Two pension boards in Detroit are suing the state of Michiganover the recently passed emergency financial manager legislation,claiming that the law is unconstitutional.

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Several individual city employees (both retired and currentlyemployed) joined the GeneralRetirement System of the City of Detroit and the Police andFire Retirement System of the City of Detroit in filing suitMonday. Michigan Gov. Rick Snyder and state Treasurer Andy Dillonare named in the suit.

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The lawsuit challenges Section 19(1)(m) of the legislation,which grants an emergency manager with the power to unilaterallymodify vested pension benefits and to remove or replace thetrustees of public pension funds.

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The pension funds believe that there are too few checks andbalances on the emergency financial manager's power, and that itthreatens the qualified plan status of public pension trusts underapplicable tax laws.

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The legislation was designed to help school districts and citiesavoid financial crises. According to a statement by the RetirementSystems, the legislation's intent is laudable, but the execution isflawed, as "the seizure of control of a local public pension fundor the transfer of the assets of a local public pension fund tosome other pensionsystem will have no effect on a municipality's short or longterm financial health."

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In a statement to the Associated Press, a spokesperson fromSnyder's office said if the governor didn't beleive the legislationwas constitutional, he wouldn't have signed it.

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