Settlement guarantees stable cost-of-living increases for public employee retirees

July 28--A 2013 legislative attempt to cut the annual benefits increase for retired state and local employees died after a recent settlement between the retiree association and the state of Montana.

The potential cut has been in limbo for nearly two years, and was bound for a decision in front of the Montana Supreme Court. Chief Justice Mike McGrath dismissed the case last Thursday after both parties agreed to drop their appeals.

The settlement maintains the 3 percent Guaranteed Annual Benefit Adjustment for employees hired prior to July 1, 2013. It also requires both parties to pay their own attorney fees.

The 2013 Legislature passed a law to reduce GABA from 3 percent to 1 percent. The Montana Public Employees' Retirement System had been ailing since the financial recession, and the 2013 bill was one of several steps aimed at making it fiscally sound.

Later that year the Association of Montana Retired Public Employees and four retirees filed a lawsuit against the cut. A district judge permanently blocked the cut this March, but the Montana Attorney General's Office appealed the case to the Supreme Court shortly after.

Cathy Kendall, president of the retiree association, touted the settlement as a victory that provides stability for 20,000 Montana retirees.

"Because the GABA is the only method that retirees have to adjust their lifestyle to the cost of living, and to the increased cost for health insurance and medical care, it's critical to retirees to know that they have some constancy," she said.

She added that the settlement solidifies the contract between the state and its employees. It shows "the state is actually going to honor its commitment to them," she said.

A spokesperson for the Montana Attorney General's Office said the settlement was made with the support of legislative leaders and is in the best interest of all Montanans.

"It preserves flexibility for the Legislature and governor to craft other lawful pension reforms in the future, and Montana taxpayers will not be paying the Association of Montana Retired Public Employees' attorney fees," spokesman John Barnes wrote in an email.

If the retiree association had lost the case and the GABA had been reduced to 1 percent, Kendall said an employee receiving median retirement benefits would have lost about $135,000 over the next 20 years.

Though PERS was considered fiscally unsound in 2013, it has since stabilized.

Dore Schwinden, executive director of the state's public employee retirement administration, said a projection assuming the 3 percent GABA will continue showed that the settlement should not affect the retirement system.

"The PER system is going to be fine," he said.

A similar proposal to lower GABA for retired public school teachers was also blocked in district court this June. Barnes declined to comment if the state would appeal that case to the Supreme Court.

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