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Still no decision on PA 75's 3 percent retiree health care provision

Apr 15, 2015

The Supreme Court is still holding off deciding whether school employees have to pay an extra 3 percent into a fund for retiree health insurance with no guarantee that the benefits will be available when they retire. 

In 2010, MEA challenged PA 75's requirement saying it violated school employees' federal and state constitutional rights by "impairing the contract" formed when MPSERS was set up in 1980.

In 2011, Court of Claims Judge James Giddings agreed with MEA, and put the money into an interest-bearing escrow account until the issue was fully settled. Gov. Snyder appealed the decision to the Michigan Supreme Court, where the case still sits.

But, last week, the Michigan Supreme Court did rule that PA 300, 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.

Under PA 300, MPSERS members have to contribute 4 percent to their pensions, while employees hired between Jan. 1990 and July 2010 and MIP members pay 7 percent. Those members who opt out can take a lower multiplier or move into a defined contribution plan. Members also must pay 3 percent to receive retiree healthcare benefits.

While there are similarities in the lawsuits against PA 300 and PA 75, the Supreme Court emphasized that in their decision regarding PA 300, "we address only 2012 PA 300 and do not decide whether the Court of Appeals correctly held that 2010 PA 75 violated those same provisions."

In response, MEA General Counsel Mike Shoudy said, "We remain hopeful that the Court will rule in favor of public school employees regarding our legal challenge to PA 75 which resulted in the mandatory taking of 3 percent of our members' hard-earned money despite prior commitments."