Court Rules Against Reduction in State Pension Payments

A Montana court has put a halt to a change in inflation adjustments made to state retirees’ pension payments in a 2013 reform bill.

The Montana First Judicial District Court in Helena, found that the change in guaranteed inflation increases of 1.5% to just 0.5% starting in January 2014, violated the contract clause in the state’s constitution. The court also noted in its opinion that the Montana constitution requires public retirement systems to be funded on an “actuarially sound” basis, and the other provisions of the 2013 pension reform put the Teachers’ Retirement System on an actuarially sound basis, so the change to inflation increases was not necessary.

In addition to the reduction in inflation increases, the pension reform required additional contributions to the pension plan from both employers and employees. Retirees warned state lawmakers they would oppose reductions in their guaranteed inflation increases, and after the bill was passed they filed suit. The lawsuit recently decided was filed by the teachers’ union in Montana and several retirees.

The court granted the defendants’ motion to dismiss, and ordered a permanent injunction of the reduction in inflation increases.