March 9, 2017
Public Safety Personnel Retirement System
State of Arizona
March 9, 2017
Contact: Christian Palmer
Arizona Supreme Court sends Hall lawsuit to trial court
EORP refund method to be determined, impact on PSPRS lawsuit still unknown
ARIZONA – The Arizona Supreme Court today declined to address a motion for reconsideration of the Hall v. Elected Officials Retirement Plan filed by attorneys for EORP and the state of Arizona. The motion was filed in response to the court’s November ruling that several 2011 pension reforms were unconstitutional.
The decision remands the lawsuit to the trial court level to determine how and when excess employee contributions and retroactive pension increases to impacted members of EORP must be made. The court also must decide whether Hall-stylerefundswill be applied to public safety employees impacted by the Parker v. Public Safety Personnel Retirement System.
Last year, the Arizona Supreme Court determined that 2011 legislative reforms that increased EORP employee contribution rates and created modest conditions to pension benefit increases were unconstitutional. The court’s ruling impacts EORP-covered employees who were already hired but not yet retired by the effective date of the 2011 law.
In response to the ruling, EORP must return excess contributions to impacted members who under the contested law had their retirement contribution rates rise above the existing 7 percent level. Likewise, those who retired after the effective date of the 2011 legislation may be owed retroactive benefit increases calculated under the previous permanent benefit increase (PBI) formula.
The motion for reconsideration filed by EORP and the state sought an expanded explanation of the high court ruling for the purposes of receiving clear guidance on future legislation. The Hall lawsuit does not directly impact members of PSPRS or the Corrections Officers Retirement Plan.
In November, Brian Tobin, chairman of the PSPRS Board of Trustees, said the reforms deemed unconstitutional in the Fields and Hall lawsuits were the results of “good faith efforts to put Arizona public safety retirement plans on a stable and sustainable path forward.”
PSPRS urges members of its plans to avoid making major financial decisions based on expectations of refunds related to the Hall and Parker lawsuits.
It is not immediately clear when impacted members of EORP can expect to receive refunds of excess contributions or retroactive pension increases. In the event the same full refund and retroactive payment remedy is applied to the Parker lawsuit that impacts PSPRS-covered public safety employees, PSPRS estimates combined expenses of roughly $200 million.
However, pension reforms passed in 2016 that impact PSPRS would still offset potential losses from the Parker lawsuit and save an estimated $475 million in long-term costs. Reforms have not been implemented for EORP, which remains the least funded of three retirement plans managed by PSPRS.
The combined assets of the PSPRS, Corrections Officer Retirement Plan (CORP) and the Elected Officials Retirement Plan (EORP) are currently valued at $9.1 billion.
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