TRENTON—New Jersey's largest public unions, including those representing teachers, police officers and firefighters, filed suit Wednesday in federal court challenging a new state law that boosts employees' health care and retirement plan contributions and suspends retirees' automatic cost-of-living increases in retirees' pension benefits.

Among other things, the suit charges that the new law violates employees' and retirees' contractual rights.

“Pensions and health benefits are not gifts from employers or the state. They are earned compensation. What our members have been promised and have already worked to earn cannot be taken away by the governor or the legislature,” New Jersey Education Assn. President Barbara Keshishian in Trenton said in a statement.

Changes under new law

Under the new law, employees pay a percentage that ranges from 3% to 35% of their health insurance premium, with the percentage linked to their salaries. Under the previous system, employees paid a flat 1.5% of their salaries for single or family coverage.

Increases in employees' health insurance premium contributions under the new law will be phased in over four years. An employee earning $65,000 to $70,000 a year and opting for family coverage will pay 19% of the health care premium. Depending on the plan in which the employee enrolls, that annual cost will be roughly $3,600 to $3,800 vs. about $1,000 under the previous system.

On the retirement plan side, most New Jersey public employees had been paying 5.5% in pension plan contributions. The new law immediately increased the required contribution to 6.5% of salary, with the required contribution rising gradually to 7.5% during the next seven years.

Cost-of-living increases suspended

In addition, automatic cost-of-living increases in retirees' pension benefits are suspended until pension plans meet certain funding targets.

“We are fixing our pension and health benefit systems in order to save them and, in the process, bringing fiscal sanity to our state,” Gov. Chris Christie said at the time the legislation was passed in June.