Ohio Teachers Pension Sued over Eliminated COLAs

Plaintiffs says retirement system board reduced benefits unlawfully.

The $80 billion Ohio State Teacher’s Retirement System (OSTRS) is being sued in federal court by two retired teachers who accuse the trustees of the retirement system of unlawfully ending their cost-of-living allowances (COLAs).

The retired teachers, Dean Dennis and Robert Buerkle, both worked in the Cincinnati Public School System for at least 35 years, and upon retirement, both were approved for a retirement allowance and became vested under Ohio law

According to court documents, the plaintiffs allege that the indefinite elimination of the 2% annual COLAs, which it says are mandated by Ohio law, violates the US Constitution, the Ohio Constitution, and state laws. They are seeking damages and declaratory and injunctive relief for themselves and all other retired teachers in the form of reinstatement of their COLAs, and restitution of foregone COLAs.

“By circumventing and disregarding the mandatory statutory process for adjusting cost-of-living allowances, the board acted unlawfully and deprived plaintiffs and the class of their substantial vested property interest in their retirement benefits,” says the complaint.

Because the teachers are asking the court to certify their case as a class action, it could open it up to nearly 150,000 retired teachers.

In 2017, the OSTRS board voted to indefinitely eliminate COLAs for retirees receiving monthly pension allowances beginning on July 1 of that year. The teachers say that prior to the decision, the retirement system’s actuary never presented an actuarial valuation that showed that the indefinite elimination of COLAs was necessary to preserve the fiscal integrity of the system.

“The State Teachers Retirement Board broke faith with Ohio’s retired teachers in 2017, when it abruptly and indefinitely eliminated their cost-of-living increases without due consideration, and without a valid legal basis for its action,” said Finney Law Firm, which is representing the teachers, in a statement. “Our clients worked for decades, for very modest compensation … over the course of those decades of work, our clients had been repeatedly promised that, in their retirement years, they would receive annual cost-of-living adjustments that would at least allow them to keep pace with inflation.”

According to the complaint, in November 2016, the OSTRS board’s actuary reported in its actuarial valuation that the plan had experienced net gains during the year and maintained a steady funding percentage. And in March 2017, the actuary submitted an actuarial experience review that recommended changes to several actuarial assumptions, such as reducing the rate of inflation assumption to 2.5% from 2.75%, and a reduction in the assumed rate of return to 7.00% from 7.75%.

“The actuarial experience review projected that the effect of the proposed assumption changes would be to reduce the plan’s funding percentage,” said the complaint. “However, there is no mention in the actuarial experience review that a reduction or elimination of cost-of-living allowances was recommended or necessary.”

The plaintiffs’ lawyers argue that the financial issues that the board cited as the justification for eliminating the COLAs “could have been addressed in a variety of ways that would not have dealt such a devastating blow to our retired teachers.”

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