MEA retirement lawsuits still pending in court system

Two major cases affecting MEA members’ retirement benefits are slowly making their way through the state’s court system, and it’s not yet known when — or if — members will receive refunds of a “retirement tax” imposed upon them by the state Legislature.

The Michigan Supreme Court has yet to decide whether to take up a lawsuit brought by MEA challenging a 2010 law that requires school employees to pay an additional 3 percent tax for retiree health insurance.

Also pending is MEA’s challenge to a 2012 law requiring school employees to pay more toward retiree health care and pensions. That case is currently before the Michigan Court of Appeals.

Passed by the Legislature in May 2010, Public Act 75 of 2010 required that all school employees pay an extra 3 percent of their compensation into a fund for retiree health insurance — with no guarantee that the benefits will be available to them upon retirement.

On June 11, 2010, five MEA members filed a lawsuit, McMillan v. Michigan Public School Employees Retirement System, alleging that Public Act 75 violated school employees’ federal and state constitutional rights by impairing the contract formed when the Michigan Public School Employees Retirement System was set up in 1980.

In a ruling issued April 1, 2011, Court of Claims Judge James Giddings agreed with the MEA members, ruling that extracting 3 percent of school employees’ wages “in the absence of any vested or contractual right to retiree health care benefits constitutes a taking for public use in violation” of the state and federal constitutions.

Giddings ordered the retirement taxes collected from school employees be placed into an interest-bearing escrow fund until the matter could be fully settled by the courts.

Gov. Rick Snyder’s administration appealed Giddings’ ruling, but on Aug. 16, 2012, the Michigan Court of Appeals affirmed the lower court’s decision. The Snyder administration appealed again to the Michigan Supreme Court, which has yet to consider the case.

Anticipating that they may have been standing on thin legal ice, the Republican-led Legislature in 2012 passed Public Act 300, which proponents argued fixed many of the problems brought on by Public Act 75. The new law required state and public school employees to pay at least 20 percent of their retiree health care premiums.

Public Act 300 also mandated that 200,000 public employees hired before 2010 choose either to continue to pay the 3 percent for retiree health care or else be forced into a 401(k)-style plan. Furthermore, the 2012 law required school employees to choose whether to pay more to continue using a 1.5 percent multiplier in calculating their pension, or maintain their current contribution rate and have future earnings calculated with a 1.25 percent multiplier.

Like Public Act 75 of 2010, Public Act 300 is rife with constitutional issues regarding the protection of government pensions, according to experts.

The same day Snyder signed the bill into law, school employees filed a lawsuit, Michigan Education Association v. Michigan Public School Employees Retirement System, challenging Public Act 300’s constitutionality. In that case, Michigan Court of Claims Judge Rosemarie Aquilina ruled against school employees in late November, finding that the new law was constitutional.

MEA has appealed Aquilina’s decision in MEA v. MPSERS to the state Court of Appeals, which has yet to make a ruling.