Multistate Bar Examination (MBE) Practice Exam

The outcome of repealing a law that provides cost-of-living increases to pensions is often prohibited due to contractual obligations. Pension benefits are generally considered to create vested rights for employees, meaning they have a contractual expectation of receiving those benefits once they have worked long enough to qualify. This vested interest implies that the terms of the pension, including any cost-of-living increases, are typically protected under state constitutions or statutes.

The legal doctrine generally prevents states from unilaterally diminishing or impairing these contractual rights. Courts have often held that once pension benefits are earned, they cannot be altered without violating the contractual clause. Therefore, a repeal that removes cost-of-living increases would likely be viewed as a significant impairment of the contractual rights of the employees.

This understanding helps in analyzing why this is the most appropriate answer, as it reflects the consideration of legal protections afforded to pension benefits and the potential ramifications of altering such agreements. In contrast, the other options might suggest that there is greater flexibility in modifying pension benefits than is typically the case under prevailing legal standards.