Traverse City Record-Eagle

August 15, 2013

Court rejects changes to state workers' pensions

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 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).