New Mexico teachers’, public safety officers’, and public workers’ pension benefits are entitled to certain protections under state law and affirmed by court rulings. At the same time, the state does have some legal precedent that allows them to change particular aspects of retirement benefits.
In other words, there are parts of public pension benefits that can be changed by future state laws, but only certain parts of those benefits.
Equable Institute partnered with Columbia Law School’s Center for Public Research and Leadership to create infographics that map states’ pension governance. Understanding the legal environment for pension policies can be confusing for both lawmakers and public workers, but illuminating legally permissible policy pathways to improve funding sustainability and ensure adequate retirement income security for states’ workforces is essential.
In the case of New Mexico, state law allows the legislature to decrease cost-of-living adjustments for public workers. In 2013, they did just that, reducing COLAs from 2 to 3% for retirees in the Public Employee Retirement Association system. Some public workers sued the state in an effort to have that part of the law overturned, but the court ruled COLAs were not part of workers’ core pension benefits. In 2020, COLAs were exchanged for a profit-sharing model aligned with the retirement system’s investment performance.
Changes have also been made to employee contribution rates, which in 2020 were increased by 2% over the course of four years.
The legal environment is favorable for these shifts – meaning that state law and legal precedent allows for changes to these aspects of pension policy.
What’s unclear is whether New Mexico can shift workers’ vesting periods or benefit calculations, because neither of those issues have been brought to court and there is no existing law explicitly prohibiting these changes.
It is important to note that current retirees’ benefits have greater legal protection than those of active employees. Apart from reduced or eliminated COLAs, current retirees’ benefits cannot be taken away or reduced.
Disclaimer: The information here doesn’t constitute legal advice or representation. Equable is not necessarily recommending any of the policies discussed in the infographic. Some may not work for certain states, others may not be desirable policy. Ultimately, any pension policy change should honor promises made to public workers and put them on a path to retirement security, while ensuring sustainable funding measures.