PIERRE, S.D. (AP) — The South Dakota Legislature acted legally when it trimmed the annual cost-of-living increase for retirees in the state's public pension plan during the recent economic crisis, a state judge ruled Wednesday.
After the economic downturn in 2008 and 2009 caused the value of assets to fall in the South Dakota Retirement System, the Legislature passed a law pegging annual cost-of-living adjustments to the system's financial health. The annual increases had been 3.1 percent, but were cut to 2.1 percent in the last two years.
Some retirees filed a lawsuit arguing the cut was unconstitutional because it interfered with their retirement contract and amounted to a taking of their private property.
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Circuit Judge Mark Barnett of Pierre ruled Wednesday that the Legislature had constitutional authority to change the cost-of-living adjustments. He said retirees have no contract guaranteeing them a 3.1 percent increase every year, so the cutback to a 2.1 percent inflationary increase was not an unconstitutional taking of property.
Stock market declines largely contributed to the South Dakota Retirement System's losses in 2009 and 2010, but gains have since restored the system's financial health. Because the system is in good shape, the cost-of-living adjustment will return to 3.1 percent on July 1.
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