Courts in Denver and St. Paul, Minn., ruled on Wednesday against retired public employees in Colorado and Minnesota who filed lawsuits over reductions to their cost-of-living adjustments, saying retirees do not have a right to specific COLA formulas.
In the Minnesota case, Judge Gregg E. Johnson said the legislature “properly responded” to the unprecedented market conditions of 2008-2009 by reducing the COLA.
“The challenged legislation addressed legitimate and significant public purposes, particularly given that these plans are intended to be viable beyond the lifetime of the current plaintiffs,” Mr. Johnson wrote in the opinion.
In the Colorado case, Judge Robert S. Hyatt ruled that “it is impossible to establish a contractual right to a particular COLA for life … given that the General Assembly (as well as Denver Public Schools Retirement System) has changed the COLA formula for those retired numerous times over the past 40 years.” He also noted that Denver Public Schools employees signed documents at retirement acknowledging that the COLA was subject to change.
Stephen Pincus, an attorney with Stember Feinstein Doyle & Payne and lead counsel for the retirees in both cases, expressed disappointment in the decisions.
“The statutes granting the COLAs contain the same mandatory language as the statutes granting their base benefits, which both the Colorado and Minnesota supreme courts have previously found to be enforceable contracts,” Mr. Pincus said in a news release. “Under the courts’ reasoning, the legislatures could eliminate the entire COLA and the retirees would have no recourse. This is particularly troubling because government employees typically work for less pay in exchange for their promised pensions, and many do not receive Social Security, which provides a COLA, due to their participation in a state pension system.”
It is uncertain whether the decisions will affect a similar lawsuit in South Dakota, Mr. Pincus said in the news release.
Plaintiffs in both cases will consider filing an appeal in the next few weeks.