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This just in… Another pension lawsuit filed

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* 4:46 pm - The State Universities Annuitants Association has filed its lawsuit against the pension reform law. Click here to read it.

RNUG’s evening plans will probably have to be changed. But help him out in comments with your own take.

The lawsuit was filed in Champaign County, by the way. The other pension lawsuits have been consolidated in Sangamon County.

posted by Rich Miller
Thursday, Mar 6, 14 @ 4:46 pm

Comments

- RNUG -, I will send Cannoli and Coffee.

OW

Comment by Oswego Willy Thursday, Mar 6, 14 @ 4:47 pm
RNUG is going to dinner as planned in a little while with Mrs. RNUG and another couple. He may read the suit sometime late tonight.

Comment by RNUG Thursday, Mar 6, 14 @ 4:50 pm
OW,

Thanks for the thoughts but according to my doctor, caffeine is on the “banned” list although I do cheat a bit occasionally. Now the Cannoli …

Comment by RNUG Thursday, Mar 6, 14 @ 4:53 pm
I’ll send decaf(?)

Thanks for taking time, no snark.

Comment by Oswego Willy Thursday, Mar 6, 14 @ 4:58 pm
SUAA is a real ‘Johnny come lately’ and has alwasy been very cautios about taking on the big boys.

I guess they felt they had to so something to look relevant.

Comment by Federalist Thursday, Mar 6, 14 @ 4:59 pm
Will this lawsuit be consolidated with the other 4, or will it stand alone?

Comment by For Whatever It's Worth Thursday, Mar 6, 14 @ 4:59 pm
They went to some effort to select a group of plaintiffs who all reside in Champaign County. Since SURS is also HQd there and “cuts its own checks” they are trying to argue that the diminishments take place there hence jurisdiction is proper.

Interesting argument.

Comment by Arthur Andersen Thursday, Mar 6, 14 @ 5:14 pm
Scanning it now until our friends get here, so this will be just a partial take …

Hits the obvious three claims in the IL Constitution: Pension Clause, Contracts Clause, Takings Clause

Implies the cash balance plan claim also

Requested a stay until issue is resolved

One of items I noticed enumerated in the individual examples cited is the fact the employees / retirees had to make an irrevocable choice of a plan when hired.

At least one of the plaintiffs is a survivor of a SURS annuitant; I don’t think I’ve seen a survivor explicitly named before in any of the other suits.

Asked to be heard in Champaign County, but I would expect this to be consolidated with the other cases in Sangamon County.

Will read it again more closely later on.

And for the record, I don’t know any of the plaintiffs …

Comment by RNUG Thursday, Mar 6, 14 @ 5:22 pm
Looks boilerplate to the others. Waiting for the expert’s opinion, hope you enjoy your meal. Keep thinking about the ultimate conclusion, and a poster on this blog (sorry dont remember who) who said it may end w/o going to the Supremes. I tend to agree with that, especially with the venue being Sangamon County which prob favors Defendants. Supremes refusing to take the case would be a slap at the legislative and executive misbehavior, and encourage a negotiated settlement such as the union had accepted. Terms will not be as generous this time.

Comment by Pensioner Thursday, Mar 6, 14 @ 5:29 pm
Pensioner, what do you mean by your statement, the terms will not be as generous this time? Curious on your reasoning?

Comment by equivocator Thursday, Mar 6, 14 @ 5:56 pm
Pensioner-

If the Sangamon court slaps the pension law down in its entirety and the SC refuses to hear the case, what’s left to negotiate? The only “negotiation” I see is if all the plaintiffs and the state got together and settled out of court before the case went to trial, and with the number of plaintiffs and the nuances of all their positions, it would be a very challenging proposition.

Comment by Six Degrees of Separation Thursday, Mar 6, 14 @ 6:15 pm
==Pensioner, what do you mean by your statement, the terms will not be as generous this time? Curious on your reasoning?==

The GA would have no choice with their law struck down, would be more apt to see AFSCME’s positions.

==If the Sangamon court slaps the pension law down in its entirety and the SC refuses to hear the case, what’s left to negotiate?==

Nothing if the state wants the status quo. Union can “give” on contributions for example with guarantee state makes required payments with a “ramp” to catch up. Power would shift to unions.

Comment by Pensioner Thursday, Mar 6, 14 @ 6:28 pm
I’m sure RNUG will mention this later, but something else I noticed in the pre-dinner scan of the first 20 pages was a mention of “Consideration and Acceptance” on the part of each of the Plaintiffs.

