Michigan state employees will not be forced to pay 4 percent of their income to participate in pensions, ruled a Michigan Court of Appeals. The decision upholds a lower court ruling from October 2012, and finds the entire 2011 law unconstitutional.
Suggested by legislators as a way to fund the state's pension plans, the law said state employees hired before 1997 would pay a 4 percent fee to participate in the pension. Those who opted out of the payment would be required to move to Michigan's defined contribution plan.
The three-judge panel included Judge Donald S. Owens, Judge Elizabeth L. Gleicher and Judge Cynthia Diane Stephens, who ruled unanimously for the Michigan State Employees Retirement System.
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In its ruling the judges said this type of change must be made by the Civil Service Commission, not the legislature. Key to their decision was the central question whether the law changing the original contribution-free retirement plan constituted a change in rate of compensation or a change in condition of employment. The plaintiffs argued it was a rate of employment. The court disagreed, noting that changes to fringe benefits such as pension plans would've been considered compensation at the time of the state's 1963 constitution, the document which determines jurisdiction.
The law only would have affected state workers hired before 1997, when Michigan switched to a 401(k)-type pension plan that doesn't guarantee defined benefits.
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