State and local governments currently owe public workers between $1 trillion and $4 trillion in retirement benefits they have already earned. The unfunded liabilities are creating unprecedented financial pressures, and some municipalities have even gone bankrupt due in part to the cost of pensions and other retiree benefits. In an effort to address these fiscal challenges, many cities and states have approved measures to reform their pension systems; however, the reforms are frequently challenged in the courts. The Laura and John Arnold Foundation created this site to track the latest information on pension reform lawsuits filed across the U.S.
Since 2008, more than 40 state and local jurisdictions have faced lawsuits alleging that pension reform is unconstitutional. Courts have expressed a wide range of views on constitutional issues, at times arriving at diametrically opposite conclusions. For example, reductions of cost-of-living adjustments (COLA) have been upheld despite constitutional challenges in New Mexico, Colorado, Minnesota, New Jersey, Washington, New Hampshire, Rhode Island, and South Dakota state courts. In addition, the U.S. Courts of Appeal for the First, Fourth, Fifth, and Sixth Circuits have upheld legislation that modifies or eliminates COLAs in Massachusetts, South Carolina, Texas, Tennessee, and Kentucky. However, similar reductions have been struck down in Arizona, Montana, Illinois, and, for accrued benefits, Oregon.
Other significant reforms aimed at reducing the cost of pension benefits—such as mandatory increased employee contributions and eliminating state income tax exemptions for pension benefits —were struck down in Michigan. Yet, the courts of that state upheld subsequently passed statutes requiring increased contributions from which employees could opt out, as well as statutes eliminating tax exemptions for pension benefits. Other courts—including Supreme Courts in New Hampshire, Georgia, and Alabama, and the Sixth and Eleventh Circuit of the U.S. Courts of Appeal—have upheld legislation requiring increased contributions from employees. In Texas, a court of appeals upheld legislation eliminating the practice of deferring retirement while pension benefits continued to accrue at high interest rates.
In 2016 and 2017, appellate courts in both California and Illinois upheld legislation aimed at eliminating pension spiking, while an Arizona court struck similar legislation as unconstitutional. The Fifth Circuit of the U.S. Courts of Appeal upheld legislation in Texas that modified pension benefit calculations, thereby reducing future benefits for employees. In Oklahoma, the state Supreme Court upheld legislation that converts fixed benefit plans to defined contribution plans.
As we head into 2018, several cases challenging pension reform efforts are pending in California, three in the Supreme Court and others in the first and sixth appellate districts.
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The economic and social costs of governments failing to pay for their pension promises are not only harmful to future generations of workers and taxpayers, but are potentially crippling to the nation. Laura and John Arnold Foundation works to remedy this untenable situation by promoting transparency and concrete structural solutions that address pension debt in a manner that is comprehensive, sustainable, and fair to all parties. We do not seek to cut workers’ pensions and believe that all workers deserve to be part of a system that is fiscally sound, responsibly managed, and that ensures retirement benefits will be paid when due.
Disclaimer: We attempt to provide comprehensive and current information on this site. Nonetheless, this site may not be exhaustive. If you know of any information that ought to be listed on this site (including new pension reform lawsuits, new court decisions, or the parties’ briefs, etc.), please email us at firstname.lastname@example.org.