Despite settlement, pension lawsuit trial still set for Sept. 15

February 24th, 2014 at 3:42 pm by under Nesi's Notes, On the Main Site

Preparations for a September trial in the union lawsuit challenging Rhode Island’s landmark 2011 pension overhaul are still happening despite the high-profile announcement of a proposed settlement to end the suit.

Court spokesman Craig Berke confirmed Monday that the Sept. 15 start date for the pension lawsuit trial remains in place. R.I. Superior Court Judge Sarah Taft-Carter set the date on Feb. 12, just hours after the first press conference to announce the pension settlement was abruptly postponed.

Berke told WPRI.com that if the proposed settlement hasn’t been approved by Sept. 15 – which would require affirmative votes by workers, retirees and state lawmakers – the trial will begin as scheduled.

Judge Taft-Carter ordered lawyers on both sides of the pension suit to begin coming up with an agreed-upon schedule for the pre-trial discovery phase when evidence will be collected. The judge also ordered that discovery should be completed by 30 days before Sept. 15.

The trial, like the settlement, would cover not only unions’ challenge to the 2011 pension overhaul but also their earlier suit opposing pension cuts enacted by the General Assembly in 2009 and 2010. The two sides presumably could still complete a settlement and end the litigation after the trial begins, however.

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12 Responses to “Despite settlement, pension lawsuit trial still set for Sept. 15”

  1. John says:

    The court case should proceed full speed in spite of the expensive charade mediation that has wasted time and money. Now the state is using more taxpayer and retiree money in an attempt to manipulate a vote in support of a very weak “proposed” settlement. Even if all of the “parties” to the “mediation” approve the proposed settlement, there are thousands of parties not included, i.e., those retirees not members of retiree organizations party to the lawsuit. They still have the constitionally extremely strong case about the breaking of preexisting contracts in the matter of COLAs for retirees retired prior to the 2011 law. The mediated settlement proposal does not address that issue at all.

    1. Beki says:

      Unfortunately the settlement includes the change in COLA’s for retirees prior to the 2011 law. My question is the settlement itself constitutional? There is case law that states that a state can’t enter into a contract that takes away a person’s property rights. Isn’t that what the state is doing?

  2. Jeff Crawford says:

    Hi Ted. Keep up the good reporting. What do you think the State Statue means when it comes to the question of is it a contract?

    § 36-9-2 Membership of persons employed after establishment of system. – All employees as defined in chapter 8 of this title who became employees on or after July 1, 1936, shall, under contract of their employment become members of the retirement system and shall receive no pension or retirement allowance from any other pension or retirement system supported wholly or in part by the state of Rhode Island, except as provided in chapter 10.3 of title 36 and § 36-9-3, nor shall they be required to make contributions under any other pension or retirement system of the state except as provided in chapter 10.3 of title 36, anything to the contrary notwithstanding; provided, however, that this section shall not apply to those employees who may be required or elect to participate in a retirement program existing by virtue of chapter 17.1 of title 16 or § 36-10-9.1.

    1. Bob W says:

      There is no question about the Statute,but where does it state that the system cannot be changed? Was the plan that was established in 1936 the same in the 40′s,50′s,60′s,etc.. If it goes to court,and the State loses,the next step could be bankruptcy. The City of Detroit is proposing a 1/3 cut in pensions as part of their bankruptcy restructuring. The unfunded liability would be doubled. The case for bankruptcy would be strong.

      1. B says:

        First of all, Detroit is a city, not a state…
        and Gina Raimondo has stated that the State of RI is far from bankrupt–
        The fact that our assets are liberally wasted on other expenditures does not give the state a pass to break existing contracts.

      2. Jeff Crawford says:

        It doesn’t state that it cannot be changed, but it was clearly the understanding when employees started working in the 1980′s and that an employee would receive 70% of their three highest years earnings averaged after 30 years of service. Bob, where does it state that the taxpayers need to pay back the moral obligation bonds in the 38 studios case? It doesn’t, but the Governor and the GA are moving ahead to pay them back because they know that one of the bigger bond purchasers and their insurance company will sue the State, win and the truth will come out about a lot of the former and current leaders. It’s easier for them to pay off the bonds with taxpayer money than be smeared in the papers.

  3. Tradita says:

    I agree with Beki. This case needs to be decided in court, particularly with respect to those who retired before 2011.

    In other states, where changes have been made to those already retired, their cola’s were reduced but not eliminated. RI has eliminated these inflation adjustments for an estimated minimum of 20 years, meaning all current retirees will be dead before it is reinstated.

    IMO, other measures could have been taken that would have ensured at least a partial cola for current retirees. These may have included a longer reamortization period. And I find it hard to believe Gina’s assumption that ALL retirees are going to live to be 85.

  4. Tradita says:

    With respect to the word “contract” …

    State employees are forced to participate in the state’s pension plan, “under contract of their employment.” As such, they are forced to contribute 8.75% of each and every paycheck into the pension fund; in my case for 40 years. Employee contributions earn interest from being invested, which is compounded over time.

    After the employee retires, the pension they receive is taxed by both the federal IRS and by the state as deferred compensation.

    The pension is not a gift. It is the result of forced participation in a state-sponsored program. The retiree receives their pension only after a written agreement between the retiree and the state is signed by both parties.

    Sounds like a contract to me.

    1. B says:

      Yes, and you are also told that the terms of this Agreement can not be changed after you sign it.

  5. AT says:

    What the future retirement plan should look like:

    First 22 years of employement goes towards a pension only.

    22 years of work will give someone 45% of their salary in retirement.

    Salary amount will be based on the following:

    1. a ten year average of the highest wages payed to the worker while paying into the pension.

    2. calculations of salary at retirement time will use the present value of past wages.

    3. retirement age may start at 62 years of age.

    4. takes 10 years to be vested in plan

    After 22 years of employment the employee will be moved to an IRA plan.

    The amount the town pays into the employees IRA will be 3.5% of the workers pay.

    The amount the state pays into the employees IRA will be 4.5% of the workers pay.

  6. Snow says:

    AT,

    How in the world does it make sense to begin paying into an IRA or 401k 22 years after you’ve started working? There would be no time to compound the funds you put in. I’m glad you are designing pension plans.

  7. Snow says:

    Jeff Crawford, I don’t know about the other classes of employees, but even before the 2009 changes, Teachers’ pensions after 30 years were 63% of salary based on the final three years. Now, of course, they are considerably less.