pension rights (or accruals) is through contract. In Illinois, the guarantee is stated explicitly in its State Constitution].
“Higher employee contributions
are unconstitutional, according to unions:
“Four public employees’ unions are taking the state to the
Supreme Court, seeking reversal of 2011 increases to the amounts they pay
toward their pensions, as well as refunds for increased pension payments they
made during the last three years.
“The Supreme Court decision could mean
a loss of $25 million to $50 million a year in employee pension contributions,
and refunds of $75 million to $150 million, according to Marty Karlon, spokesman
for the New Hampshire Retirement System.
“The unions seeking to overturn that
so-called pension reform are members of the Professional Fire Fighters of New
Hampshire, New Hampshire Police Association, the National Education Association
and State Employees Association of New Hampshire. They are represented by
attorney Andru Volinsky, who successfully secured cash refunds for
municipalities that overpaid for health and liability insurance through the
municipal insurer formerly known as the Local Government Center.
“Volinsky said the 2011 increases to employees'
pension contributions that were mandated by the Legislature are
unconstitutional under ‘contract clause,’ because they were imposed upon
employees ‘already in the system.’ Those employees made contractual agreements
with their public employers to pay a specific portion of their earnings toward
their pensions and those agreements cannot be changed during their careers, he
said…
“‘Changing employment terms, after both
sides agreed to them, said Volinsky, is like telling a plow driver he'll be
paid $50 an hour to clear roads, then telling him in the middle of a snowstorm
he'll be paid less.’
“Representing the state, Associate
Attorney General Richard Head cites case law saying that a law such as the one
that increased the employees' pension contributions ‘is not intended to create
private contractual or vested rights, but merely declares a policy to be
pursued until the Legislature shall ordain otherwise.’
“Head said he expects the Supreme Court
will be interested in hearing debate about when employee contracts became
effective — in other words, when employees are ‘vested.’ The state argues
employees are vested when they retire, the Merrimack Superior Court has ruled
employees are vested after 10 years, while public employees argue they're
vested when they're hired, or after a probationary period of typically a year.
“The legal debate…
“The 2011 legislation in dispute
increased pension contribution rates for teachers from 5 percent to 7 percent
of their wages. Teachers are also eligible to collect Social Security benefits.
Police officers' contributions increased from 9.3 percent of their earnings to
11.5 percent. Firefighters' pension contributions were increased from 9.3
percent to 11.8 percent.
“All public employees have been paying
these increased pension contributions since the law took effect July 1, 2011,
according to the state.
“Volinsky said public employees took
their jobs knowing they're paid less than their private counterparts and the
lower pay was offset with ‘richer’ pensions. ‘Part of the deal is a dependable
pension,’ he said. ‘Then, all of a sudden, the 2011 Legislature says, you know
that pension we promised you? You can't rely on that.' And if that's true, he
argues, ‘What's to prevent increases of 50 percent or 80 percent? The state is
held to its contracts.’
“Changing the terms, Volinsky said, is
unconstitutional.
“Head argues that many public employees
took their jobs because there's nothing comparable in the private sector and he
doubts the Supreme Court will be interested in that debate. The associate
attorney general said employees' pension contributions are comparable to their
health insurance contributions that are also a benefit with no guarantee that
employees ‘will never pay a dime more.’ There's nothing in the law saying that
once the pension contribution is set at 5 percent, it can never be raised or
lowered, he said.
“According to Head, state law does not
use ‘unmistakable language,’ as required, to guarantee set pension contribution
rates. Volinsky counters that, ‘If they can change this, they can change the amount
of the payout and the number of years’ an employee has to work before being
eligible to start drawing a pension. ‘How is that fair?’ he asked.
“Head said the law does state that
employee pension contributions cannot exceed contributions made by their municipal
employers. In other words, the most public employees could be mandated to
contribute would be 50 percent of his or her pay. The state also argues that
language in pension law allows future legislatures to evaluate pension
contributions and adjust them up or down.
“In his brief to the Supreme Court,
Volinsky outlines the history of how the state pension system became underfunded,
including the state's ‘raiding’ of the fund and its history of failing to fully
contribute to it. He also reminds that the state recently ceased paying a
portion of the pension contributions.
“Now, he said, the state wants public
workers to make up the difference, when it's new employees and municipalities
that should fill the funding gap.
“Volinsky said the only changes that
can be made to employee contracts are through quid pro quo, when they receive
something in exchange. ‘They were induced to work for the government’ with
specific pension promises, he said.
“Head argues that, like health
insurance, as pension plans are adjusted, employee contributions are legally
allowed to be adjusted accordingly. ‘We say there's nothing special in the
retirement package that says nothing will ever change,’ he said.
“According to Head, the New Hampshire
Municipal Association, the Association of Counties and the School Board
Association have filed briefs in support of the state's position.
“Multimillion-dollar impact:
“If the Supreme Court affirms a
Superior Court decision that says vesting occurs for employees after 10 years,
Karlon said, ‘future contributions for those members who had 10 years of
service would be adjusted to the contribution rates that were in place prior to
July 1, 2011. This would result in a decrease of about $25 million in
contributions annually to the system.’ If
refunds to those employees are ordered, ‘there would be about 25,000 affected
individuals and $75 million in refunds,’ Karlon said.
“If the Supreme Court rules all
full-time employees are to be considered vested, that would result in a
decrease of about $50 million in annual member contributions to the pension
fund, according to Karlon. If refunds are ordered under that scenario, ‘there
would be about 49,000 affected individuals and $150 million in refunds to be
made by or through employers,’ according to the NHRS. In either case, he said, ‘this
means that employer contribution rates would have to increase to offset the
loss of revenue to the system.’
“The New Hampshire Retirement System is
‘discussing scenarios for several possible outcomes,’ he said. ‘Any outcome
that includes changes to member contribution rates or individual member
accounts will require significant modifications to the pension database.’
“Volinsky said, ‘Overpayments should be
refunded, yes. The retirement system should not be allowed to keep that if it's
unconstitutional. That part is easy.’ Volinsky wrote to the Supreme Court that
the NHRS ‘paints a drastic picture that mass logistical calamity will erupt
should (the unions) succeed and seek an equitable refund of their excess
contributions.’ If the unions win, he wrote to the court, they will ‘work
cooperatively’ with the NHRS ‘to determine an appropriate, efficient and
practical manner in which to credit (union members) for their excess
contributions. Thus, Volinsky tells the Supreme Court, ‘the court should not be
tempted by the NHRS's doom and gloom contentions.’
“Oral arguments from both sides are
scheduled to be presented to the Supreme Court on May 15.”
from State pension fight heads to Supreme Court by Elizabeth Dinan
from Jack Tucker:
ReplyDeleteI believe our current Executive Director of TRS was formerly of the New Hampshire system. There the Legislature is not only required to pay benefits BUT they are also required to FUND it. What a novel idea!