Retirement benefits case heard again by Alaska Supreme Court

Justices Winfree and Fabe
In this photo taken in February 2015, Alaska Supreme Court Justice Daniel Winfree and Chief Justice Dana Fabe listen to oral arguments in Peter Metcalfe vs. State of Alaska during the first time it was heard by the court. (Photo by Matt Miller/KTOO)

The Alaska Supreme Court on Thursday heard a case that labor unions say could affect the retirement plans of thousands of former state employees.

It’s not the first time this case has been before the state’s highest court.

Juneau resident Peter Metcalfe said he was earning money for college in the early 1970s when he landed a state job that included “punching boilers” at the Capitol building. He essentially worked as a chimney sweep using a 14-foot-long brush to pull out gallons of soot from the flues.

“I was swathed in cloth to keep the soot off me,” Metcalfe remembers. “I just remember standing in the well of the Capitol building, the sun shining, and the sweat coming down my face, and I’m sure that I was all black. I was thinking ‘I need to be somewhere else.’“

After only a few weeks, Metcalfe left town to try his hand at commercial fishing.

Metcalfe said he really didn’t understand it then, but had he stayed on the job with the state, then he could’ve vested as a Tier I employee.

Those Tier I benefits are famously generous. That included a defined benefit retirement plan, cost-of-living adjustments and family medical coverage on retirement at age 55.

“A gold chain in Juneau with ‘Tier I’ on it, everyone loves you!’ said Metcalfe’s attorney Mark Choate with a laugh. “You know you’re the object of desire, because it’s such a great retirement system.”

Those benefits — that “gold chain” — they aren’t available to new state employees anymore.

Metcalfe didn’t go back to work for the state. But the core of the case is about what would happen if he wanted to do that now.

In the early 1980s, he cashed out his retirement account. But, at the time, he could have paid back his retirement refund and returned to work as a Tier I employee.

Now, he can’t do that. If he goes back to work for the state, it would be under a new kind of retirement benefit that is not as generous as his original plan.

In 2005, the Legislature closed membership in all defined benefit retirement plans and started the new Tier IV defined contribution plan.

“It just kind of struck me as, like, making law by fiat,” Metcalfe said. “In other words, the governor and the Legislature: The party in power had majorities in both houses, and the governor was Republican, and they just pushed this through.”

Metcalfe believes that violates the Alaska Constitution. Specifically, he refers to Article XII, Section 7, where it says an employee’s retirement benefits shall never be diminished, and membership in a retirement plan is a contractual relationship with the state.

Choates, Wakley, Davis
In this photo taken in February 2015, attorneys, from left, Mark Choate, Jon Choate and Kevin Wakley, along with Larry Davis of the Alaska Division of Retirement and Benefits, prepare for oral arguments before the Alaska Supreme Court in Juneau. (Photo by Matt Miller/KTOO)

Oral arguments before justices on Thursday were expected to focus on interpreting the Constitution’s retirement benefit section and whether it’s unconstitutional to deny Metcalfe’s potential retirement benefits.

State attorneys declined to do a recorded interview for this story. But they argued five years ago before the Alaska Supreme Court that Metcalfe permanently ended his contractual relationship with the state when he cashed out his retirement. They also said he waited too long to file a lawsuit.

Two current justices have recused themselves because of a potential conflict of interest.

Two former justices, Dana Fabe and Warren Matthews, came out of retirement to help hear and decide the case.

The Alaska Supreme Court typically issues an opinion 6-12 months after oral arguments.

State employee unions have said that a decision in Metcalfe’s favor could also affect as many as 85,000 former employees who may want to return to a state job and became vested in their earlier retirement plans.

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