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Court Rejects Changes To State Workers’ Pensions

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By DAVID EGGERT, Associated Press

LANSING (AP) – Nearly 18,000 state employees don’t have to contribute 4 percent of their pay to get full pension benefits in retirement because a Republican-backed law requiring the paycheck deductions is unconstitutional, the Michigan appeals court ruled.

In a 3-0 decision released Wednesday, the court said only the state Civil Service Commission can change state workers’ compensation, not lawmakers. The judges rejected arguments that at the time of the panel’s creation in 1940, “compensation” wasn’t understood to include fringe benefits such as pensions.

Unions that sued to block the pension changes signed into law by Republican Gov. Rick Snyder in 2011 said the ruling should be a lesson for legislators. Appellate judges previously struck down a 2010 law signed by former Democratic Gov. Jennifer Granholm that forced state workers to pay 3 percent of their salary to cover retiree health costs.

“The Michigan Civil Service Commission exists to protect civil service employees from the political whims of lawmakers,” the Coalition of State Employees Unions said in a statement. “It’s time to stop the unconstitutional attacks against state employees and focus on rebuilding Michigan’s working families.”

The four-member commission currently has three appointees of Granholm, and has battled with Snyder over some proposals affecting state workers.

Current state employees hired before April 1997 qualify for a defined benefit pension plan. Those hired since then – about 33,000, or two-thirds, of current workers – are in a defined contribution 401(k)-style plan.
Snyder is considering whether to appeal to the Michigan Supreme Court.

“No decision has been made as of yet, but the state must remain focused on resolving the long-term liabilities that these retirement reforms have helped solved,” said Kurt Weiss, spokesman for Snyder’s budget office.

He said the state has collected $59 million in pension deductions since April 2012. The law gave employees with pensions a choice: pay 4 percent to stay in the plan or freeze the pension benefit and move to a 401(k).

All but 600 of 17,800 eligible workers chose to make the contribution, said Weiss, who said employees weren’t being asked to contribute toward their pension before passage of the law.

The appeals court mostly upheld an Ingham County judge’s opinion last year that found the pension changes to be unconstitutional, including a provision that treated overtime pay differently for purposes of calculating pensions. Instead of declaring the entire law void, however, the appeals judges ordered Judge Joyce Draganchuk to determine if other parts of the measure can stay intact.

The state will continue collecting the money during the appeals process and it isn’t being held in escrow. It’s being used to pay down pension liabilities, Weiss said.

Judges Donald Owens, Elizabeth Gleicher and Cynthia Stephens signed the ruling.

(© Copyright 2013 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.)

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