Comment by Arthur Andersen Thursday, Mar 6, 14 @ 6:29 pm
SUAA issued a press release on Feb 26th on their plans to file a lawsuit. The press release talks briefly about some of the situations that make their lawsuit a bit different.

http://www.suaa.org/assets/pdf/2014/SUAAPressRelease.pdf

Comment by Joe M Thursday, Mar 6, 14 @ 6:56 pm
Pages 33-37 of lawsuit are not readable. This lawsuit the contact begins when vested, while the Arizona ruling indicated the contract began when hired. How do the other lawsuits interpret when the contract starts?

Comment by lakecounty Thursday, Mar 6, 14 @ 6:57 pm
They appear to misunderstand the portable plan. The portable plan is a db plan just like the traditional, except without the survivor benefit, and with the additional option to take the lump sum. It is worrisome that they miss this basic fact.

Comment by CommentGenerator Thursday, Mar 6, 14 @ 7:10 pm
What I’m really looking forward to is the State’s response. Given the pension clause (and the contract clause, and the takings clause) it looks as if the plaintiffs have a pretty obvious and easy argument to make.

But what argument or arguments will the defendants make? So-called ‘police powers’? Or that the pension clause does not mean what we ignorant non-lawyers think it means? Or…?

Anyone got any thoughts?

Comment by UIC Guy Thursday, Mar 6, 14 @ 7:23 pm
State’s Response might be a “Motion to Strike or Dismiss” the Complaint ?

Interesting Presentation and Format but appears to have:

A lot of compound allegations

A lot of surplusage

A lot of evidentiary facts as opposed to ultimate facts

As such , it might get a challenge arguing that it needs to be restated in order for the State to properly Answer.

( Whatever happens , it is a very good PR document for the Plaintiff’s Cause )

Comment by x ace Thursday, Mar 6, 14 @ 8:12 pm
The State response has pretty much already been stated. They will first argue that they are operating within contract law. They have given the members consideration - the 1% reduction for active members and a more secure payment into the pension system for the retired and inactive members.

They will also argue the police power - that the action is reasonable and necessary for the welfare of the State.

The latter argument will be the focus of the case. The plaintiffs have the burden of proof, I think, that the GA’s actions are not reasonable and necessary.

Comment by archimedes Thursday, Mar 6, 14 @ 8:15 pm
I’ve been having trouble reading the brief on my iPhone. But I did take a look at the first several pages and the press release. To me it looks like were talking about a distinction without a difference. While there are differences in the retirement plan, the reasons used for voiding the law transcends all system. Of the 5 suits, the RSEA and ISEAR suits throw in a couple of twists. One is the challenge the law on the basis of equal protection in that the similarly situated JRS was not included in the law. Second, they highlight the additional contract promise to folks that took the “early retirement deal.”

Comment by Norseman Thursday, Mar 6, 14 @ 8:25 pm
Is there a reason they use COLA rather than AAI in the filing?

Comment by east central Thursday, Mar 6, 14 @ 8:45 pm
=== Is there a reason they use COLA rather than AAI in the filing ===

Lack of attention to details.

Comment by Norseman Thursday, Mar 6, 14 @ 8:47 pm
Thanks for the input RNUG @ 5:22 pm–eSPECially given stepping away from a Dinner Date with the Mrs! Now that ALONE truly puts/re-asserts you in the “Big Kahuna” Category of Pension Analysts in this State!

The most INteresting I’d like to learn, once RNUG and others continue to pick this new suit apart like the last shreds of fowl on a chicken bone, is, what DOES specifically distinguish it from the other suits and/or how does it emBELLish on the other 4, if at all…?

Comment by Just The Way It Is One Thursday, Mar 6, 14 @ 8:50 pm
That was meant to read above, “…most INteresting thing I’d” hope to learn…(?)

Comment by Just The Way It Is One Thursday, Mar 6, 14 @ 8:52 pm
The 1% as consideration argument seems flawed, as acceptance must be voluntary. And, in the case of the portable plan, where the state matches the employees’ contributions for the sake of computing the lump sum, reducing the employee contribution by 1% actually forces them to lose the match on that 1%, and thereby harms them. It is hard to argue in the case of the portable plan that the contribution reduction benefits the employee.

Comment by CommentPoster Thursday, Mar 6, 14 @ 9:04 pm
I also noted in the first pass that this suit discusses optional service, or “bought time,” as it’s sometimes called in the impairments. I guess the argument is that the value of the time purchased is diminished becaused the retirement age is delayed.

Comment by Arthur Andersen Thursday, Mar 6, 14 @ 9:22 pm
SURS is different in several respects, but perhaps the most significant are the irrevocable decisions that participants make given 3 plans (traditional, portable, and self-managed) and under the new legislation the unequal treatment of members of the plans.

Multiple plans exist to assist Illinois public universities to remain competitive with other universities, as I understand it.

