The DeKalb County School District could owe current and former employees more than $250 million for breaching a contract by abruptly ending annual contributions to a supplemental retirement fund.
The Georgia Supreme Court issued an opinion Monday upholding a Georgia Court of Appeals ruling that the DeKalb County School District should have given employees two years’ notice before any contribution reductions.
According to the original lawsuit, filed in 2011 by teacher Elaine Gold and school counselor Amy Shaye, the school district instead suspended contributions to the Georgia Tax Shelter Annuity Plan abruptly in 2009, citing a budget shortfall after a 3% state reduction in funding for all Georgia school systems.
Other employees may soon be able to join the lawsuit as a class action.
District officials said Monday they will work with their attorneys to determine where the process heads next.
“Although we would have liked to see a different outcome, we will move forward with the next phase of this process,” Superintendent Steve Green said. “We value the hard work of all DeKalb County School District employees. Despite the disposition of this case, we remain committed to our teachers and employees.”
In 2015, DeKalb County Superior Court Judge Gregory Adams ruled the district did not breach a contract, saying there was no provision calling for a two-year notice before reducing the contributions. The Georgia Court of Appeals reversed that decision last year, citing a “governmental promise” that no changes would take place without two years’ notice. The case will now return to DeKalb County Superior Court, where a judge will determine whether other employees can join the suit as a class action, then award compensation. More than 10,000 employees were impacted.
“The board promised its teachers and employees it would fund this retirement benefit,” Elaine Gold, now retired, said. “The district says it wants to retain good teachers in the classroom. But breaking this promise has hurt everyone — the students, the community and especially the classroom teachers.”
Former Gov. Roy Barnes, an attorney for the plaintiffs, said a class-action suit would “ensure that everyone who was impacted by the district’s unlawful action is fairly compensated.”
The district had annually contributed 6% of a participating employee’s salary. During the 2009-10 school year, DeKalb was scheduled to pay $26.5 million into the plan. If it is found to be liable for that much for each year since, the district could be responsible for more than $250 million, just more than 20% of its annual operating budget. The DeKalb County Board of Education approved a $1.2 billion budget for the 2019-2020 school year. The district currently has about $100 million in its general fund balance.
The annuity plan, established in 1979, was an additional benefit to educators and a Social Security alternative. The fund is separate from the state retirement fund and contributions were paid into individual employee accounts, not taxed until withdrawn.
Former DeKalb County Board of Education Chairman Tom Bowen said after the lawsuit was filed that the board did not act improperly, adding that the board had the ability to amend its policies.
The suit argues, though, that the board voted to waive the two-year notice a year after contributions were suspended.
In late 2015, the DeKalb school board voted to establish a 403(b) plan with a match of employees’ contributions up to 2 percent of their salaries. That is less than the halted plan’s 6% contribution that required no match. While the district has spent tens of millions on the new benefit, fewer employees have participated, mostly because fewer employees were eligible. Chief Financial Officer Bell said in 2018 that some employees still received a TSA contribution that had not been suspended in the school board’s 2009 decision.
The district’s school board opted out of Social Security in 1978, and DeKalb is one of many districts across the state that does so. In neighboring Gwinnett County, which also opted out of Social Security, career schoolteachers can receive nearly their entire salary annually during retirement because of two retirement plans funded mostly by state and local tax money.
A teacher and a counselor sued the DeKalb County School District in 2011 claiming it improperly suspended contributions to a retirement fund in 2009. A judge later sided with the district, saying two years’ notice was not needed to reduce or eliminate the plan.
The Georgia Supreme Court on Monday upheld a 2018 Georgia Court of Appeals decision, which ruled a “governmental promise”meant district officials could not reduce the plan without notice to participating employees.
The case returns to DeKalb County Superior Court, which will decide if eligible employees can join the suit as a class action and how much, if anything, they are owed by the school district.