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Judge awards $30.7 million to Baltimore police, fire retirees

A Baltimore judge on Tuesday awarded $30.7 million to retired and retirement-eligible city police and firefighters in compensation for changes Baltimore made to its pension system that eliminated a stock market-based benefit.

Baltimore City Circuit Judge Julie R. Rubin’s award has been stayed pending an appeal by the city. Counsel for the police and firefighters said they also planned to appeal.

Rubin’s compensation calculation followed her earlier ruling that the retiree and retirement-qualified responders were shortchanged beginning in 2010, when the city revised the Fire and Police Employees’ Retirement System to eliminate a variable benefit that increased as the market thrived but made no provision for when the market struggled.

The $30,716,108.79 award — less any future award of reasonable attorneys’ fees and costs — would be divided among the 1,459 responders who were retired or eligible to retire as of June 30, 2010, and sustained a pension reduction due to elimination of the variable benefit, according to counsel for Baltimore.

Rubin ruled earlier that the city breached its contract with retired and retirement-eligible police and fire employees because it “retrospectively diminished” their benefits. She found that the changes did not breach the city’s contract with active members ineligible to retire as of June 30, 2010.

Charles O. Monk II, an attorney for the responders, said Wednesday that he will argue on appeal that those active members are also entitled to compensation because they had a settled expectation that the city’s pension plan would not be diminished or impaired.

“We plan to seek review of the court’s decision that the city’s pension contract with its active police officers and firefighters was not breached in 2010 when the city reduced their benefits, in particular by moving the retirement goal line – adding five years to the 20 years of work needed to earn a pension,” Monk stated in an email.

“We agree with Judge Rubin that the city breached its pension contract with retired and retirement-eligible police officers and firefighters when it eliminated the variable benefit provisions from the retirement plan,” added Monk, of Saul Ewing Arnstein & Lehr LLP in Baltimore. “However, we disagree with the computation of damages suffered by these public safety workers and look forward to seeking review of that issue, as well.”

Attorneys for Baltimore will argue on appeal that the city had the authority to change the terms of its pension plan and validly replaced the variable benefit with a tiered cost-of-living adjustment when the stock market tanked beginning in 2008, threatening Baltimore’s financial well-being.

“Even though she did find a breach of contract with respect to the retirees and retirement eligible members of the system (as of June 30, 2010), under the damages methodology that Judge Rubin approved, less than 25 percent of the retirees and retirement eligible members as of June 30, 2010 have damages,” James P. Ulwick, an attorney for the city, stated in an email Wednesday.

“In other words, for more than 75 per cent of those members, the revised system will provide those members with the same or better benefits than the pre-2010 system would have, had it been allowed to continue, and thus they have no damages,” added Ulwick, of Kramon & Graham PA in Baltimore. “More importantly, the judgment leaves the reformed system intact. The result is a more actuarially sound system, which is both sustainable and affordable. That is in all parties’ best interests.”

The city’s pension plan was instituted in 1962. In 1983 the variable benefit was established to allow retirees to receive increases to their basic pension benefits, according to court papers. If the plan’s investments the prior year earned enough, benefits would increase. Those increases would be compounded in the future.

The case is Robert F. Cherry Jr. et al. v. Mayor & City Council of Baltimore City, 24C16004670.

 


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