Working retirees sue state

By Cindy Landrum  

AUGUST 20, 2010 8:28 a.m. (0)

Eight workers who retired and returned to work for a  South Carolina governmental entity say they should not have to contribute to the state retirement system after their retirement date if the state is not going to give them credit for those contributions.

The eight filed suit in federal court in Florence earlier this month.

While all of the plaintiffs live in Darlington and Beaufort counties, the lawsuit is a class action which would cover any municipal, county or state employee covered by the South Carolina Retirement System or the South Carolina Police Officers Retirement System who retired and returned to work after July 1, 2005, said Columbia attorney Dick Harpootlian.

Harpootlian said the lawsuit could affect 16,000 people.

Attorneys for the state Budget and Control Board say the plaintiffs’ case does not have legal merit and the state expects to win.

It’s not the first lawsuit Harpootlian has filed on behalf of the state’s working retirees since the state legislature passed the State Retirement System Preservation and Investment Reform Act in 2005. The other lawsuits were heard in state court.

The 2005 law required retired employees who returned to work  to contribute to the state’s pension plan as if they were active participants in the plan. The working retirees do not accrue additional service credit for the contributions.

The Supreme Court ruled in the first lawsuit the state had wrongly forced thousands of retirees who returned to work under the Teacher and Employee Retiree Incentive program before July 2005. The court said the retirees weren’t required to contribute to the retirement plan when the program was created in 2001.

Employees in the TERI program are allowed to work for five years. All the employees covered in the first suit, in which the state had to refund $89 million, have re-retired.

A second lawsuit covering working retirees who were hired before July 1, 2005 but were not in the TERI program is now in state court.

The third lawsuit covers working retirees who were re-hired after July 1, 2005.

Harpootlian said the lawsuit questions whether the state can deduct money from working retirees’ paychecks as contributions to a retirement plan without giving credit toward the retirement plan.

Harpootlian said the only way the state can take the deductions without taxes is for a defined benefit plan.

“The state has fought to keep their ill-gotten gains in the first two lawsuits and we expect it will fight hard on this one,” he said. “Taking money from people and not giving them credit is a good way to fund a retirement system without having to increase contributions or decrease benefits. But we think it’s unconstitutional.”

David Avant, an attorney for the state Budget and Control Board, said the new lawsuit does not have legal merit.

“We think our defense is meritorious. They lost the other cases on the Constitutional claims,” he said. “They lost for a whole lot more people than they won for.”

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