Alaska Supreme Court restores access to public employee and teacher retirement benefits

Justices Winfree and Fabe
Alaska Supreme Court Justice Daniel Winfree and then-Chief Justice Dana Fabe listen to oral arguments in Peter Metcalfe v. State of Alaska in Feb. 2015. (Photo by Matt Miller/KTOO)

The Alaska Supreme Court says the Legislature violated the state constitution when it arbitrarily limited when some public employees could return to work and resume making retirement contributions. The decision provides a second chance for many as 78,000 Alaskans to get back into the state’s coveted and most generous retirement plan.

“I was very pleased to learn that on Friday, the [Alaska] Supreme Court reaffirmed the Constitution, that it’s not constitutional for the legislature to try just, by legislation, overcome a promise in the Constitution,” said Peter Metcalfe of Juneau.

Metcalfe had brief stints working for the state in 1972 and 1980 and qualified for what later was known as Tier I in PERS or the Public Employees’ Retirement System. Tier I was the golden ticket for public employees in Alaska, maybe in the country at the time.

It was a defined benefit retirement plan which included guaranteed income for life for a retired employee. It included inflation and cost-of-living adjustments, and medical coverage for a public employee or teacher – and their dependents – when they retired as soon as age 50.

Click to view PERS Plan Comparison Chart courtesy of Division of Retirement and Benefits

In 2005, the Legislature shut all of that down. They closed the first three tiers of PERS and TRS, the Teachers’ Retirement System, to new members. They also created a new defined contribution retirement plan, referred to as Tier IV with benefits that were not as generous.

But lawmakers also imposed a deadline for former employees who cashed out their retirement contributions when they left. They could requalify as Tier I as long as they returned to work by 2010 and paid back their cash out.

And that deadline is where lawmakers broke the promise made to state employees.

“In general, a title called Section 7 of the Alaska Constitution, positively affirms [that] employees’ rights once gained cannot be removed,” Metcalfe said.

In a split 3 to 2 opinion issued on April 2, justices with the Alaska Supreme Court ruled in Metcalfe’s favor.

Now, as many as 78,000 Alaskans could buy their way back into the state’s more generous retirement benefit programs.

Metcalfe said he really doesn’t plan to work for the state — a requirement for him to buy his way back into the Tier 1 benefit program. But that wasn’t the point.

“It is a principle,” Metcalfe said. “I don’t think the legislature or the governor should be willy-nilly trying to limit benefits, or freedom of speech or anything else that is protected in the Constitution.”

Choates, Wakley, Davis
Attorneys (from left) Mark Choate, Jon Choate, and Kevin Wakley along with Larry Davis of Alaska Division of Retirement and Benefits, prepare for oral arguments in Peter Metcalfe v. State of Alaska before the Alaska Supreme Court in Feb. 2015. (Photo by Matt Miller/KTOO)

Metcalfe’s attorney, Mark Choate, said he remembers when lawmakers were debating the changes to the retirement program.

“When the legislature did this in 2005, there was a lot of pushback, I think, within the legal community, people giving advice, saying ‘This is not right. You can’t do this. It’s contrary to the Constitution,’” Choate recalled. “And the legislature chose to do it anyway because they thought it would save them a lot of money. And maybe, nobody would do anything about it.”

Choate said the decision applies to any former employee who cashed out and has yet to return to work or who already returned to work under a less-generous retirement plan.

The eight-year-old class action lawsuit was previously considered by the lower courts twice already and twice appealed to the Alaska Supreme Court.

Two retired justices were brought in to hear it. Choate said two current justices had to recuse themselves during the latest appeal because they also worked as state employees earlier in their career.

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