NEW YORK (Reuters) - New Jersey's overhaul of the pension and benefits system for its state workers deprives retirees of "promised and earned" benefits by eliminating cost of living adjustments, the state's unions said in a lawsuit filed on Wednesday.

The lawsuit, which was filed in U.S. District Court in Newark, also argued New Jersey violated state and federal contract rights of its employees by forcing current workers to pay substantially more toward their pensions and healthcare.

The pension-benefits law was a top priority for New Jersey's Republican Governor Chris Christie after he took office in 2010 and the issue helped vault him to national prominence. Christie signed it into law in June after winning the support of the Democrat-controlled state legislature.

Christie said at the time the changes will save an estimated $120 billion over 30 years in pension costs for around 500,000 active and retired public workers. Curbing the state health benefits system could save another $3.1 billion over the next decade.

But critics have said Christie hurt the state's fiscal standing by skipping a $3 billion payment to the pension fund last year. New Jersey has one of the largest unfunded pension liabilities of any U.S. state.

"This lawsuit is about basic fairness and justice," teachers' union president Barbara Keshishian said in a statement. "Governor Christie and the Legislature passed a law which illegally takes away benefits that school employees and others have already earned through their service to the people of New Jersey."

A spokesman for Christie had no immediate comment.

By the time the changes are fully phased in, a state employee making $70,000 a year -- or slightly above the average salary -- will pay an extra $5,000 for a family healthcare plan and make $1,100 more in pension contributions, according to calculations provided by the unions.

But Keshishian called it a "travesty" that workers who have already retired and are living on a fixed income will receive smaller pension payments because of the law.

"Rather than working in good faith to arrive at a negotiated solution to the pension crisis they have created, (Christie and the legislature) chose political grandstanding," she said.

"They chose to illegally reach into the pockets of active and retired public employees to generate more funding for the pension systems at a time when they are still not making their own full contributions," she said.