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PERA Cuts Challenged in Colorado Class Action

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Denver, CO: A class action lawsuit has been filed on behalf of Colorado Public Employees' Retirement Association (PERA) retirees challenging the newly-passed amendments to PERA which reduce the annual increase to the retirees' pension benefits.

The suit charges that the new law, which was signed by the governor this past Tuesday, is unconstitutional because it impairs the retirees' contractual rights to receive pension benefits at the levels promised them when they became eligible to retire or when they actually retired.

From 1994 until now, state law has guaranteed annual pension adjustments, either through a cost of living adjustment (COLA) or a guaranteed 3.5 percent yearly increase. Citing PERA's underfunding, the Legislature recently passed Senate Bill 10-001, which eliminated the 3.5 percent annual increase in effect since 2001.

In a 2004 formal Opinion, then-Attorney General Ken Salazar acknowledged that "[w]hen a PERA member retires from active service and begins receiving a pension, the member's pension becomes a vested contractual obligation of the pension program that is not subject to unilateral change of any type by the General Assembly. " As a result of the new 2 percent cap on the COLA, retirees will lose millions of dollars in promised benefits. For example, a public employee who retired in 2002 and who was eligible for $2,772 a month (the average PERA benefit in 2008) will lose more than $165,000 in promised benefits during the next twenty years. "This lawsuit is about the state complying with its own Constitution," said plaintiff Gary R. Justus, a retired Denver Public Schools math teacher. "The General Assembly is trying to correct its past mistakes on the backs of the retirees. We can't go back and restart our careers."

Denver Public School retirees are also included in the suit as their pension plan became part of PERA on January 1 of this year. The new law eliminates the guaranteed 3.25 percent annual increase owed to them.

The lawsuit, Justus v. State of Colorado, et al., was filed in the state District Court in Denver. The other named plaintiff, Kathleen Hancock, retired from the Colorado Department of Labor in 2001. The suit is filed on behalf of approximately 100,000 PERA members who became eligible to retire or who have retired since March 1, 1994, when annual pension increases were first guaranteed under state law. Defendants are the State of Colorado, PERA, Governor Bill Ritter, PERA Board Chair Mark J. Anderson and PERA Board Vice Chair Sara J. Valt.

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Last updated March 19 2010

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