Supreme Court upholds PA 300 on teacher pension, retiree benefits

Apr 11, 2015

Court still holds PA 75 in abeyance

The Michigan Supreme Court ruled Thursday that requiring public school employees to contribute to their pension and retiree benefits is not unconstitutional. The decision is in response to a suit brought by labor unions representing public school employees challenging PA 300 of 2012 which amended the Michigan Public School Employees Retirement Act (MPSERA).

"We are disappointed by the decision of the Michigan Supreme Court. School employees deserve respect from their elected leaders and fair compensation for the critically important services they perform. In our opinion, Public Act 300 degrades the work performed by these professionals," said Mike Shoudy MEA General Counsel.

In the lawsuit, the plaintiffs claimed that PA 300 was an instance of the government taking private property for public use since it required school employees to pay more for their pension and healthcare costs. 

Under PA 300, all actively employed MPSERS members had to make elections about their pension and retiree benefits. Basic Plan members are expected to contribute 4 percent to their pensions or opt out. Employees hired between Jan. 1990 and July 2010, and former Basic members who transferred in the Member Investment Plan (MIP), are expected to contribute 7 percent or opt out. 

Members choosing to opt out can maintain their contribution rates by freezing their existing benefits at the 1.5 percent multiplier and take a 1.25 percent multiplier from then on. Or they can freeze their existing pension benefits and move into a defined contribution plan with a 4 percent employer contribution for the future. 

Members who opted in also had to contribute 3 percent to receive the retiree healthcare benefit. Members opting out would not receive the benefit. 

In response to the lawsuit, the Supreme Court in a 6-0 ruling, decided that since PA 300 has a voluntary provision that allows employees to opt out, it does not represent a government takeover of private property. Their decision upholds earlier rulings by the Michigan Court of Appeals and the Ingham County Circuit Court.