Persons in the self-managed plan have received their full match from the State–the State made its contribution to the pensions for those persons.

Persons in the other plans were assured that they would receive the benefits of the State’s contribution according to the defined benefits programs as specified when they made their irrevocable decision to elect either the traditional or the portable plan.

As we know, the State failed to make its contribution to the traditional and portable plans. However, members of the portable plan who left Illinois public universities for other institutions were able to take with them their contributions, the State’s contribution (as if the State had made their full “match”), and the compounded earnings on both. With the new legislation, members of the portable plan who leave for other institutions would receive a reduced amount relative to those who left previously. Thus, there is unequal treatment even within a particular plan.

Comment by east central Thursday, Mar 6, 14 @ 9:27 pm
AA, yes, you highlight an important point. The purchase of service credit involves irrevocable commitments of payments on the part of the participant in exchange for specific pension benefits.

This illustrates the State’s weak position. The State is in the position of voiding its contractual obligations to various individuals–not to all entities with which the State has contractual obligations as would presumably be the case in bankruptcy for example.

Comment by east central Thursday, Mar 6, 14 @ 9:56 pm
- Pensioner - Thursday, Mar 6, 14 @ 5:29 pm:

I was the one who suggested it might be whimper by letting a trial court ruling stand.

Comment by RNUG Thursday, Mar 6, 14 @ 10:00 pm
lakecounty - Thursday, Mar 6, 14 @ 6:57 pm:

Previous IL case rulings have said rules when when hired.

Comment by RNUG Thursday, Mar 6, 14 @ 10:05 pm
I’m curious why “Maureen McCord” is a plaintiff in this lawsuit. It says her COLA will be effected, but the SERS website says “the ACT does NOT change the COLAs of widow, survivor and disability annuities.” Did I miss something?

Comment by Andy Thursday, Mar 6, 14 @ 10:06 pm
What consideration have retirees been given? Also, I thought there had to be a choice when consideration is offered, not just mandated.

Comment by For Whatever It's Worth Thursday, Mar 6, 14 @ 10:06 pm
I’m going to take another read through in a few minutes but it looks like all of you are doing fine without me.

The biggest difference I picked up so far was the irrevocable decision language. The choice among the plans is probably what makes this suit somewhat unique even though it makes basically the same unconstitutionality claims made in the other suits.

If my memory is working OK, I think those kind of decisions are irrevocable specifically because of IRS pension rules, which indirectly inserts a federal issue into this …

Comment by RNUG Thursday, Mar 6, 14 @ 10:14 pm
So if this turns out to be a police powers issue, who has the burden of proof?

Comment by Jack Handy Thursday, Mar 6, 14 @ 10:24 pm
The choice provision violates both the Kraus and Felt rulings. In Felt the SC held a legislative change in calculating the salary base violated the constitution and was an unreasonable exercise of the state’s police power.

Comment by Liberty First Thursday, Mar 6, 14 @ 11:05 pm
Continuing my thoughts from 5:22 PM …

One other thing the individual examples cite is the additional monies / service time purchased by various peoples. That is pretty much the same argument used for the people who purchased additional time under the 2002 ERI offering.

Aside from the opening statements telling us so, the consistent use of the “offer / acceptance / consideration” language makes it clear the thrust of the argument here is contract law.

It looks like the lawyers tried to get one example of every combination they could think of under the SURS rules.

The one footnote about the deceased spouse only being allowed to pick between 2 of the 3 plans may by why the survivor was included in the suit. I’m still trying to figure out exactly why that would make a significant difference in terms of this suit other than it provided more limited consideration than in the other cases. Could just be a case of trying to cover every base.

Along with just being sloppy (as -Norseman- noted), the use of the term COLA is both inaccurate and confusing in that the term COLA does not exist anywhere in the Pension Code. Suits can get tossed on technicalities like this; remember Nardulli ruled against the Kenerva/Maag suit because “health insurance” was not listed anywhere in the Pension Code. Since it would only take a minute to fix, if it was my case, I would amend the suit, replacing all COLA references with AAI.

Bottom line, after reading it a second time and mulling it a bit, other than being SURS specific, this suit doesn’t bring much new to the table. In fact, it actually muddles things up a bit through it’s incorrectly calling the AAI a COLA.

Comment by RNUG Thursday, Mar 6, 14 @ 11:08 pm
@Andy10:06=but the SERS website says….Did I miss something?=
Possibly. SURS, not SERS.

Comment by DuPage Thursday, Mar 6, 14 @ 11:11 pm
The choice option also goes against the Miller ruling which is summarized: “The appellate court likened Miller to Kraus vs. Board of Trustees of the Police Pension Fund and Felt vs. Board of Trustees of the Judges’ Retirement System in that the plaintiffs stood to gain a higher benefit under the law that existed when they entered the system than under a subsequent legislative enactment.

