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Unions file lawsuit over pension plan

Last modified: 6/30/2011 12:00:00 AM
Firing off the first of what will likely be a series of legal challenges to the Legislature's pension reform plan, a coalition of the state's biggest unions filed a lawsuit yesterday contesting the constitutionality of an increase in employee contributions to the state's retirement system.

"Today we move the debate over so-called pension reform from the New Hampshire General Court to a New Hampshire court of law," said attorney Glenn Milner, flanked by union presidents representing police officers, firefighters, state employees and the AFL-CIO at a press conference in the Legislative Office Building.

The employee contribution increase, between 2 and 2.5 percentage points for all public workers, was included in a Republican reform plan that officially became law yesterday. The wide-ranging plan seeks to soften the burden on public employers, such as towns and school districts, that will be caused by the elimination of the state's 25 percent contribution to their retirement costs.

The union suit seeks an immediate injunction in Merrimack County Superior Court to stop the employee rate increase, which takes effect Friday. The lawsuit challenges the legality of changing contribution rates for current employees who would pay more into the system without a commensurate benefit in return.

"It is, at bottom, an unconstitutional tax," Milner said. After the Legislature agreed with the governor's proposal to eliminate the state's contribution to cities and towns, lawmakers are "replacing that with a tax on just . . . public employees."

Sen. Jeb Bradley, a Wolfeboro Republican who led the pension reform effort, said in a statement he is "disappointed, but not surprised by the union's legal action." The reform plan is constitutional and will ensure the system's viability for retirees and existing and future state employees, he said.

"It's wrong to categorize the reforms we made as a tax on state employees," Bradley said. "What they are is an investment by our current 55,000 public employees towards their retirement."

Milner said the lawsuit is "the first step in our legal challenge" to pension reform. Unions could still challenge several other reforms, such as an increase in the number of years used to calculate pension payments, before they take effect at the end of the year, he said.

Those challenges would likely center on the Legislature's position that many of the reforms do not affect vested employees, which lawmakers define as employees who have worked for the state for more than 10 years, thus making them eligible for some retirement benefits.

"The legislators are saying you have to have earned a benefit before we're prevented from taking it away from you," said Marty Karlon, spokesman for the New Hampshire Retirement System. "But the unions are saying the first time you punch a clock and 7 cents on the dollar goes to (the retirement system), you're in."

Milner said employees should be considered vested after one year, when they are taken off probationary status.

"They're taking the position that it's 10 years, they're making all those changes for those people," Milner said. "I say it's one year. So, game on."

Pamela Walsh, Gov. John Lynch's deputy chief of staff, said yesterday that the state attorney general's office will dutifully defend the new retirement law, but added that the legal disagreements are caused by the Legislature's decision to go further with reform than the governor suggested.

"We were all aware that making changes that impact current employees would raise legal issues," Walsh said. "That's why the governor proposed changes that only affected new employees."

Yesterday's filing also challenges the Legislature's requirement that the assumed rate of return on investments remain unchanged over the next biennium, saying the demand usurps the New Hampshire Retirement System board's constitutional authority to set employer rates as determined by investment returns.

The board had initially voted in May to assume an 8.5 percent rate of return on investments over the next biennium before implementing a new 7.75 percent rate on July 1, 2013, as recommended by an actuary. But then the board's union majority voted earlier this month to assume the lower rate for the upcoming biennium, citing a detrimental effect on the system's unfunded liability. In response, the Legislature included a provision in the budget bill that investment return assumptions remain unchanged.

Bradley said changing the investment return assumptions for the next two years would not give fair warning to public employers, whose contribution rates would go up to fill a resulting $50 million hole. Milner said the Legislature's requirement that the board assume a higher investment rate is an "artificial attempt to keep employer rates down."

(Matthew Spolar can be reached at 369-3309 or mspolar@cmonitor.com.)

Correction: This article now gives the correct title for Pamela Walsh, Gov. John Lynch's deputy chief of staff.


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