Pension reform sounds abstract and distant from everyday life. It is almost entirely confined to state- and local-government workers. Companies stopped giving pensions to their workers decades ago as they switched employees to 401(k)s and other voluntary-type retirement schemes. This removed enormous future liabilities from the balance sheets of companies and shifted the risk of adequate retirement means to individuals.
Public pensions plans are now squarely in the sights of state legislatures. They are terribly underfunded and have grown unsustainable. Changes, though, must be made within the law. For example, states cannot categorically take away pensions because they are “contracted obligations.” But states can and are chipping around the edges and making changes to things like “cost of living adjustments” (COLA) and the required retirement age.
These legislative modifications are being challenged in courts. This is not surprising since people don’t generally give up their benefits or rights on a voluntary basis. In many cases these pensions are the only thing that retirees will have to fund their retirement. Workers are not winning their court cases, though. The WSJ reports that:
In the Colorado ruling, District Court Judge Robert Hyatt said for decades the state has changed the way it calculates cost-of-living adjustments. “Decades of history and legislative language do not support Plaintiff’s position that they are contractually and constitutionally entitled in perpetuity to the cost of living adjustment in effect at the time of their respective retirements,” the ruling says.
The judge, however, did acknowledge retirees’ contractual rights to their underlying pensions.