Wreszien v. State, 2016 MT 242 (Sept. 28, 2016) (Shea, J.) (7-0, aff’d)
Issue: (1) Whether the district court correctly concluded that the participants of three public employee retirement plans were not similarly situated; and (2) whether the district court correctly concluded that employer contributions to the DB Trust do not violate substantive due process.
Short Answer: (1) Yes; and (2) yes.
Facts: Plaintiffs are state university employees, and must participate in one of three Montana Public Employee Retirement System (PERS) plans: the DB plan, the DC plan, or the University plan. All covered employees participate in the DB plan unless, within one year of hire, they choose to join the DC plan or, if applicable, the University plan. The decision to participate in the DC or University plan or remain in the DB plan is irrevocable.
All employees contribute 7.9% of their earnings to the respective retirement plan. Under the DB plan, the contribution goes to the DB Trust. Under the DC and University plans, the contribution goes into an individual account that the employee chooses how to invest. State employers must contribute 8/.17% of an employee’s earnings, regardless of which plan the employee chooses. The majority of this contribution goes to the DB Trust. After meeting minimum age and service requirements, DB Plan participants may withdraw a statutorily prescribed benefit from the Trust.
Plaintiffs elected to participate in DC or University Plans. They filed a complaint in October 2012 alleging that they are treated unequally from similarly situated DB Plan participants in violation of their constitutional right to equal protection, and that required the state employers of DC and University Plan participants to contribute to the DB Trust violates Plaintiffs’ substantive due process rights.
Procedural Posture & Holding: On cross-motions for summary judgment, the district court concluded that members of the three retirement plans are not similarly situated, that maintaining the actuarial soundness of the DB Trust is a legitimate governmental purpose, and that Plaintiffs were never entitled to the money allocated to the DB Trust. Plaintiffs appeal and the Supreme Court affirms.
Reasoning: (1) Unlike DB Plan participants, DC and University Plan participants choose how to invest their retirement funds. As a trade-off, employers do not contribute as much to a DC Plan participant’s individual account as they contribute to the DB Trust for DB Plan participants. As the district court recognized, the Legislature created dissimilar classes: “risk-averse state employees who wish to forego any potential investment gain in favor of a known, guaranteed retirement benefit, and risk-accepting state employees who wish to maintain control over how their retirement funds are invested.” As in Bean and Gulbrandson, DC, DB, and University Plan participants are not similarly situated. Plaintiffs’ ability to choose plan they would like to join does not violate their equal protection rights.
(2) DC and University Plan participants were promised an employer contribution of 4.19 percent, not 8.17 percent. In exchange for a lower employer contribution, participants have the flexibility to control their accounts. DC and University Plan participants are getting precisely what they bargained for when they voluntarily chose those plans. Therefore, employer contributions to the DB Trust do not violate DC or University Plan participants’ substantive due process rights.