CONCORD, NH – A superior court justice has ruled in the lawsuit that state unions filed to block pension reform that state workers are contractually protected beginning at the time of employment.
Hillsborough County Superior Court Judge Gillian Abramson ruled May 23 in the case of Professional Fire Fighters of New Hampshire et al. vs. the State of New Hampshire and the state Retirement System that “vesting occurs upon commencement of permanent employee status.” It is a position long held by the N.H. Retirement Security Coalition, but was challenged when the Republican-led Legislature crafted House Bill 2 in 2011, which made changes to the benefits of current employees.
Among other provisions, HB 2 changed the definition of “earnable compensation;” increased the number of years used to determine the “average final compensation” used in calculating pension payments; instituted a new maximum cap on pension benefits; and increased the minimum age requirement to receive a pension for some members. Most of the changes would affect members with fewer than 10 years in the N.H. Retirement System.
“Workers with five years in the system are just as committed to their work as those with 20 years in the system, and therefore shouldn’t be treated differently by the retirement system. The decision is right to rule in favor of promoting worker retention and recruitment,” said Steve Arnold, a retired Portsmouth police officer and the current state director for the New England Police Benevolent Association.
Member unions of the coalition filed suit in court asking a judge to rule that the changes to the state budget that would affect retirement benefits are unconstitutional. They argued that certain sections of the budget bill violate the Contract and Takings Clauses of both the state and U.S. constitutions when it comes to N.H. Retirement System members who reached permanent employment status or retired as of Jan. 1, 2012.
“The decision upholds a core value of the Retirement Security Coalition that workers should be able to count on retirement security after years of public service — a service that begins on Day One,” said Scott McGilvray, president of the National Education Association — New Hampshire.
However, Judge Abramson also wrote in her ruling that there are “genuine issues of material fact as to whether HB 2 substantially impaired” the contractual rights of public employees, and whether HB 2 represents an “unlawful taking without just compensation.”
According to a statement from the retirement coalition, the court has requested, and the coalition will provide, additional information supporting their argument of the damages the legislative changes make to workers who are “prepared to give a lifetime of service to the state.”
Proponents of pension reform have argued that reform is necessary to address an unfunded liability that climbed to around $4.5 billion in 2012, representing the difference between retirement promises made to public workers and the money to pay them. The NHRS is funded by members, taxpayers and returns on investments.