Puerto Rico Union Sues Governor, Board Over Pension Cuts

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By Carmen Castro-Pagan

The governor of Puerto Rico and the Financial Oversight Management Board were hit with a lawsuit by union members seeking to block proposed pension cuts for government employees ( Servidores Unidos de P.R. v. Fin. Oversight & Mgmt. Bd. , D.P.R., No. 3:17-cv-01483, complaint filed 4/12/17 ).

Servidores Unidos Públicos, a local government union representing more than 10,000 affected government employees and 2,300 retirees, filed the lawsuit April 12 in the U.S. District Court for the District of Puerto Rico. The union members seek a court declaration that the recently adopted fiscal plan to manage the territory’s finances and budget, which proposes a 10 percent cut to government pensions, is illegal.

The members allege that the board violated the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA)—a rescue law adopted by Congress in 2016 to address the territory’s financial situation—by adopting a fiscal plan that doesn’t provide adequate pension funding as required by the federal statute.

This is the first lawsuit filed against the oversight board and government officials over pension cuts proposed in the territory’s fiscal plan. The members lost their first battle April 12, when Judge Francisco A. Besosa denied their request for a temporary restraining order to prevent the officials from implementing the pension cuts because the accompanying exhibits were filed in Spanish. The members filed a new petition April 13.

In their lawsuit, the members take issue with the fiscal plan proposed by Governor Ricardo Roselló Névares and later adopted by the board after it made certain amendments. The board overreached its authority under PROMESA by approving the governor’s fiscal plan in an “amended” form—even though PROMESA provided no authority to the board to do so, the lawsuit alleged. Under the federal statute, the board could approve the governor’s fiscal plan or develop its own, but it didn’t have the authority to modify the governor’s plan, the union alleges.

The board amended the governor’s plan in two ways, the lawsuit alleges. First, it imposed a furlough program for government employees and eliminated Christmas bonuses. Second, it required that the 3 percent pension cuts proposed by the governor be supplemented to provide for progressively reduced total pension outlays by 10 percent by fiscal year 2020.

If the territory files for bankruptcy under PROMESA—a remedy that wasn’t available for U.S. territories prior to the federal law’s implementation—the 10 percent pension cuts proposed in the fiscal plan will be “set in stone,” the lawsuit alleges.

The board won’t comment on the lawsuit, José Luis Cedeño, the board’s spokesman, told Bloomberg BNA April 13.

Rodriguez-Banchs CSP and the American Federation of State, County & Municipal Employees represent the members.

To contact the reporter on this story: Carmen Castro-Pagan in Washington at ccastro-pagan@bna.com

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

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

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