AARP argues that Oregon violated contract law as well as state and federal constitutional protections when it enacted cuts in public employee pension plan cost of living adjustments.
In 2013 the Oregon Legislature enacted severe cutbacks in Cost of Living Adjustments (COLA) for members of the Oregon Public Employees Retirement System (PERS). The Legislature also put an end to favorable Oregon state tax treatment of PERS benefits during the 2013 session. Oregon AARP fought both of these measures. Following the legislative changes, retirees in the PERS system and workers who will be depending on PERS upon their retirement sued. The lawsuit claims that changes made by the legislature constitute an impairment of contract under the Oregon and U.S. Constitutions, a taking of property without proper compensation, and a breach of contract. The issue is currently before the Oregon Supreme Court, where AARP has filed an amicus brief.
AARP’s friend-of-the-court brief, filed by attorneys with AARP Foundation Litigation, points out that the economic impact on retirees caused by curtailment of COLAs is far reaching and significant. Even beyond the obvious economic consequences on those with fixed incomes and increasing costs (especially with the inflation in health care costs), studies link cuts in COLAs to increasing isolation among retirees, and furthermore studies link isolation to depression and other psychological/psychiatric and physiological health problems. Moreover, as the brief points out, the Oregon legislature historically made manifest its intentions to ensure that promises made to PERS remain inviolable. The changes made in the 2013 legislation therefore constitute a breach of good faith in contracting, AARP’s brief contends.
What’s at Stake
Cutbacks in promised COLAs have extremely detrimental effects to the health, psyches, and well being of retirees. Such cut are also unfair, as workers invest their labor during their working lifetimes in exchange for not only immediate salaries, but also the benefits (such as retirement programs) at their workplace. Changing the rules after one party has already performed its part of the contract is unfair, a breach of contract, and in the context of retirement income for those on fixed or limited incomes, a significant hardship.
Moro v. Oregon is one of several cases (now consolidated) before the Oregon Supreme Court, the state’s highest court.