PERS & TRS GABA reduction stopped for now

January 22, 2014 / Comments (0)


Dec. 2013


Good news: The litigation that MEA-MFT helped sponsor has resulted in reduction of GABA (Guaranteed Annual Benefit Adjustment) for PERS & TRS retirees being suspended for now.


Read about the TRS suit here.


More about the PERS suit below:


Injunction blocks planned COLA cut for state retirees



A state district judge late Friday blocked for now a planned cut in the annual cost-of-living increases received by thousands of retired state and local government employees under the Montana Public Employees’ Retirement System.


District Judge James Reynolds of Helena granted a preliminary injunction to the Association of Montana Retired Public Employees and some individual retirees.


The preliminary injunction will stop the pension fund from on Jan. 1 reducing the cost-of-living raises for retirees from 3 percent to 1.5 percent. More than 18,000 retired public employees or their dependents are drawing pensions from PERS.


The 2013 Legislature, as part of a major proposal to shore of the finances of the financially troubled pension fund, reduced what’s known as the Guaranteed Annual Benefit Adjustment or GABA, for PERS retirees. Other changes were made, including increasing the contribution rates paid into the fund by employees and employers and providing an infusion of coal tax revenues into the fund.


Attorneys for the association argued this part of the new law that cut the GABA violated a contract state and local employees had with the government over their pensions.


Reynolds said the preliminary injunction shall remain in place until further order by the court.


“To be clear, the court is not concluding that the state cannot reduce the GABA,” Reynolds said. “The state did just this with its 2007 amendment reducing the GABA to 1.5 percent for newly hired employees. The state did in that enactment what it has not done in this enactment — made the reduction applicable only to newly hired employees, without changing the GABA for existing retirees. [NOTE: MEA-MFT has never argued that the state could not adjust retirement benefits for new hires. But once hired and eventually vested, we firmly believe the state cannot reduce benefits guaranteed at date of hire.]


“Under that law, a newly hired employee knew as of ‘the first day of a member’s covered employment’ what the terms of his employment and retirement contracts with the state were. There were no impairment changes to previously entered contracts.”


A similar lawsuit was filed by the MEA-MFT and current and retired educators over a GABA cut under a separate law seeking to fix the state Teachers’ Retirement System. They also are seeking a preliminary injunction.


That case is pending before District Judge Mike Menahan, also of Helena.


Watch for more information on this important case.


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