Washington Education Ass'n v. Department of Retirement Systems
332 P.3d 439
Wash.2014Background
- DRS and the State seek review of a superior court order granting summary judgment to a class of Plan 1 employees/unions challenging the 2011 repeal of UCOLA as unconstitutional contract impairment.
- UCOLA was enacted in 1995 to replace several targeted COLAs and created an annual increase amount, with an express reservation that the legislature could amend or repeal and that no contractual rights were created.
- Plan 1 and TRS Plan 1 cover pre-1977 state employees; Plan 1 is a defined-benefit pension funded by employer/employee contributions and investment returns; UCOLA provided automatic yearly increases tied to service years (initially $0.59/year of service, increasing 3% annually).
- The 1995 reservation clause explicitly stated the legislature’s right to amend or repeal the statute and denied any contractual right to COLA postretirement adjustments.
- The 2011 repeal froze future increases at the 2010 level, exempted the minimum benefit COLA, and saved the state substantial funds; the trial court granted summary judgment for the plaintiffs, while the state challenged on appeal.
- The court adopts the Carlstrom three-part framework, integrating the Bakenhus implied-consent/compensation approach for public pension contracts, and concludes that neither the 1995 enactment nor the 2011 repeal unconstitutionally impaired the contract rights.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Carlstrom test applies to public pension contracts | Plaintiffs rely on public-contract standard (Carlstrom/Bakenhus). | Defendants contend Carlstrom framework governs public contracts, including pensions. | Yes; Carlstrom three-part test applies to public pension contracts. |
| Did 1995 UCOLA create contractual rights or a valid reservation of power | Reservation of rights should not defeat vested benefits created by statute. | Reservation clause in 1995 UCOLA is explicit and enforceable. | UCOLA’s reservation clause is enforceable and did not by itself impair rights. |
| Did the 2011 repeal substantially impair contract rights under Bakenhus/Implied Consent | Repeal without comparable new advantages constitutes impairment. | Whether the total change was favorable or not governs impairment under implied-consent analysis. | No substantial impairment; the 1995 change plus favorable effects and implied-consent analysis show no impairment. |
| Was the 1973 COLA a contractual right that could be impaired | Some argue 1973 COLA created a contractual right. | 1973 COLA depended on discretionary funding and did not create firm rights. | Even if a contract existed, impairment analysis shows no substantial impairment under totality of change. |
| Are time-bar defenses applicable to retirees challenging the 2011 repeal | Some class members are not time-barred if not retired for >3 years. | Most retirees are barred by a 3-year statute of limitations. | Most claims time-barred; remaining non-retired class members fail on substance. |
Key Cases Cited
- Bakenhus v. City of Seattle, 48 Wn.2d 695 (1956) (pensions create contract rights; changes need comparable new advantages)
- Carlstrom v. State, 103 Wn.2d 391 (1985) (three-part test for public contract impairment)
- Charles v. Retired Pub. Emps. Council of Wash., 148 Wn.2d 602 (2003) (applies Carlstrom with pension context; implied-consent framework)
- Navlet v. Port of Seattle, 164 Wn.2d 818 (2008) (reservation clauses analyzed in CBA context; statute-reservation distinction)
- Jacoby v. Grays Harbor Chair & Mfg. Co., 77 Wn.2d 911 (1970) (reservation clauses in pension context; distinguish private vs statute-created rights)
- Washington Fed’n of State Emps. v. State, 98 Wn.2d 677 (1983) (pension rights vest; aided implied-consent analysis in modifications)