The city of Colorado Springs has refiled its lawsuit against the Public Employees' Retirement Association, seeking a declaratory judgment that it owes PERA nothing for Memorial Health System's employees.
The new action, filed in Denver District Court on Sept. 13, restarts the process that began just before the Aug. 28 election in which 83 percent of voters approved leasing Memorial to the University of Colorado Health.
The city's initial Aug. 15 lawsuit triggered a filing by PERA against not only the city but also UCH, which jeopardized the lease transaction closing on the prescribed Oct. 1 date. (Our prior report on those matters is here. And how it was resolved can be found here.)
In the new case, the city argues that the termination provisions under which PERA alleges the city owes up to $246 million to remove Memorial's workers from PERA "apply when a political subdivision or an agency created by such a political subdivision seeks to terminate its affiliation with PERA in favor of establishing its own alternative pension plan or system."
"The Termination Provisions do not apply, however," the lawsuit states, "when a public hospital that participates in PERA is sold, leased, or otherwise transferred. Indeed, Section 311 specifically states that when a public hospital is sold, leased or otherwise transferred to a nonprofit corporation organized under Colorado law for the purpose of conducting a hospital, it's employees may, but are not obliged to, continue membership in PERA if certain conditions are met under Section 311."
Here's what Section 311 says in its entirety, from the Colorado Revised Statutes:
Notwithstanding the provisions of section 24-51-310, employees of a public hospital which is sold, leased, or otherwise transferred to a nonprofit corporation organized pursuant to the laws of this state for the purpose of conducting a hospital, or employees of an association-affiliated employer that has transferred title pursuant to section 26-12-112(a), C.R.S., to an entity organized pursuant to the laws of the state for the purpose of conducting a long-term care facility or health care facility, may continue membership in the association if the board determines, in its sole discretion, that continued membership will not adversely affect its qualified governmental plan status and if the transfer agreement provides for continuance of membership and the new employer agrees to submit to the association the appropriate amount of employer and member contributions and disbursements pursuant to part 4 of this article.
UCH has created a new retirement program for Memorial workers, but some workers won't get the retirement from PERA they had counted on because of the switch, depending on their years of service.
PERA says it needs money from the city so that the remaining members of PERA's local government division don't have to pay more to offset the contributions that would have been made by Memorial and its employees. Those include Springs Utilities and the city of Colorado Springs.
PERA also contends the termination process — which mandates a vote of employees in which 65 percent favor the termination, and approval by PERA board — should be followed.
UCH will pay the city $185 million to resolve the PERA issue. City Attorney Chris Melcher has stated that sum will be ample to settle the PERA matter. Meantime, though, the city has agreed to impound that amount plus the city's $74 million upfront payment from UCH in a special account, pending the outcome of the lawsuit.
The city also seeks payment from PERA for all its attorney fees and court costs. The case was filed on behalf of the city by Hogan Lovells law firm.
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