PROVIDENCE, R.I. (WPRI) – R.I. Superior Court Judge Sarah Taft-Carter on Wednesday entered a final judgment formally approving the sweeping settlement to end nearly all legal challenges to Rhode Island’s 2011 pension overhaul, which saved taxpayers roughly $4 billion.
The judge had already approved the settlement on June 9, but she entered the final judgment Wednesday to reflect that the final step required to execute settlement – legislative approval by the General Assembly – happened in late June.
“This Judgment is final and shall be binding on all parties and all class members in the above-referenced class action case for settlement purposes,” Taft-Carter wrote in the order, reiterating her finding that the agreement is “fair and reasonable.”
“Nothing in this Judgment shall be construed as a limitation on the General Assembly to enact, amend or repeal laws now or in the future, including, without limitation laws with respect to the Rhode Island pension statutes, consistent with the Constitution and laws of the State of Rhode Island and the United States,” she wrote.
“In the event the General Assembly ever does so, the foregoing statement shall not be construed as a waiver of any of the parties’ or class members’ rights, claims or defenses under the terms of this Judgment or with respect to any such legislation,” she continued.
The final judgment starts the 20-day clock for appeals to be filed, court spokesman Craig Berke said. One retiree has already filed a notice of appeal, he said. The ruling was first reported on Twitter by Rhode Island Public Radio.
The terms of the settlement took effect July 1.
The original landmark pension legislation instantly improved the funding level of Rhode Island’s pension system for state workers from 42% to 56% and lowered the annual state contribution to the fund by hundreds of millions of dollars a year. But unions argued the changes were unconstitutional and filed suit in 2012 to overturn the law.
The settlement would end almost all of the litigation challenging the law. Under the terms of the agreement, some of the nearly 60,000 retirees and workers impacted by the pension overhaul would receive small increases in their benefits in exchange for dropping the suit.
One significant change is a tweak to cost-of-living adjustments (COLAs). COLAs will be awarded every fourth year until a pension fund reaches an 80% funding level, and will be calculated with a new formula based on both inflation and the pension fund’s investment returns. The COLA will be calculated on up to $30,000 in benefits, rather than $25,000, and indexed to inflation.
In addition, retirees will get two one-time stipend payments of $500, one this year and one next year.
A spokeswoman for General Treasurer Seth Magaziner, who oversees the pension system, said last month his office planned to pay the one-time cost-of-living adjustment and the one-time $500 stipend “as soon as administratively possible after the law takes effect July 1.”
Retirement ages for many workers will also change with the adoption of a new “rule of 95,” meaning workers can retire when their age and their years of service add up to 95, or at the age allowed under the 2011 pension law, whichever is earlier. Workers with 20 or more years of service as of June 2012 will be returned to a full defined-benefit pension plan, but will have to contribute more to get it.
The deal is not binding on three groups that have not agreed to settle: active police officers in the state-run pension system, and the police and fire unions in Cranston. While it’s possible they could eventually decide to join the settlement, for now their case is continuing to proceed to trial. A court spokesman said previously that motions in their cases were docketed for July 29.
The three holdout groups only account for about 733 workers, compared with the roughly 58,901 in the groups that agreed to settle, according to former R.I. Supreme Court Chief Justice Frank Williams, who is serving as a special master in the case and successfully led the new push to end the litigation through an agreement.
Taft-Carter, a 2010 appointee of former Gov. Don Carcieri, has been handling the legal challenge to the pension law since it was filed three years ago.
This marked the second high-profile attempt to settle the pension litigation, following an aborted effort last year that ended when a small group of police officers rejected the proposal. The new settlement contains many of the same terms as last year’s, but makes some changes that union leaders described as a win for workers and retirees.
In addition to the 2011 pension overhaul, the settlement also ends legal challenges against two less expansive rounds of pension changes that lawmakers made in 2009 and 2010.
The shortfall in Rhode Island’s state pension system stands at about $4.9 billion with the settlement in place, according to a recent actuarial analysis that used retiree data from June 30, 2014.Ted Nesi (firstname.lastname@example.org) covers politics and the economy for WPRI.com. He hosts Executive Suite and writes the Nesi’s Notes blog. Follow him on Twitter: @tednesi