Public Pension Cuts Upheld by Sixth Circuit—Again

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By Jacklyn Wille

Aug. 15 — A firefighter and a police officer challenging reduced cost-of-living adjustments in their public pension benefits lost their appeal to the U.S. Court of Appeals for the Sixth Circuit ( Puckett v. Lexington-Fayette Urban Cty. Gov't, 6th Cir., No. 15-06097, 8/15/16 ).

The Sixth Circuit on Aug. 15 upheld a Kentucky municipal pension plan's attempt to weather financial difficulties by reducing the annual cost-of-living adjustments (COLAs) received by pensioners. The court issued a similar opinion on Aug. 12, affirming COLA cuts made by the Tennessee Valley Authority Retirement System.

In the Kentucky case, two pensioners claimed that the temporary reduction in their COLA benefits—authorized by emergency legislation passed by the Kentucky General Assembly in 2013—violated the Contract, Due Process and Takings clauses of the U.S. and Kentucky constitutions.

A district judge dismissed their claims in 2014, finding that the pensioners had no contractual right to COLA benefits at specified levels.

The Sixth Circuit agreed and upheld the cuts, noting that pensioners' constitutional arguments presented an issue of first impression in the circuit.

The court found that the Kentucky legislature didn't contractually bind itself to provide COLAs at specified levels, which defeated the pensioners' arguments under the Contract Clause. The Sixth Circuit said it was following the majority position on this question, noting that only in “very limited circumstances” have courts found that state pensioners had a contractual right to specific COLA levels.

Judge Eric L. Clay wrote the opinion, which was joined by Senior Judge Martha Craig Daughtrey and Judge Jane Branstetter Stranch.

Stranch in a concurring opinion emphasized that it could sometimes make “eminently good sense” for a state legislature to contractually guarantee certain COLA levels, even if the Kentucky legislature didn't do so in this case. Daughtrey joined in the concurring opinion.

Green Chesnut & Hughes PLLC represented the pensioners. Frost Brown Todd represented the county government. Kentucky was represented by its attorney general.

To contact the reporter on this story: Jacklyn Wille in Washington at jwille@bna.com

To contact the editor responsible for this story: Jo-el J. Meyer at jmeyer@bna.com

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