HELENA — About 20,000 retired state and local government employees will keep a 3 percent annual increase in pension benefits in the settlement of a lawsuit with the state of Montana.
The 2013 Legislature had lowered the annual increases in an attempt to restore financial stability to the pension system that took a hit during the national economic recession in 2008 and 2009. The Association of Montana Retired Public Employees sued in late 2013 and won an injunction to stay the cuts until the lawsuit was settled.
“It’s a long time coming but it’s something that we said all along; that retirement benefit is a contract and the state needs to abide by that,” association Vice President Mike O’Connor said Monday.
A Helena judge in March agreed with retirees that the law violated a constitutional contracts clause and said the reductions weren’t necessary because other pension system remedies were available.
The law had specifically cut annual inflationary increases — known as the Guaranteed Annual Benefit Adjustment — in the Public Employees Retirement System from 3 percent to about 1 percent.
Lawmakers employed other fixes that helped shore up the pension system from adding ongoing coal tax revenue to requiring employers and employees to increase fund contributions.
The retirees’ court case was dismissed last week after both sides agreed to drop their appeals to the Montana Supreme Court.
John Barnes, spokesman for Attorney General Tim Fox, said his office consulted with lawmakers before negotiating the terms and said the settlement is in the best interest of 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,” he said.
The state teachers’ union filed a similar lawsuit over cuts to their annual increases and in July, a Helena judge ruled for the teachers, saying it also violates the contracts clauses in the Montana and U.S. constitutions.
O’Connor said many retirees are now breathing a sigh of relief.
“It was a concern of a lot of retirees because it would have greatly reduced what they expected to get when they retired,” he said. “They would have been in a pickle.”