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

Several individual city employees (both retired and currently employed) joined the General Retirement System of the City of Detroit and the Police and Fire Retirement System of the City of Detroit in filing suit Monday. Michigan Gov. Rick Snyder and state Treasurer Andy Dillon are named in the suit.

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

The pension funds believe that there are too few checks and balances on the emergency financial manager's power, and that it threatens the qualified plan status of public pension trusts under applicable tax laws.

The legislation was designed to help school districts and cities avoid financial crises. According to a statement by the Retirement Systems, the legislation's intent is laudable, but the execution is flawed, as "the seizure of control of a local public pension fund or the transfer of the assets of a local public pension fund to some other pension system will have no effect on a municipality's short or long term financial health."

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

Instant Insights /

Detroit pensions sue Michigan over financial manager law

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