A retired Lexington police officer and firefighter have filed a federal lawsuit against city officials, challenging changes to the police and fire pension fund that would affect retirees.
The lawsuit, filed Wednesday in U. S. District Court by retired police officer Tommy Puckett and retired firefighter Roger Vance Jr., names several defendants, including Lexington Mayor Jim Gray, members of the Urban County Council and some members of the local board of trustees for the Policemen's and Firefighters' Retirement Fund. Puckett and Vance are members of Lexington police and fire pension board, but Puckett said the other board members were named in the lawsuit because they are the governing body of the pension.
Puckett and Vance contend in the lawsuit they are entitled to an injunction prohibiting officials from enforcing the changes to the cost-of-living provisions.
"This lawsuit is about fairness," Puckett said Wednesday in a statement. "We believe the city and the mayor have not dealt fairly with police and fire retirees."
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The retirees have vested interests in their pensions and cost-of-living adjustments "that we believe the city and the mayor infringed upon, and in fact those interests are protected by the federal Constitution," said Puckett.
"And we don't believe they followed the process required by law in making these changes to the pension system."
A deal between city officials and local representatives of the Fraternal Order of Police and the International Association of Firefighters that had to be approved by the state legislature earlier this year trimmed retirement benefits in several ways, including smaller cost-of-living adjustments for retirees.
The Policemen's and Firefighters' Retirement Fund is managed by a local pension board but ultimately controlled by the state legislature.
The deal was an attempt to resolve the city's $296 million unfunded liability in its police and fire pension fund. It meant the Lexington-Fayette Urban County Government would commit a minimum $20 million a year instead of the previous $11 million to more aggressively pay off the pensions' unfunded liability over the next 30 years.
The federal lawsuit says the proposed changes were not agreed to by any retired members on the pension board or the full membership of the pension board.
Susan Straub, a spokeswoman for Gray, declined to comment on the lawsuit Wednesday, but said that two members of the pension board were involved in the negotiations. In February, the mayor's office said in a press release that in votes since the agreement was announced, 76 percent of active and retired police officers and firefighters supported the plan.
Lexington police officers and firefighters who meet certain criteria are entitled to retirement annuities — a stream of payments — or disability benefits when they reach a certain age or become incapacitated, the lawsuit said. Kentucky law requires the city to provide a minimum amount of annual funding to cover normal costs and interest on the unfunded liability of the pension fund, according to the lawsuit.
The lawsuit said the city has historically underfunded its annual contribution to the fund and that the city's failure caused budget issues and the growth of unfunded liability of the pension fund.
The lawsuit alleges that in 2012, when Gray created a Police and Fire Pension Task Force to develop proposed changes to the pension fund in order to reduce the unfunded liability, he usurped the statutory role of the pension board and denied Puckett and Vance due process.
In January 2013, the task force announced proposed changes to the state law governing the fund which the General Assembly approved in March.
The amendments significantly changed the eligibility for cost-of-living adjustments to the annuity for retirees and substantially decreased the rate at which cost-of-living increases are made, the lawsuit said. Since 1980, the pension board could set a rate of a minimum two to five percent cost-of-living adjustment, Puckett said in an interview Wednesday.
The changes mean there is a tiered system in which police and fire retirees get a rate from zero to a maximum of two percent cost-of-living adjustments based on their annuity, Puckett said in the interview.
Both Puckett and Vance said Wednesday that police and fire employees and the city agreed in 1980 to put more money into the pension system to offset the cost-of-living adjustments — two percent from the employees and three percent by the city.
"We did what we were supposed to and the city failed to meet their pension contributions and now want to attempt to fix the unfunded liability by reducing the cost of living to retirees,'' said Vance.