Two retired Arizona judges filed a proposed class action lawsuit yesterday in the Superior Court of Maricopa County against their retirement plan (The Elected Official Retirement Plan of the State of Arizona, or "EORP"). The suit alleges that recent legislative changes, effective in July of 2011, violate the Arizona Constitution in that they take away or diminsh the class members' right to annual cost of living adjustment ("COLA") benefits.
When the named plaintiffs retired, the EORP was funded with contributions from employees and employers, court filng fees, and some other sources. The Arizona Legislature assumed that the fund would retrun an average annual "hurdle" rate of 9%, and anything over that 9% was considered excess earnings. 50% of the excess earnings would then be paid out in the form of permanent COLA increases not to exceed 4% of the employees' total benefits. Any excess funds that would result in a permanent COLA increase above 4% would be available for future year COLA benefits.
The new law, A.R.S. §38-818-01, changed the "hurdle" rate from 9% to 10.5%, and introduced an actuarial adjustment. In addition, one of the provisions provides that the excess earnings above the 4% benefit would revert back to the employer instead of remaining in the fund for future benefit increases.
The plaintiffs allege that the new law violates sections of the Arizona Constitution preventing the impairment of contractual obligations and impairment of retirment plan benefits. Plaintiffs define the class as "retired members and their surviovors who are fully vested in the plan under Arizona constitutional law and the EORP statutes." The plaintiffs are represented by Colin F. Campbell of Osborn Maledon, P.A. in Phoenix. For more information see The Honorable Kenneth Fields, et al. v. The Elected Official Retirement Plan of the State of Arizona, CV2011-017443 (Maricopa Sup. Ct.). A copy of the the Complaint is here.