Law: On Oct. 9, 2017, the Ohio Schools Educational Retirement System (“SERS”) voted to freeze all cost of living adjustments for all retirees for a period of three years.
Type of reform: Cost of Living Adjustment (COLA) suspension
Case: Ohio Association of Public School Employees et. al v. State Educational Retirement System et. al (Case No. 18CV000891, Franklin County Court of Common Pleas) (filed Jan. 29, 2018).
In their complaint, plaintiffs allege that SERS squandered valuable funds over the course of a decade through mismanagement, risky investments and payments of high fees. Then, in an effort to reduce the financial strain, SERS unlawfully imposed a three-year COLA freeze. Plaintiffs allege that in enacting the three-year freeze, SERS violated its obligation under Ohio statutes and the Ohio Constitution.
First, plaintiffs allege that SERS was required by Ohio R.C. 3309.375 as amended by House Bill 49 (HB 49), 132nd General Assembly, effective Sept. 27, 2017, to annually review the appropriateness of a COLA as related to the consumer price index. Ohio R.C. 3309.375 provides that:
“[T]he retirement board may annually increase each allowance, pension, or benefit payable under this chapter by the percentage increase, if any, in the consumer price index, not to exceed two and a half per cent, as determined by the United States bureau of labor statistics . . . for the twelve-month period ending on the thirtieth day of June of the immediately preceding year.”
Plaintiffs allege that SERS did not have authority to overlook this requirement and cannot impose a three-year freeze.
Plaintiffs also allege that SERS violated the equal protection rights of the retirees by creating separate classes of retirees: “Depending on when a retiree retires, they may have their pension levels frozen for three or more years, some for two years, some for one year, and others may never have a pension freeze.” (Complaint ¶18)
Plaintiffs also allege that the General Assembly conferred authority to SERS in passing HB 49, in the 132nd General Assembly. That legislation, plaintiffs allege, improperly delegated rule making authority to an agency, SERS.
In addition, Plaintiffs allege that the provisions in HB 49 that confer authority to SERS violate “The One-Subject Rule” in the Ohio Constitution (Art. II, Section 15(D)). The One-Subject Rule requires that legislation address a single subject and serve a single purpose: “HB 49, however, which establishes the State’s biennial budget, also contains provisions that are completely unrelated to the budget or to the appropriation of funds.” (Complaint ¶44)
Finally, they allege that the three-year COLA freeze was procured through fraud and misrepresentation.
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