We have previously reported on the Appellate Division’s favorable ruling in July, 2014 in the matter entitled Berg v. Christie, et als. The case involves the PBA attack on the effective “freeze” upon COLA increases for PFRS and other public employees. Chapter 78 effectively eliminated COLA increases for the foreseeable future and this suit was designed to compel those payments. In its decision, the Appellate Division ruled that retirees do have a “contractual right” to annual COLA increases and that COLAs are part of the promised pension benefit.
First, the court held that COLA benefits are part and parcel of the base pension benefit itself. The court rejected the governor’s argument that COLA benefits were not an integral part of the pension system, but were instead gratuitous payments periodically authorized by the legislature.
Second, the court agreed with us that COLA benefits, like the base benefits, are a “contract right” to which retired members may seek enforcement. This was based upon the “non-forfeitable right” to pension benefits contained in a 1997 statute. No court had previously ruled that pension benefits – either COLA or the base benefit – constitute a “contract” which is enforceable under law. The Appellate Division remanded the case to the trial court to address a number of issues, including whether there is a sufficient “fiscal emergency” which allows the state to “breach” the contract right of retirees to the COLA benefit.
Since we last reported on this case, the governor has sought review by the New Jersey Supreme Court. We have opposed that request, arguing this is a matter which first should go back to the trial court for a full record before the Supreme Court reviews it. Further trial court proceedings have to wait until the Supreme Court acts.
One issue which has been raised by members is whether this court decision, if upheld, applies equally to retirees who retired prior to 1997. Arguably, there is a distinction between pre- and post-1997 retirees. As noted, in 1997 the legislature enacted the “non-forfeitable right” statute (N.J.S.A. 43:3C-9.5(b)) which is effectively the springboard for our claim that there is a “contract” right to COLA benefits. While we have also taken the position that there is a contract right to a vested pension even without regard to the statute, obviously the statute is our strongest point.
We believe, and continue to argue, that statute applies to individuals who were already retired when it was enacted in 1997. However, the Appellate Division in Berg noted it specifically was not deciding this issue. In footnote 19 of its decision, the Appellate Division stated:
We have intentionally refrained from addressing the scope of the class entitled to protection under section 9.5.As previously noted, a class has not been certified in this case, and the record contains minimal information about the individual plaintiffs. Those employed between 1997 and 2010 gave the State the benefit of their labor in exchange for the contractual protection section 9.5 provided, and those who retired during that time presumably did so in reliance on having contractually-guaranteed COLA benefits in retirement. The parties have not briefed, and we have not addressed, whether the necessary elements for the formation of a contract exist with respect to employees who retired before section 9.5 was enacted, and who had since July 1, 1970, been receiving COLAs. That issue may be raised on remand to the trial court.
In short, while we continue to take the position that the 1997 “non-forfeitable right” statute applies to all retirees, regardless of the year in which they retired. This remains an open issue that will also have to be addressed by the trial court on remand. That should occur once the Supreme Court decides whether to hear the State’s appeal of the Appellate Division decision.