You asked if the General Assembly can make changes to the state employee retirement plan and can the legislature make changes to the retirement benefits of retired state employees.

The Office of Legislative Research is not authorized to provide legal opinions and this report should not be considered one.

SUMMARY

The legislature generally cannot make changes to an employee retirement plan that has been agreed to through collective bargaining unless the state renegotiates the plan with the unions. The state's current employee retirement plan was established in 1997 in a 20-year collective bargaining agreement between the state and the State Employee Bargaining Coalition (SEBAC), which represents all the state employee unions.

Typically the legislature does not play an official role in negotiating labor contracts. Such agreements are usually negotiated between the executive branch and the unions, often with informal input from legislative leaders. Once an agreement is reached, it goes to the legislature for approval. At that point the legislature is just voting to accept or reject the agreement; it does not have the option of altering it.

In 1992, the legislature passed a bill that expanded certain provisions of the existing SEBAC-negotiated retirement plan. The union filed a grievance and in 1996 an arbitrator ruled in favor of SEBAC, that the act made unilateral changes that could only be reached through collective bargaining. The arbitrator ordered the state to cease and desist and the state filed an appeal in Superior Court. The appeal was dropped when the two sides settled some of the issues through negotiation.

Likewise, it would appear the legislature cannot change the benefits of retired employees. There is no Connecticut case law specifically on this point as the state has never tried to change the benefits of the already retired. A Maine case provides some context for how courts view these cases and are often divided by them. But this case is not directly applicable to Connecticut because it does not involve a retirement plan established through collective bargaining.

In a 1996 decision a federal judge found that the Maine legislature could not make changes effecting teachers who were already vested in the state retirement plan. He ruled that once an employee was vested, the retirement plan amounted to a binding contract and the legislature's changes were a violation of the employees' Constitutional Contract Clause rights. But when Maine appealed to the U. S. Court of Appeals (the next level of federal court) the judge ruled the plan changes did not violate the Contract Clause rights of teachers as long as they were not yet retired.

The Connecticut legislature could possibly alter the pension plan for the approximately 10% of the state's workforce that is not unionized. (The workforce is approximately 54,000. ) But, it is not clear if the legislature could make changes for those non-unionized employees who are vested in the plan who could argue that by being vested they have a contractual agreement with the state. It does appear the legislature could create a different retirement plan for all non-unionized new hires.

LEGAL BACKGROUND

The Pineman case was a long-running lawsuit by state employees against a 1975 change the legislature made to the State Employees Retirement Act (SERA). This case was decided before state employees collectively bargained their wages, retirement, and other benefits. At the time SERA was the retirement plan and, as with any statute, was subject to change by the legislature. Pineman does not apply today because a

contract explicitly addresses issues such as the retirement plan, but Pineman provides background on how courts approach these issues (Pineman v. Fallon, 842 F. 2d. 598).

In approving PA 75-531, the legislature required both male and female state employees to reach age 55 before they could retire. Previously, women could retire at age 50, but men had to be 55. A federal court ruled this policy was unconstitutional. Until the legislature decided how to address the situation, the state briefly made 50 the retirement age for everyone. When PA 75-531 passed, it in effect changed the retirement age for all state workers from 50 to 55 years old.

A group of employees challenged the law in court arguing that anyone already working for the state should not be required to meet the new 55 requirement.

After several rounds of decisions and appeals, the U. S. Court of Appeals ruled against the employees by upholding a federal court judge's ruling. The federal judge had ruled SERA did not constitute a legally valid contract between the state and its employees that would prohibit the legislature from changing the terms of the retirement plan. The ruling said the legislature did not explicitly give up its power of revision or amendment and that such intent had to be explicit in SERA in order to find for the employees.

The employees appealed to the U. S. Supreme Court, but the court declined to hear the case.

Also in 1975, the legislature passed PA 75-566, which allows for, and sets the guidelines to, collective bargaining by state employees. Since that time there have been several major union contracts. Today SEBAC V is in effect until 2017 and it explicitly deals with retirement issues. It was approved by the legislature and signed by the governor in 1997. The contract appears to give employees the explicit binding agreement with the state that would make unilateral action by the legislature unlikely to withstand a legal challenge.

Some parties believe there may be a new retirement deal negotiated due to the current budget crisis, but as of this writing there has been no substantive discussions between the executive branch and SEBAC.

ARBITRATOR'S DECISION

We could not find any court cases that directly address the question of whether the state legislature can unilaterally change a retirement plan established through collective bargaining. But a 1996 arbitrator's decision ordered the state to cease and desist the implementation of an act that was a unilateral change by the legislature.

In 1992, the legislature passed a bill that expanded certain provisions of the existing SEBAC-negotiated retirement plan. PA 92-226 made some not classified employees eligible for an early retirement incentive and allowed employees to use military service time as a credit toward their state retirement.

SEBAC filed a grievance on grounds that the act violated (1) the contract because it was a unilateral action and not bargained and (2) existing statute because the legislature failed to seek an opinion from the Retirement Commission on how much the new provisions would cost as required by CGS § 5-156a(d). In 1996, the arbitrator ruled in favor of the unions that the act was a unilateral action that could be properly reached only through collective bargaining (He also ruled the legislature failed to meet the statutory requirement). The arbitrator ordered the state to cease and desist.

The state filed an appeal in Superior Court. The appeal was dropped when the two sides settled some of the issues through negotiation.

MAINE RETIREMENT PLAN CASE

A Maine case illuminates some of the considerations courts make in retirement plan cases, but this case is not directly applicable to Connecticut because it does not involve a retirement plan established through collective bargaining.

In a 1996 decision a federal judge found that the Maine legislature could not make changes effecting teachers whose pension rights were already vested. He ruled that once an employee was vested, the retirement plan amounted to a binding contract and the legislature's changes were a violation of the employees' Constitutional Contract Clause rights. The Constitution bars any legislative action that impairs contracts (Art. 1, § 10).

But when Maine appealed to the U. S. Court of Appeals, the judge ruled the plan changes did not violate the Contract Clause rights of teachers as long as they were not yet retired. It ruled that without "unmistakable intent" by the legislature to create contractual rights protecting against any reduction of pension benefits prior to the point when such benefits may be received, "we hold the Maine amendments do not violate the Contract Clause with regard to the plaintiffs" (Parker v. Wakelin, 123 F. 3D 1 (1997)).

Other cases involving retirement plans are often argued on a variety of grounds including employees' property interest rights, due process rights, or equal protection rights.

JM: ro