A group of current and former government workers in Colorado have sued the state following the recent passage of a pension overhaul bill, which — among other things — reduced the raise that individuals who are already retired receive in their pension checks. The legislative change reduces from 3.5% to 2% the maximum cost-of-living adjustment that retirees would be eligible to receive. A lawyer for the plaintiffs estimates that this change will cost retirees with 30 years of service approximately $165,000 each over the next 20 years. In deciding the case, a court will be asked to consider whether there was an “actuarial necessity” for the change.

A recent study by the Pew Center on the States estimated a $1 trillion gap as of the 2008 fiscal year between what states had promised retirees in the way of pension and health benefits and the funds that states had on hand to pay for these obligations. Until now, states generally had taken less drastic measures in addressing this situation, including deferring pension contributions, requiring current workers to contribute more to pension and healthcare costs, and even barring future hires from the pension plan entirely. For example, in the midst of the current fiscal crisis plaguing Connecticut, the governor and legislative leaders earlier this year agreed to delay $100 million in contributions to state employee pension plans. To read more about this matter, please click here.