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R&K Pension News: Michigan Trial Court Strikes Down Pension Law as Unconstitutional

September 30th, 2012

On September 28, 2012, a State Court Judge struck down Michigan’s mandate for State employees to make pension contributions equaling 4% of their salary.  In 2011, Michigan’s Legislature enacted Public Act 264. The Act required State employees to choose between having their benefits frozen (and joining a defined contribution plan) or contributing 4% of their salary toward the pension fund.  Friday’s ruling found the Act infringed on the constitutionally guaranteed powers of Michigan’s Civil Service Commission to determine the “rates of compensation” of State employees.

The Court explained:

“The Court will not belabor what is clearly the latest attempt by Michigan’s Legislature to delve into the realm of decision-making power held by the Commission.  Ample authority exists to support Plaintiff’s position that the Legislature can neither regulate the conditions of employment in the classified service nor fix rates of compensation.  A similar attempt was at issue in AFSCME Council 25 v State Employees Ret Sys, 294 Mich App 1 (2011), Iv denied 490 Mich 935 (2011), where the Court of Appeals affirmed the Court of Claims’ ruling that a statute (MCL 38.35) requiring a three percent employee compensation contribution to finance retiree health care was unconstitutional.”

The State is expected to appeal this case. The public safety pension and labor attorneys at Reimer & Dobrovolny Labor Law PC are monitoring and will provide updates regarding this developing matter.