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Washington state high court rules pension benefit reductions are constitutional

The Washington State Supreme Court upheld as constitutional two bills passed by the state Legislature in 2007 and 2011 that reduced benefits for some participants in several of the state's pension funds.

The rulings last week came as a result of two class-action lawsuits filed by the Washington Education Association against the Washington State Department of Retirement Systems, Olympia, that questioned the Legislature's right to repeal or modify benefit enhancements.

The first ruling affects 2007 legislation that repealed gain-sharing benefits originally enacted in 1998, which gave members and retirees a share of what the state called “extraordinary investment returns.” That legislation also created “early retirement factors,” or ERFs, which allowed some members — those hired before May 1, 2013 — of three of the state's pension funds with 30 years of service to retire as early as age 62 without a benefit reduction.

“Many pension system members have been 'on the bubble' for months about whether to retire under the ERFs, not knowing if the provisions would be in place,” said Marcie Frost, director of the Department of Retirement Systems, in a statement. “Today's ruling brings some certainty and ability to plan effectively for retirement.”

The plans affected were Plans 2 and 3 of the Public Employees' Retirement System, School Employees' Retirement System and Teachers' Retirement System. Each retirement system has three tiers of pension plans.

The state Supreme Court ruling also upheld 2011 legislation that removed uniform cost-of-living adjustments in the Public Employees' Retirement System Plan 1 and Teachers' Retirement System Plan 1. Both of those plans have been closed since 1977.

King County Superior Court Judge Richard Eadie ruled in September 2010 that the repeal of gain sharing was invalid. Thurston County Superior Court Judge Chris Wickham ruled the discontinuation of the uniform COLA was unconstitutional in November 2012.

The state Supreme Court heard oral arguments in both cases in October 2013.

Kim Mead, president of the Washington Education Association, said in a statement, “It's not right for the Legislature to unilaterally cut retirement benefits it promised — and to take away what educators already earned.”

David Brine, spokesman, and Shawn Merchant, assistant director, policy and strategic initiatives, both at the Department of Retirement Systems, were not available by press time. Rich Wood, Washington Education Association spokesman, did not return a phone call by press time.

The $100.6 billion Washington State Investment Board, Olympia, oversees the investment management of the state's retirement systems.