Public sector employees and retirees in Puerto Rico filed suit Wednesday to prevent the governor and oversight board from implementing a fiscal plan that calls for 10% reductions in benefits paid by the Puerto Rico Government Employees' Retirement System, Hato Rey, beginning in 2020.
The lawsuit was filed in U.S. District Court in San Juan by Servidores Publicos Unidos, Council 95 of the American Federation of State, County, and Municipal Employees, and three pension plan participants. The union represents 10,000 commonwealth employees and 2,300 retired workers participating in ERS, which contributes 6% of wages for police and firefighters and 5.5% for all other members.
Plaintiffs contend that the fiscal plan approved March 13 by the government and oversight board created by the Puerto Rico Oversight, Management and Economic Stability Act in June violated PROMESA procedures and intent, and that the proposed cuts are an unconstitutional impairment of the workers' pension rights.
“Plaintiffs do not seek to stall the commonwealth's economic recovery,” the lawsuit said. “Congress specifically required any fiscal plan to adequately fund the commonwealth's pension systems.”
The lawsuit also seeks to stop the fiscal plan from being implemented and then used as a basis for seeking bankruptcy protection. “It is important to get this legal question settled before that happens,” said Teague Paterson, a lawyer in AFSCME's Washington office, in an interview.
The oversight board, which expects to finalize the fiscal plan by June 30, has projected that Puerto Rico's three main pension plans could run out of money by fiscal year 2018.