Comment by Liberty First Thursday, Mar 6, 14 @ 11:16 pm
- Jack Handy - Thursday, Mar 6, 14 @ 10:24 pm:

Generally speaking, it is the plaintiff(s) who bear the burden of proof; in this case proving (if it is the State’s argument) that there is no fiscal emergency hence no need to invoke police powers (IMO pretty easy given the new spending being proposed w/o clearing up the state’s backlog of bills or using the savings to shore up the pension systems) and/or, if a fiscal emergency really does exist, showing that other more equitable alternatives exist such as cutting bondholders at the same rate, cutting other existing contracts at an across the board rate, or raising revenue using one or more of the various proposed methods.

Comment by RNUG Thursday, Mar 6, 14 @ 11:20 pm
In addition to AAI, their description of the portable plan seems incorrect. It really seems like sloppy work.

Comment by CommentPoster Thursday, Mar 6, 14 @ 11:21 pm
The Money Purchase Formula under SURS is dramatically reduced under PA 98-599.

Comment by Liberty First Thursday, Mar 6, 14 @ 11:24 pm
Another interesting point not included in any of the suits is the SURS retirement choice options included in insurance in 2 of the choices but not the third.

Comment by Liberty First Thursday, Mar 6, 14 @ 11:30 pm
- CommentPoster - Thursday, Mar 6, 14 @ 11:21 pm:

I’m not real comfortable with my understanding of the portable plan even though I’ve had friends under SURS explain it to me, so I defer to your opinion on it.

Comment by RNUG Thursday, Mar 6, 14 @ 11:32 pm
Went and read the press release after doing my own take on things. Not really to their claim of uniqueness.

The irrevocable choice under SURS is on the front end, but under the other systems there is a back end irrevocable choice known as the “Level Payment Option” and that alternative is also diminished by PA98-0599.

And, as previously noted, while the ability to buy (front end) additional service time and lower the retirement age is not part of the standard offering under the other systems, it was a (back end) option at least once, under the 2002 ERI, and produced pretty much the same end result.

So while the “unique” situations are more common under SURS, IMO they are not quite as totally unique as claimed.

Comment by RNUG Thursday, Mar 6, 14 @ 11:51 pm
- Just The Way It Is One - Thursday, Mar 6, 14 @ 8:50 pm:

Just for the record, I took Mrs. RNUG to dinner as planned, then came home and read things again after watching the 10 PM news.

Comment by RNUG Friday, Mar 7, 14 @ 12:01 am
One of these days they’re going to kick Rich off the internet for having helpful and civil postings in his comments section. Thanks RNUG.

Comment by Quizzical Friday, Mar 7, 14 @ 12:14 am
I beleive the argument that the courts have ruled the state can not be forced to make their payments is such a powerful one. Made clear to the state that the courts will not intrude on the other two branches when it comes to funding, but you owe the benifits. This speaks to the key issue which is underfunding. The contract was upheld by the employees, ie. did the work and made the payments, but the state now broke their end by diminishing the pension benifits largely because they chose not to fund the plan. The courts have made it clear that underfunding is not an emergency!

Comment by facts are stubborn things Friday, Mar 7, 14 @ 7:08 am
I suspect the courts will apply a shifting burden of proof such as that used in discrimination cases. The plaintiffs would have the initial burden of demonstrating a diminishment or impairment. The burden would then shift to the State to prove that the diminishment or impairment was justified by necessity/police powers. The plaintiff would then have the burden of rebutting the State’s claim of police powers by showing that it had less drastic means available.

Comment by anon Friday, Mar 7, 14 @ 11:05 am
anon - Friday, Mar 7, 14 @ 11:05 am:

That’s a better explanation of the process that the way I put it. I jumped right over those steps, assuming the diminishment was a given and the police powers argument response was also a given based on the language used to pass the bill.

Comment by RNUG Friday, Mar 7, 14 @ 11:18 am
A great conversation, but it assumes that legal issues will govern the outcome. When the Madigan bill was being considered, he said he was certain a majority of the Supremes would find it constitutional. Would he have said this openly if he hadn’t already counted the votes? I suspect that his contributions to judicial campaign fuhds will play a bigger role. After all, this is IL.

Comment by Crabby Old Guy Friday, Mar 7, 14 @ 1:38 pm
The Felt opinion doesn’t expressly say it is using a shifting burden but the analyis suggests it. 107 Ill.2d 158 (1985). BTW, flopping up actuarial reports about pension underfunding didn’t meet the State’s burden in Felt. Hard to imagine what else the State could present here.

Comment by anon Friday, Mar 7, 14 @ 1:55 pm