Judge sides with W.Va. teachers by halting merger

May 02, 2006|By ROBERT SNYDER

MARTINSBURG, W.Va. ? A scheduled merger of two retirement plans for West Virginia schools personnel was halted Monday in Kanawha County Circuit Court pending a review of the proposal's legality, a lawyer for the state school workers said following the decision.

Charleston, W.Va., attorney Jim Lees, who is representing more than 1,000 West Virginia educators and school service workers in a suit they brought against the West Virginia Public Consolidated Retirement Board in April, said a preliminary injunction requested by the teachers was approved by Circuit Judge Paul Zakaib to determine if the planned merger is constitutional.

Teachers argue the proposal, which will join the newer Teachers Defined Contribution Retirement System with an older plan that stopped taking new employees in 1991, constitutes an illegal taking of property without compensation. The merger would add about $662 million of accrued retirement savings to a plan that is underfunded by about $5 billion and require the new plan's participants to pay 1 1/2 percent of their earnings for each year they worked or lose as much as 25 percent of their accrued investments, Lees said in an interview.


"Case law says you can't do that," Lee said. "Once the state makes a contractual obligation, the contract clause of the U.S. Constitution prohibits the state from going back and changing the rules," Lees said.

About 22,700 school workers participate in the new retirement plan, which allowed employees to contribute 1 1/2 percent less in payroll deductions and had a larger state contribution than the original plan. The old plan was closed to teachers and school workers in 1990.

Hedgesville High School teacher Eric Goff, who is opposed to the merger, said he was pleased with the judge's order.

"We're very enthused and we're very excited about it," said Goff, adding he was encouraged that the state retirement board did not oppose the request.

Teachers and school workers voted 7,821 to 4,926 to approve the merger earlier this year. It was scheduled to take effect July 1.

A number of factors compromised the effectiveness of the new retirement plan, West Virginia Education Association Executive Director David Haney said.

There were limited opportunities to fully diversify one's investments and an education program that should have helped introduce the new system was inadequate, Haney said.

To date, the average value of the plan is $28,000, with less than 100 participants having earnings valued at $100,000 or more, Haney said.

"It shows there were failures of the plan," Haney said. "Those were some of the statistics and data that led the state to take another look at this plan."

The court will hear the case July 26.

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