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Professional Firefighters Association of New Jersey v. State of New Jersey

August 23, 2011

PROFESSIONAL FIREFIGHTERS ASSOCIATION OF NEW JERSEY, I.A.F.F.-AFL-CIO, FRATERNAL OF POLICE, PATRICK B. DOHERTY, GEORGE M. BOREK, PETER YACKEL, KENNETH W. MARTIN, JR., DEBORAH CARR, EDWARD R. BRANNINGAN, STEVEN DEMOFONTE, LAWRENCE BROWN AND LINDA KERPER, PLAINTIFFS-APPELLANTS,
v.
STATE OF NEW JERSEY, ANDREW P. SIDAMON-ERISTOFF, TREASURER OF THE STATE OF NEW JERSEY, INDIVIDUALLY AND OFFICIALLY, THE NEW JERSEY STATE SENATE, A BODY POLITIC OF THE STATE OF NEW JERSEY AND THE NEW JERSEY STATE ASSEMBLY, AS A BODY POLITIC OF THE STATE OF NEW JERSEY, DEFENDANTS-RESPONDENTS.



On appeal from Superior Court of New Jersey, Law Division, Mercer County, Docket No. L-2658-05.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

ORDER

Argued January 4, 2011

Before Judges Carchman, Graves and Messano.

The plaintiffs in this case include the Professional Firefighters Association of New Jersey, I.A.F.F.-AFL-CIO (PFANJ), the Fraternal Order of Police (NJFOP), and several of their individual members. They appeal from a Law Division order dated April 8, 2010, dismissing their complaint against defendants State of New Jersey, the State Treasurer, the State Senate, and the State Assembly. For the reasons that follow, we affirm.

The PFANJ and NJFOP collectively represent the interests of active and retired firefighters and police officers in the State of New Jersey. Their members participate in the Police and Firemen's Retirement System of New Jersey (PFRS or the Plan), which was enacted on July 1, 1944, N.J.S.A. 43:16A-25, "for the purpose of providing retirement allowances and other benefits for policemen and firemen," N.J.S.A. 43:16A-2. Retirees who have participated in the Plan receive an allowance calculated based on their years of service, salary, and retirement status.

See N.J.S.A. 43:16A-5.

PFRS is governed by an eleven-member board of trustees, N.J.S.A. 43:16A-13(a)(2), and responsibility for its day-to-day administration is vested with the Division of Pensions and Benefits, N.J.S.A. 43:16A-13(a)(8). Additionally, the Plan employs an actuary who operates as the board's "technical adviser" regarding the management of PFRS funds. N.J.S.A. 43:16A-13(a)(12).

PFRS is funded by contributions from both members and their employers.*fn1 N.J.S.A. 43:16A-15. Members are required to contribute 8.5% of their total compensation to the Plan.

N.J.S.A. 43:16A-15(2).*fn2 Employer contributions, which are divided into "normal" and "accrued liability" contributions, are calculated on an annual basis by the board's actuary. N.J.S.A. 43:16A-15(4), (9). These contributions are included in the employers' budgets and collected in the same manner as taxes. N.J.S.A. 43:16A-15(9).

In 2003, the Legislature passed a bill (the 2003 Amendment) modifying the PFRS employer contribution scheme. L. 2003, c. 108, § 3. To compensate for the loss of "excess valuation assets," an alternative source of funding for employer contributions that was being discontinued, the Legislature reduced the required contribution amount for all employers other than the State. See Statement to Assemb. Bill No. 3703 (June 19, 2003) (indicating that the purpose of the change was "[t]o ease the fiscal impact on local employers of the loss of" excess valuation assets). These employers were required to pay only 20% of their actuarial liability for fiscal year (FY) 2004; 40% for FY 2005; 60% for FY 2006; and 80% for FY 2007. N.J.S.A. 43:16A-15(9).*fn3

On October 4, 2005, plaintiffs filed a complaint alleging, among other things, that passage of the 2003 Amendment "violate[d] the contract and the contractual rights" of PFRS's members and beneficiaries under the Contracts Clauses of the New Jersey and United States Constitutions. The five other counts in the complaint were dismissed with prejudice on March 13, 2007.

In July 2008, plaintiffs moved for summary judgment. The State Senate and Assembly subsequently cross-moved for summary judgment, and the State and State Treasurer moved to dismiss the complaint. While the motions were pending, however, the Legislature enacted another bill (the 2009 Amendment) that reduced the required PFRS contribution for employers other than the State to 50% of the actuarially-certified amount for FY 2009. L. 2009, c. 19, § 2 (codified at N.J.S.A. 43:16A-15(9)).

As a result, plaintiffs sought and received permission to file an amended complaint with an additional count asserting that the 2009 Amendment had violated their constitutional contract rights. According to the amended complaint:

By enacting the 2009 Amendment, the Legislature is depriving PFRS of the contributions necessary for maintaining PFRS on a sound actuarial reserve basis, preventing PFRS from earning investment returns and interest on the otherwise required contributions and jeopardizing the financial ...


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