Retirement Litigation Overview
Many questions have come in to NHMA staff seeking information about the effect of the variety of law suits against the State and the New Hampshire Retirement System (NHRS). We have prepared this short overview of the litigation and will update it periodically to keep members informed.
Our advice at this time relative to levels of withholding and contribution payments is to follow the directives of the NHRS. Should any adjustments be required as a result of litigation, the NHRS will make those recalculations and issue notice to employers.
During the 2011 Legislative Session, the State budget deliberations drew the attention of municipal officials concerned with retirement reform and, in particular, employer contributions for teachers, police and firefighters. Many municipalities adopted their budgets under the assumption that the legislature would continue funding at least 25 percent of employer contributions, the figure for fiscal year 2011. Instead, the budget that passed without the Governor’s signature eliminated State funding almost entirely, and NHRS announced dramatically increased rates for monthly employer contributions that reflected the loss of State support. Learn more at the NHRS website.
At the same time, however, the legislature had taken other steps in the budget trailer bill, HB2, enacted as Chapter 224, that could keep employer contribution rates at approximately the same levels as would prevail with 25 percent State funding. Member contributions were increased, and Section 188 directs the NHRS board of trustees to recalculate and recertify the previously determined employer contribution rates “to reflect the requirements of amendments to RSA 100-A in the 2011 legislative session,” using the demographic and economic assumptions as disclosed in the June 30, 2010 valuation by the NHRS actuary. The Board recertified the rates effective August 1, 2011 through June 30, 2013.
Within days of passage of HB 2, two lawsuits were filed against the State, challenging the constitutionality of these measures.
NHRS Suit. One suit was filed by NHRS itself, alleging that Chapter 224 usurps the board’s authority and requires “unsound actuarial practice” in violation of New Hampshire Constitution, Part 1, Article 36-a. The plaintiff sought a preliminary injunction to prevent implementation of the measures in Chapter 224. In a hearing in Merrimack County Superior Court on July 14, 2011, Judge McNamara declined to grant a preliminary injunction. Subsequently, in a non-public session on September 13, 2011, the NHRS Board of Trustees voted not to pursue this lawsuit.
‘Retirement Security Coalition’ Suit. The second suit, brought by a coalition of four public employee unions representing firefighters, police, teachers and State employees, makes the same claim under Part 1, Article 36-a as the NHRS suit. The unions’ suit also claims that the legislation increasing employee contribution rates violates the employees’ alleged constitutionally protected contractual vested right to enjoy all the retirement benefits in place at the time they commenced their employment. This suit also requested a preliminary injunction to prevent increasing the employee contributions, but again Judge McNamara denied the request in a hearing on the same day—July 14, 2011.
A superior court hearing is scheduled for November 17, 2011.
The unions’ suit to strike down increases to member contribution rates is actually the fourth suit in recent years in which active and retired public employees have attacked retirement reforms as a violation of their constitutionally protected vested rights allegedly set forth as a contract in the terms of a retirement statute. The unions claim that earlier rulings of the New Hampshire Supreme Court have already held that RSA 100-A and other retirement statutes confer vested rights on a public employee to enjoy the benefits in place on the first day of permanent employment. The contrary view is that the Court has not in fact ruled on the issue yet, and such claims should be analyzed consistent with a line of federal cases that recognize a strong presumption against establishing contractual vested rights by statute, known as the “unmistakability doctrine.”
SEA v. State. In the first case, the Supreme Court held that the automatic deduction of health care premiums from pension payments did not substantially impair the retirees’ vested rights to a full pension. The ultimate issue was not reached. State Employees’ Assoc. of N.H. v. State of New Hampshire, No. 2010-271, April 14, 2011.
Cloutier. Oral arguments were head in the Supreme Court on August 26, 2011. In this case, retired judges claim that statutory changes to their anticipated pension benefits made in 2003, after they became full-time judges, violate their contractual and constitutionally protected vested rights. Cloutier et al. v. State of New Hampshire et al., No. 2010-0714. This case deals with the Judicial Retirement System, not NHRS, so it remains to be seen if the ruling will affect amendments to RSA 100-A. Under the “unmistakability doctrine,” each statute should be scrutinized to determine whether it expresses a contract, notwithstanding the presumption that it does not. LGC filed amicus curiae briefs in both the SEA and Cloutier cases.
AFT. The third case, American Federation of Teachers-New Hampshire et al v. State of New Hampshire et al., originally filed in August 2009, remains pending in Merrimack County Superior Court, No. 09-E-0290. In this case, the plaintiffs attack reforms enacted in 2009 that amend the definition of “earnable compensation” and eliminate cost-of-living adjustments. These claims go to the heart of the legislature’s ability to reform RSA 100-A.
28-A Unfunded Mandate. A Supreme Court appeal has been taken in the lawsuit challenging the 2009 legislation that mandated increases in the public employer contributions to the NHRS. The suit, filed on behalf of more than 300 municipalities, school districts and counties, with the City of Concord, Mascenic Regional School District and Belknap County as named plaintiffs, asserts that by reducing the State’s contribution from 35 percent to 25 percent—and thus increasing the local government contribution from 65 percent to 75 percent—the State violated Part 1, Article 28-a, of the New Hampshire Constitution, which prohibits unfunded state mandates. A superior court judge ruled in favor of the State, and the plaintiffs appealed to the New Hampshire Supreme Court. Both sides have filed briefs, and oral argument is likely to be scheduled in the winter or early spring 2012.
As developments occur, we will update this posting, so check back periodically. Please do not hesitate to contact the Legal Services and Government Affairs Department by email or at 800.852.3358, ext. 3408 if you have additional questions.