The Michigan Supreme Court has ruled that pension changes made in 2012 are constitutional. The reforms require school employees to elect either to contribute 3% of salary to pre-fund health care benefits or forego retiree health care in lieu of a 2% matching contribution into the state’s defined contribution plan.
Specifically, the court said the state “is not obligated to provide publicly subsidized health care to public school employees, but has affirmatively chosen to do so, and it is therefore entirely reasonable to request that any eligible employee who desires the benefit help pay for it.” The court found the pension reform does not take private property in violation of the Takings Clauses of the state constitution.
In addition, the court decided the changes do not attach an unconstitutional condition to the receipt of a governmental benefit and do not impair any employment contracts. Instead, the changes “afford public school employees the option to choose between two potential retirement benefits, and the underlying employment contracts are unaffected,” the court said in its opinion.