Boston rules against teachers

The First Circuit of Appeals confirmed this Tuesday the Plan of Adjustment (PDA) of the central government by denying the appeal for review filed by several teachers’ organizations and which sought to preserve the retirement plan for these professionals in the public education system.

The legal setback, unless the Supreme Court of the United States accepts the case, has the effect of closing forever the defined benefit plan that manages the Teachers’ Retirement System (SRM).

The ruling came this Tuesday, when the panel made up of Justices O. Rogeriee Thompson, Jeffrey R. Howard, and William J. Kayatta, Jr. concluded that, by rejecting the right to a defined pension in the central government’s PDA, educators will contribute to a defined savings plan that will be “materially less favorable” for most participants.

But in turn, The judges concluded that the pension or defined benefit plan that -for decades- was offered to educators proved to be unsustainable for the Puerto Rican government and that the Fiscal Oversight Board (JSF), as mandated by Congress in federal law Promisecan -through a PDA- modify the contractual obligations of the government as debtor, including those that could have been contracted by law, such as the payment of pensions.

“The PDA (of the central government) simply replaces those commitments,” reads the decision, indicating that although the modification of debts closed the defined pension plan for teachers, the government contracted other obligations with educators in regard to their withdrawal.

“The plan does not amend or replace any law, but instead addresses teachers’ claims through a combination of rejecting and accepting new obligations,” the ruling states.

According to the PDA, in force since March 15, teachers who contributed to the SRM before 2014 will receive what is contributed under said plan when they retire and, in turn, they will be able to contribute to a new retirement plan or contribute to Social Security .

“The Board welcomes the decision of the United States Court of Appeals for the First Circuit to reject the appeal of the teachers’ organizations against the substitution of the defined contribution plans for the defined benefit plans of the PDA of the government of Puerto Rico” , indicated the organism after knowing the judicial decision.

“The PDA allows teachers to participate in Social Security and creates a safe way to contribute to defined contribution plans that allow teachers to maintain control of their own retirement savings,” the agency added.

Lacerated the right to a defined pension

The determination of the federal appellate court confirmed the impairment of the pension rights that educators had in the public education system -by means of a PDA-, but this occurred after two attempts by the Board and the Association of Teachers of Puerto Rico (AMPR), the union representative for that professional class, to modify retirement benefits through a mutually agreed plan.

Before the PDA of the central government was confirmed last January, the Board agreed to an agreement that, although it delayed the retirement age, made other concessions to that professional class. In two separate voting processes, the educators rejected the proposal between the fiscal body and the AMPR.

After rejecting both proposals, the National Union of Educators and Education Workers (UNETE), the Teachers’ Group Educators (as) for Democracy, Unity, Change, Militancy and Union Organization (EDUCAMOS) and the Federation of Teachers of Puerto Rico ( FMPR) went to Boston to stop the implementation of the PDA, which they did not achieve, and in turn, in massive demonstrations, demanded that the government of Pedro Pierluisi and the Legislature implement a new mechanism to compensate for the impact of the PDA.

To date, the Pierluisi administration, the Legislature dominated by the Popular Democratic Party (PPD) and the Board have not reached any final agreement on the issue.

The ruling also occurs just when the Board is negotiating the restructuring of the obligations of the Electric Power Authority (PREPA), where there is also a practically insolvent defined pension plan, and while the fiscal agency has conditioned the allocation of new funds to the University of Puerto Rico at the closing of your retirement plan.

According to the opinion of the federal appellate court and signed by Judge Kayatta, given that the laws related to educators’ retirement benefits are subject to what is dictated in Promesa, the PDA adjusted the teachers’ claims regarding the benefits of pension that these would have received in the future.

The power of the Board

“It would make little sense if the Board does not have the capacity to restrict accumulations under the same pension payment regime that, in the first place, helped create the (fiscal) crisis,” reads Judge Kayatta’s opinion and in which They reject the arguments of the teachers’ organizations aimed at preventing the changes contemplated in the PDA in terms of pensions.

According to the appellate forum, when Congress gave the Board the power to renegotiate the island’s current debt, it also gave it the mandate to reorganize its finances so that the government can return to the capital markets, which includes promoting other modifications and adjustments beyond the obligations contracted by the government.

In his ruling, the appellate court judge echoed the central government’s PDA confirmation order issued by federal district judge Laura Taylor Swain on January 18. In this, Swain consigned that eliminating the defined pension plans was essential so that the modification of debts agreed with the majority of the creditors of the central government was feasible.

If not modified, the defined pension plan adds the ruling, honoring this benefit would have cost another $5.6 billion to Puerto Rican taxpayers after 30 years.

In denying the educators’ request, the judges also concluded that the Board did not abuse its discretion in adopting the central government’s PDA by not providing details about how the changes to educators’ retirement benefits would be implemented, nor was it necessary that changes in retirement benefits be approved by law.

Finally, the panel held that Law 53 of 2021, the statute that allowed issuing the new debt instruments as part of the restructuring of the General Obligations in the PDA, did not condition the issuance of new bonds to the policy of zero cuts to the pensions outlined by the government.

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