City Of Chattanooga Pension Reform Ruled Constitutional

CHATTANOOGA, TN – The United States Court of Appeals for the Sixth Circuit recently affirmed a previous ruling, dismissing a lawsuit filed against the city of Chattanooga by a group of retired firefighters and police officers, who challenged a key aspect of the city’s reforms to its fire and police pension plan.

The lawsuit focused on a tiered, lower cost-of-living adjustment applied annually to retirement benefits, according to archives.

In 2015, the Chattanooga City Council passed, and Mayor Andy Berke approved, multiple amendments to the city code provisions governing the Chattanooga Fire and Police Pension Fund in an effort to save money.

Since the 2008 financial crisis, the fund had incurred a nearly $150 million unfunded liability that threatened its long-term ability to pay benefits to retirees, according to a news release.

The enacted reforms were projected to save the city $227 million over 26 years. The central amendment was a reduction to the cost-of-living adjustment paid to retirees, which was changed from a fixed 3 percent annual increase to a variable rate averaging 1.5 percent.

A group of retired firefighters and police officers sued the city in Hamilton County Chancery Court, alleging that the cost-of-living amendment violated three provisions of the United States Constitution. The case was removed to federal court in Chattanooga.

The plaintiffs said that many police officers and firefighters made retirement decisions based on the promise of the 3 percent adjustment and that an unfavorable court ruling could have major negative impacts on the overall savings that the new pension plan offers, according to archives.

Senior United States District Judge Curtis L. Collier granted summary judgment against the plaintiffs in November 2015, and the plaintiffs appealed to the Sixth Circuit in Cincinnati.

In affirming Collier’s ruling that the cost-of-living amendment is constitutional, the panel of three appellate judges unanimously ruled, “The retirees do not have a contractual right to a fixed 3 percent [cost-of-living adjustment] because the city code does not bind the fund to the fixed cost-of-living adjustment.”

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