St. Louis' public schools retirement system has lost its appeal against a lower decision changing benefits for employees and decreasing employer contributions.
The Public School Retirement System of the City of St. Louis filed suit against the schools, a charter school operator, and the state of Missouri in a bid to block the changes introduced following the passing of legislation in 2017.
In its filings, the system argued that the changes, which lowered the age in which employees could access full benefits, effectively means it will never be able to fully fund its obligations to former employees.
Following the decision by Missouri Court of Appeals, Eastern District, to affirm a lower court finding in favor of the defendants, Andrew Clark, executive director of the retirement system, told the St. Louis Record: "No comment." St. Louis Public Schools did not immediately respond to a request for comment.
Clark previously said that the fund was on track to become fully funded within 19 years, but that the legislative changes mean that will not happen.
“The simultaneous increase in benefits and decrease in employer contributions substantially harms the Retirement System’s ability to provide retirement benefits that are required by law,” Clark told the St. Louis Post-Dispatch.
The legislation gradually lowers the employer contribution from 19 percent to nine percent by 2032, while increasing employee contribution from five to nine percent by 2025.
But this case centers first on the eligibility requirements, previously governed by the "rule of 85," which meant members of the system could access normal pension benefits when their ages and years of credited service totaled a sum of not less than that number. The legislation changed the threshold from 85 to 80.
The system argued that St. Louis City Circuit Court was wrong to conclude that the "legislative changes to retirement eligibility requirements do not constitute a benefit increase, supplement." Changes, therefore, could not be introduced until proper calculations were carried out to make sure the system was fully funded.
Further, the system claimed that it was entitled to protection under the "Hancock Amendment" as an "other political subdivision," essentially that the state was unlawfully reducing its proportion of financing of an existing activity, introducing an "unfunded mandate."
"The change to the Rule of 80 does not increase, supplement or enhance the amount of the 'cash payment or service' that eligible retirees receive under the plan, but instead only changes the eligibility criteria for those benefits," Judge Michael Gardner wrote in his judgment, with Judges Robert G. Dowd Jr. and Robert M. Clayton III concurring.
On the Hancock Amendment, the appeals court stated: "Missouri courts have long held that public and quasi-public entities without the power to tax are not 'political subdivisions' for purposes of Article X of the Missouri Constitution.
"In sum, because the Retirement System does not have the power to tax, it is not an 'other political subdivision' and is not entitled to protections of the Hancock Amendment."