Teacher Pension Law Upheld in Michigan Supreme Court

by | April 9, 2015

By Paul Egan Detroit Free Press

The Michigan Supreme Court, rejecting arguments from unions, has upheld a 2012 state law requiring teachers and other school employees to put more of their pay toward their pension plans or face cuts to benefits such as post-retirement health care.

The 6-0 ruling upheld a January 2014 ruling by the Michigan Court of Appeals and an earlier ruling by an Ingham County Circuit Court judge. Only the court's newest member, Justice Richard Bernstein, did not participate in the decision.

"We hold that the act does not violate any provision of either the Michigan constitution or the United States Constitution," wrote Justice Stephen Markman.

The law, backed by Gov. Rick Snyder and the Republican-controlled Legislature, was intended to cut an estimated $45-billion unfunded liability in the Michigan Public School Employees Retirement System by more than $15 billion.

Under the law, school employees hired before 1990 -- who were paying nothing toward retirement -- must contribute 4% of their pay or have their benefits cut. Those hired from 1990 to June 2010 must pay 7% to keep their pensions intact. Previously, they paid 3% to 6.4%.

Those hired since the middle of 2010 are in a 401(k)-type pension plan and aren't affected by the law.

In 2012 lawmakers also ended employer-provided health care for new hires, and instead gave them a match of up to 2% in their 401(k), plus a lump sum upon retirement to pay for health insurance. Current retirees must pay at least 20% of their medical premiums.

The American Federation of Teachers and the Michigan Education Association unions argued the law impaired contracts and amounted to uncompensated takings of pension benefits.

But both the Michigan Supreme Court and the appeals court said the law doesn't violate a Michigan constitutional provision protecting earned pension benefits, because only future benefits are affected. Also, unlike an earlier law that mandated 3% contributions toward health care, the 2012 law provides an opt-out provision, the court said.

Markman said the court is "not oblivious to the fact" many teachers consider the changes "unfair and unsatisfactory." But he said "decisions concerning the allocation of public resources will often leave some parties disappointed," and changes should be pursued through the Legislature, not the courts.

The courts earlier struck down a 2010 law which required teachers to put 3% of their pay toward retirement costs but included no opt-out provision.

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