The Arizona Supreme Court ruled that the employee contribution rate of the $8.3 billion Arizona Public Safety Personnel Retirement System, Phoenix, must be reduced to levels before a 2011 pension reform law increased them.
The court ruled Nov. 10 that the 2011 law that mandated the increase in employee contributions to 10% in fiscal year 2011, 11.5% in fiscal year 2012, with a maximum of 13%, must be restored to 7% due to an article in the Arizona Constitution that says “public system retirement benefits shall not be diminished or impaired.”
The ruling came as a result of a lawsuit filed by some participants in the Elected Officials Retirement Plan, one of three pension funds that are part of PSPRS.
Christian Palmer, PSPRS spokesman, said in an e-mail that the expense of the ruling will reach an estimated $220 million, which includes payments of excess contributions and retroactive payments to retirees to increase benefits.
It is the second state Supreme Court ruling reversing a part of the 2011 pension reform law. Last year, the court reversed changes in PSPRS’ cost-of-living adjustment formula, citing the same article in the Arizona Constitution, which resulted in a law signed by Arizona Gov. Douglas A. Ducey in February creating a new COLA formula for new employees hired on or after July 1, 2017.
“Fortunately, the impacts of the lawsuit are offset by reforms passed this year. Everyone realized the need to put the pension on the right path and members of the system – Arizona’s firefighters and police officers – were involved at every single step of the way,” the pension fund said in a statement e-mailed by Mr. Palmer. “They worked with the Legislature, they worked with Gov. Ducey and they campaigned across the state to present reform that voters passed by a landslide. If everybody did not do their part the impact of this lawsuit would be an entirely different story.