A Denver district court judge ruled on Tuesday that the city of Colorado Springs and Memorial Hospital Systems cannot avoid paying remaining pension contributions of about $200 million to the Colorado Public Employees' Retirement Association after leaving the pension system in October 2012.
The ruling denied the city's motion for summary judgment. A trial date that was set for March was postponed while the judge reviewed briefs from both sides.
Memorial Hospital Systems exited $45 billion Colorado PERA, Denver, in October 2012 when the city leased operation of the hospital to the University of Colorado Hospital Authority, which is a non-governmental entity and ineligible for participation in the state's public pension system.
In September 2012, the city, pension fund and University of Colorado Hospital Authority agreed to set aside $259 million from the lease proceeds in an escrow account pending resolution of the dispute.
Under state law, any local government that wishes to withdraw from Colorado PERA must pay for the accrued, unfunded liabilities of its retirees and employees before leaving the system. Colorado Springs argued under its own interpretation that the city could exit as long as it was current on its payments at the date of withdrawal.
“This interpretation would render (legislative sections) meaningless and inconsistent with the fundamental nature of a defined benefit plan,” the judge said in his ruling.
Colorado PERA is currently paying pension and health benefits of more than $42 million annually to Memorial Hospital retirees, according to the ruling. In addition, vested Memorial Hospital employees will collect benefits when they retire.
“We are pleased with the judge's decision, but more importantly we are relieved that the city of Colorado Springs and Memorial won't be able to shift their financial burden to municipalities, and their employees, across Colorado. This decision helps maintain the integrity of Colorado's best investment,” said Gregory W. Smith, Colorado PERA executive director, in a news release.
Julie Smith, spokeswoman for the city, declined to comment while the case is still pending.