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Retirees sue over Colorado state pension changes

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DENVER—A group of retirees is suing to stop recently passed legislation designed to shore up the Colorado Public Employees’ Retirement Assn.

The lawsuit, Gary R. Justus and Kathleen Hopkins vs. the State of Colorado, et al., was filed in state court Friday on behalf of approximately 100,000 PERA members who became eligible to retire or who have retired since March 1, 1994, when annual pension increases first were guaranteed under state law.

Defendants are the state of Colorado, PERA, Colorado Gov. Bill Ritter, PERA board Chairman Mark J. Anderson and PERA board Vice Chairwoman Sara J. Valt.

The suit seeks class action status and charges that the new law, which was signed by Gov. Ritter on Tuesday, is unconstitutional because it impairs the retirees’ contractual rights to receive pension benefits at the levels promised to them either when they became eligible to retire or when they actually retired.

“Both the United States and Colorado constitutions bar reductions in pension benefits once the rights to those pensions vest. And that is exactly what the legislation did here,” said Stephen Pincus, one of the attorneys representing the retirees, in a release. Mr. Pincus is a partner at Pittsburgh-based Stember Feinstein Doyle & Payne L.L.C., a firm that specializes in pension rights on behalf of retirees.

Previous state law had guaranteed PERA members annual pension benefit increases, either through a cost-of-living adjustment or a guaranteed 3.5% yearly raise in benefits paid to retirees. But because of PERA’s underfunded status, the state Legislature passed Senate Bill 10-001, which eliminated the 3.5% annual increase for 2010 and reduced it to 2% beginning in 2011. The suit asks the court to rule that the recent changes are unconstitutional and to order the defendants not to implement them.

However, the lawsuit does not challenge other provisions in the PERA reform legislation, including increased contributions by PERA members and their employers and later retirement ages.

PERA’s assets fell from $41.4 billion in December 2007 to $29.5 billion in July 2009 due to the nation’s economic downturn, according to a July 2009 report to the Legislative Audit Committee. As a result, PERA faces $27.5 billion in unfunded liabilities, the report stated.