Mich. High Court Approves Forced Pension Contributions

The Michigan Supreme Court overturned a lower court ruling that said forcing state workers to put 4% of pay into the pension or move to a DC plan was unconstitutional.

The Michigan Supreme Court has upheld the constitutionality of a 2011 law that forced 15,000 state workers to contribute 4% of their salary to maintain full pension benefits, the Detroit News reports.

Under the law, state employees who did not contribute 4% of pay into the retirement system had their earned pension benefits frozen and were moved to a defined contribution (DC) retirement plan for the remainder of their state government career. The news report said state employees affected by the law were hired before 1997, when the Legislature closed the state government pension fund to new employees and began offering a DC plan to future workers.

In 2012, Ingham County Judge Joyce Draganchuk said Public Act 264 infringed on the constitutional authority of the Michigan Civil Service Commission to set compensation for state employees (see “Mich. Unions Win Benefits Battle”). “By mandating that members contribute 4% of their compensation to the employees’ savings fund, the Legislature reduced the compensation of classified civil servants—an act that is within the sphere of authority vested in the Civil Service Commission,” Draganchuk said.

However, the Michigan Supreme Court’s opinion said, “While the commission has considerable constitutional powers to manage the civil service system and to preserve its sphere of constitutional authority, the commission has no legislative powers. [The commission] may neither enact legislation nor revise an enactment, nor may it dictate that the Legislature repeal or modify an enactment.”