Arizona Supremes Strike Down Changes to State Judges’ Pension Plan

By ASPPA Net Staff • November 15, 2016 • 0 Comments
The Arizona Supreme Court on Nov. 10 ruled in Hall v. Elected Officials’ Retirement Plan, et al. and State of Arizona that a measure enacted in Arizona in 2011 that altered the retirement plan for state elected officials, including judges, violates the state constitution.

The measure at issue, Senate Bill 1609, made certain changes to the state’s Elected Officials’ Retirement Plan. Among the changes was altering the formula for calculating future benefit increases for retired plan members and increasing the amount that employed plan members must contribute toward their pensions. Retired plan members challenged the change to the formula for calculating future benefit increases, arguing that it violated the Pension Clause of the Arizona Constitution, which provides that “public system retirement benefits shall not be diminished or impaired.”

Plan members who are current state employees also challenged the law; they argued that the unilateral changes to the benefit increases formula and to the amount they were required to contribute toward their pensions violated the Pension Clause. They also argued that because their pensions were part of their employment contracts that vested when they began employment, the legislature could not unilaterally change the terms of their pensions to their detriment.

The trial court had granted the employed members summary judgment, invalidating the provisions at issue. The court denied the members’ request for attorneys’ fees and prejudgment interest, however, as well as the members’ request to have the judgment run against the state, EORP and the state of Arizona appealed, and the members cross-appealed.

The state Supreme Court affirmed the granting of summary judgment to the employed plan members; it also agreed with the retired plan members that this future benefit increase calculation increase provision was unconstitutional as applied to them.

The court said that the change the law made to the benefit increases formula violates the Pension Clause because it “diminishes and impairs” the employed members’ pension benefits. The court also said that the legislature cannot unilaterally change the terms of the members’ pension contracts once their rights to those terms have vested at the beginning of the members’ employment.

And for good measure, the Arizona Supreme Court overturned the trial court’s ruling and found that the employed members are entitled to attorneys’ fees and prejudgment interest and that the judgment must run against the state as well as the plan.

Pension plan spokesman Christian Palmer said the ruling affects more than 25,000 public safety plan contributors, according to the Associated Press, as well as around 1,200 judges and elected officials. In addition, says, the ruling also could affect thousands of state and local employees who participate in other pension plans run by governments in Arizona, and could result in those plans reducing what those employees contribute now and also necessitate having to refund the excess deductions taken from those employees’ paychecks since the law at issue was enacted in 2011.