COLUMBIA - The state Supreme Court will hear a high-stakes case Thursday that affects 22,000 retired state employees and carries major ramifications for the future of the state retirement system.

Five retired state employees filed a class-action lawsuit in June that challenges the General Assembly's ability to make changes to the Teacher and Employee Retention Incentive retirement program.

But state officials and leading lawmakers say the court's ruling will have much broader implications that could cost taxpayers.

Ed Evans, general counsel for the state Budget and Control Board, said the TERI suit could set a precedent for a 1998 case simmering in the court system. In that case, an anonymous taxpayer challenged the state's authority to deduct income taxes from state pensions. "If the state loses this case and the (1998) case, the ramifications to state finances is a half-billion dollars," said House Speaker Bobby Harrell, a Charleston Republican. "Our whole budget is $6 billion."

State attorneys tried to link the two cases, but the Supreme Court denied the motion.

The Supreme Court acknowledged the importance of the TERI case, though, when it plucked it from the lower courts and claimed jurisdiction in August. The justices ordered that the new payouts from the about 14,000 TERI employees and 9,000 other working retirees be put aside until they rendered a decision.

The TERI program allows employees nearing retirement to keep working, defer their pension and forgo more contributions to the retirement system. At the end of the legislative session, state lawmakers changed that by passing a law that required retirees who stay on the job to begin paying 6.25 percent of each paycheck to the system. Lawmakers said the new payouts were a necessary step to keep the system afloat after a 2004 financial analysis showed the state's pension fund was nearing its debt ceiling.

If more money didn't get put into the system, lawmakers couldn't have funded the cost-of-living adjustment retirees receive each year, they said. The working retirees said the changes amounted to "broken promises." The plaintiffs' attorneys contend that when state employees enroll in TERI, it constitutes a contract and the Legislature's actions violated it.

The court will decide whether TERI is a contract and what authority the Legislature has to make alterations to the system.

"People I talked to, whether teachers or other state employees, felt it was fundamentally unfair," said Nancy Layman, a 29-year attorney at the Department of Health and Environmental Control and lead plaintiff in the case. She just entered the TERI program.