Four Chattanooga retirees filed suit to block recently enacted changes to the pension system.

BRADENTON, Fla. — Four retired Chattanooga, Tenn., police and firefighters filed suit against the city and its pension fund in an attempt to block recent pension reform measures.

The complaint, filed in the Chancery Court of Hamilton County Tuesday, challenges the city's planned "elimination" of annual 3% cost of living adjustments, which the retirees claim were vested.

Attorneys for the fire and police pension fund, which participated in efforts to enact the reforms, had said that Tennessee courts never established COLAs as vested benefits.

The Chattanooga City Council adopted an ordinance on March 11 enacting a number of changes to the pension plan that are slated to take effect July 1.

The changes include reduced benefits, tightened retirement eligibility, and increased employees' contributions.

For those who have already retired, the changes require annual COLAs to decrease between 1% and 2%, depending on their benefit allowance, until the plan reaches a funded ratio of 80%.

When 80% is reached, a new formula requires COLAs to be based on the Consumer Price Index up to a cap of 3%.

The lawsuit argues, however, that a 3% annual COLA was guaranteed in 2000 by virtue of a referendum.

In addition, two Tennessee Supreme Court rulings on pensions for public officers and employees are binding on the city and pension fund, the suit said.

In a 1981 decision, the state's high court ruled that vested benefits are "immutable," a determination that was upheld in 1983, said the complaint.

In the 1983 case, the court ruled that a public employer can make changes in a pension plan "except that no such modification can be permitted to adversely affect an employee who has complied with all conditions necessary to be eligible for a retirement allowance," according to the suit.

Mayor Andy Berke created an 18-member Pension Task Force to arrive at a consensus and recommend changes in the pension fund.

Task force members included police and fire representatives as well as the board of the pension fund.

Lacie Stone, spokeswoman for Berke, told the Times Free Press that an overwhelming majority of the city's 1,500 active and retired public safety employees supported the reforms.

"A lawsuit by four individuals does not change that fact," she said.

The retirees who filed the lawsuit said that numerous policemen and firefighters will be adversely affected by the pension plan changes.

They asked the court to consider the suit a class action, and to strike down the ordinance imposing all reform measures.

The funded ratio of the plan was 52% as of January 2013, according to Moody's Investors Service, which said last week that the reforms were a credit positive as they reduce Chattanooga's adjusted net liability by nearly $86 million.

Moody's said plan actuaries projected the reforms would reduce the city's annual required contributions for public safety pensions by at least 35% each year going forward. In 2014, the savings are $6 million, or about 2.5% of general fund revenues.

With the changes, costs are projected to grow 4.6% a year, and are estimated to save $220 million over 25 years, according to actuarial projections.

Prior to the changes, the city projected its contribution to the pension plan would grow by 7% annually.

 

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