Retired public workers have a contract right to cost-of-living adjustments

By Salvador Rizzo/The Star-Ledger

TRENTON — A state appeals court ruled today that New Jersey’s nearly 300,000 retired public workers have a contract right to yearly increases in their pension benefits, and those cost-of-living adjustments are part of the state’s benefits package.

For now, however, the ruling keeps in place a freeze on yearly pension increases instituted in 2011, sending the issue back for more review by a lower court.

It was the second time this week that a state court signaled that public workers’ retirement benefits are protected by the New Jersey constitution, which generally forbids state officials from breaking any contracts.

Litigation is continuing in both cases, which could have sweeping consequences for the state budget, the troubled pension system, and the nearly $50 billion in unfunded liabilities it faces for state and local workers’ retirement plans.

In a narrow ruling that tossed out many of the retirees’ claims, an appellate court said today that lawmakers in 1997 gave retired public workers a contractual right to yearly cost-of-living adjustments in their pensions, or COLAs, to offset inflation.