• The San Juan Daily Star

As hearings resume, retired judges maintain opposition to debt adjustment plan

By The Star Staff

The Retired Judges Association (APJ by its Spanish initials) and labor unions continued on Thursday to object to the debt adjustment plan, whose evaluation in confirmation hearings is slated to continue today.

The judges said there are three matters that directly and impermissibly affect active judges: a reduction in pensions, an elimination of Cost of Living Adjustments (COLA) and the so-called “freeze.”

“Each, under the analysis below, runs afoul of U.S. Constitutional, Puerto Rico Constitutional and existing federal and Puerto Rico law,” the judges said. “Before reaching the reasoning that the APJ has set forth earlier in various pleadings, motions and at the Stay hearing, it is fair to point out that one of the three issues may be resolved. Law 53, in Section 104, prohibits the reduction of month benefits. The Court has accepted this Law and it appears the matter is resolved. But this issue has been a moving target for some time and the APJ must be clear that it opposes any such adjustment if some upcoming move by the Oversight Board threatens this arrangement.”

That said, the objection focuses on any potential COLA modification or elimination and the freeze. It seems unassailable that changing the COLA must be considered part of judicial compensation and, therefore, falls squarely under the ambit of Section 104 of Law 53, the judges said.

“Any attempt to construe COLA in a contrary fashion would violate basic statutory construction of the Law,” they said. “The freeze can have an even more devastating effect on many of the active judges. In various ways and fora, the APJ has repeatedly shown the Oversight Board how this could deprive certain groups of active judges the lion’s share of their respective pensions.”

The most recent iteration of the plan, filed on the eve of this past Monday’s opening confirmation hearing, made no further change to the treatment of Employee Retirement System (ERS) participants.

The 7th Amended POA, filed July 30, 2021, contained a Monthly Benefit Modification (MBM) that would have reduced payments to ERS pension creditors whose monthly benefit exceeded $1,500. The plan put ERS participants into three classes: Class 51A for ERS retirees below the MBM threshold, Class 51D for ERS retirees above the MBM threshold, and Class 51G for ERS participants still employed by the commonwealth, said several unions, the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) and Service Employees International Union (SEIU).

In its treatment of ERS participants, the 7th Amended POA said nothing about a broad restriction on the commonwealth in any way increasing DB payments in the future. Nor did the Disclosure Statement, nor did the next iteration of the plan of adjustment (POA), the Nov. 3, 2021 Eighth Amended Title III Joint Plan of Adjustment of the Commonwealth of Puerto Rico.

The 8th Amended POA provided in relevant part that ERS participants “shall be entitled to receive … his or her benefits without adjustment for any Monthly Benefit Modification, but subject to the elimination of any cost of living adjustments from and after the Effective Date.” The 8th Amended POA thus provided a floor for ERS participants, eliminating the MBM pension cuts and guaranteeing that ERS participants would receive no less than what they were currently entitled to receive under Puerto Rico law. However, except for the ban on COLAs, the 8th Amended POA set no restrictions on any other future increases to the DB pension payments to ERS participants,” the unions said.

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