Press Release

Alaska Supreme Court Decision Saves Millions of Dollars in Potential Liability to State Retirement System

January 2, 2007

(ANCHORAGE, AK) Alaska Attorney General Talis Colberg reported today that the Alaska Supreme Court issued a decision late last week that will save the state from paying millions of dollars of unanticipated cost-of-living-allowance (COLA) payments to state retirees living outside Alaska.

In 2003 three participants in the retirement systems filed a class action lawsuit on behalf of a class of approximately 10,000 nonresident retirees alleging that class members were entitled to receive a ten-percent COLA under the TRS/PERS retirement systems. The plaintiffs argued that allowing resident retirees to claim the COLA violated their right to equal protection by penalizing non-resident retirees for living out-of-state and thus infringing on their right to travel.

The lead plaintiff in the case had retired to Hawaii. He argued that because Hawaii had a higher cost of living than Alaska, he had the same right to COLA payments from Alaska's retirement system as a retiree who lived in Alaska.

The Alaska Supreme Court rejected the plaintiffs' claims. The Court found that the state had a legitimate interest in encouraging retirees to stay in the state. Specifically, the Court found that the state had a legitimate interest in providing PERS and TRS COLA payments to encourage retired state employees to remain in the state and that providing these payments does not substantially infringe upon the rights of retirees who choose to live elsewhere.

The plaintiffs had also claimed that they were entitled to receive back payments that would have multiplied the state's financial liability had the court ruled in their favor on this issue.

"If the non-resident plaintiffs had prevailed the resulting cost in implementing such an outcome would have created an additional, unplanned burden to our state's retirement system," said Colberg.

The decision does not affect the right of resident retirees to continue to receive their ten-percent COLA. A copy of the Alaska Supreme Court's decision in Public Employees' Retirement System v. Gallant, Supreme Court Nos. S-11926/11945, is available online at: http://courts.alaska.gov/sp.htm.

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