A federal appeals court Friday upheld two lower-court rulings that Fort Worth did not violate the Texas Constitution when it reduced benefits in its employee pension fund in 2012.
In a 2-1 vote, the Fifth Circuit Court of Appeals, based in New Orleans, affirmed the decisions of two U.S. District Court judges in Fort Worth in separate lawsuits filed by city firefighters and police officers. The judges dismissed the lawsuits in April and July of last year.
The plaintiffs each filed appeals, but the Appeals Court consolidated the cases. Friday’s ruling comes after a hearing in April.
We’re pleased that the city’s actions continue to be upheld by the courts as we continue to work on the long-term sustainability of the plan.
Susan Alanis, Fort Worth assistant city manager
“We’re pleased that the city’s actions continue to be upheld by the courts as we continue to work on the long-term sustainability of the plan,” said Susan Alanis, an assistant city manager.
In 2012, the city approved changes to how benefits are calculated and to the cost-of-living adjustment for current and future employees. The changes first impacted general employees and police officers. The changes were then made in 2014 for city firefighters, who had been covered by a collective-bargaining agreement until that time.
The plaintiffs said the city’s pension reform violated a section of the Texas Constitution that addresses the reduction of public pension benefits “accrued by a person.” The appeals court said the case boiled down to the meaning of accrued.
Like most public pension plans in Texas, Fort Worth’s is underfunded. Over the years, Fort Worth has sought to improve the financial condition of its pension plan.
Judge Thomas Reavley, U.S. Fifth Circuit Court of Appeals
“Like most public pension plans in Texas, Fort Worth’s is underfunded,” Circuit Judge Thomas Reavley said in the opinion. “Over the years, Fort Worth has sought to improve the financial condition of its pension plan. We have concluded that [the section] permits prospective changes to the pension plan of the public employees within its reach.”
The City Council in late June learned the Fort Worth Employees’ Retirement Fund lost money in 2015 because of poor market conditions and that it may need a bump in payroll contribution to close an increasing gap in the amount of time the city needs to make its pension fund whole.
The city's pension liability is $3.4 billion, of which $1.3 billion is unfunded. At the end of 2014, the unfunded liability — the difference between promised benefits and what's on hand to pay for them — stood at 55.7 years. As of Dec. 31, the unfunded liability had grown to 72.5 years.