Opinion ID: 197501
Heading Depth: 2
Heading Rank: 1

Heading: The Maine State Retirement System (MSRS)

Text: 3 The MSRS operates as a public pension trust pursuant to Maine's public employee retirement benefit statute. See 5 M.R.S.A. §§ 17001-18663 (1989 & Supp.1996). The MSRS was created in 1942 to encourage qualified persons to seek public employment and to continue in public employment in their productive years. 5 M.R.S.A. § 17050 (1989). For all Maine state employees, including the public school teachers comprising the plaintiff class in the instant case, membership in the MSRS is mandatory. 5 M.R.S.A. §§ 17001(14), 17651 (1989). All MSRS members make mandatory contributions into a pension fund. The State of Maine also contributes annually to maintain the fund's actuarial soundness with regard to future benefit obligations. 5 M.R.S.A. §§ 17701-A, 17701-B, 17153(1-A)(B)(Supp.1996). The MSRS can be classified as a defined benefit system, in that the retirement benefits provided for teachers are defined upon employment and financed in part by their fixed contributions into the system. 4 The teachers, as members of the system, qualify to receive retirement benefits upon (1) reaching the statutory retirement age, and (2) satisfying either of the following service requirements: (a) at least ten years of creditable service; or (b) at least one year of creditable service prior to reaching the statutory retirement age while in public service. 5 M.R.S.A. § 17851 (1989 & Supp.1996). Alternatively, a member may be entitled to receive retirement benefits when he or she retires after performing at least 25 years of creditable service. Id. In the district court's decision, the term vesting was used to describe the satisfaction of the service requirements. See Parker v. Wakelin, 937 F.Supp. 46, 49 n. 1 (D.Me.1996). However, as the district court in fact noted, the term vesting does not figure in the statutory scheme itself, which simply indicates the age and service requirements that must be met. See 5 M.R.S.A. § 17851 (1989 & Supp.1996). 1 Members who terminate their public service prior to satisfying the pension eligibility requirements are entitled to a return of their contributions, with interest. 5 M.R.S.A. § 17705(2). 5 An eligible retiree earns a pension in the amount of two percent of his or her average final compensation multiplied by the number of years of total creditable public service (up to 25 years). 5 M.R.S.A. § 17852 (1989). 2 The legislative amendments at issue on this appeal affect, among other things, the process by which one computes an employee's average final compensation in such a manner as to reduce the expected pension benefits of many members. 6 The State of Maine concedes that the sole purpose for enacting the changes in the terms and conditions of retirement benefits (the 1993 Amendments) was to save money by lowering budget allocations by the state to the trust funds of the MSRS; their enactment coincided with other responses to a state fiscal crisis. The 1993 Amendments may be sorted into two groups: three changes apply to the pensions of all current teacher-members of the MSRS, while three others apply only to those who had not satisfied the service requirements under the MSRS as of the effective date of the amendments. None of the amendments affected retirees earning pensions as of the effective date. The amendments that affected all of the plaintiffs were: (1) an increase in the rate of required member contributions from 6.5 percent of their salary to 7.65 percent; (2) a cap on the salary increase that may be included in the course of calculating the level of teachers' retirement benefits; and (3) a six-month delay in the first cost-of-living adjustment of retirement benefits. See P.L.1993, ch. 410, pt. L, §§ 28, 13, 31. 3 The district court held that these three modifications were unconstitutional as applied to those plaintiffs who had satisfied the service requirements. The other 1993 amendments, which only applied to those who had not served 10 years as of the effective date of the amendments, were: (1) an increase in the regular retirement age from 60 to 62; (2) an increase in the early retirement penalty from 2.25 percent to 6 percent of the teachers' retirement benefit for each year preceding age 62; and (3) the elimination of an inclusion of per diem payment of up to thirty days of unused sick or vacation pay in the course of calculating teachers' retirement benefits. See P.L.1993, ch. 410, pt. L, §§ 33, 35, 37, 12. 4 It is not disputed that the 1993 Amendments operate to the disadvantage of MSRS members without providing substantive offsetting benefits. 7 When the MSRS was first adopted in 1942, the legislature made no express statement as to its ability to amend or alter the pension benefit structure. In 1975, the Maine legislature enacted the following provision: 8 No amendment to this chapter shall cause any reduction in the amount of benefits which would be due to the member based on creditable service, compensation, employee contributions and the provisions of this chapter on the date immediately preceding the effective date of such amendment. 9 P.L.1975, ch. 622, § 6, codified at 5 M.R.S.A. § 17801 (1989), under the title Amendment not to cause reduction in benefit. 5