Lawsuit challenges 3 percent contribution provision in Michigan school employee retiree plan

Suit challenges part of Mich. school retiree plan

LANSING, Mich. — Five members of the state’s largest teachers union have filed a lawsuit challenging part of Michigan’s new law related to the public school employee retirement system.

The Michigan Education Association said Tuesday the class-action suit filed in a state court seeks to overturn a provision that requires school employees who don’t retire this summer to start paying an extra 3 percent of their compensation into a fund for retiree health care starting July 1.

The union said the suit doesn’t challenge a provision that gives slightly higher pension benefits to school employees who retire this summer. At least 17,000 school employees have applied for the retirement incentive and have informed the state they plan to retire this summer.

The expected retirement wave is the major reason state officials project schools statewide could save more than $500 million in the first year of the program. But the longer-term, more stable savings behind the plan relies heavily on the higher contributions to retiree health plans from employees who remain on the job.

The suit claims the contribution provision violates the contract formed when the Michigan Public School Employees Retirement System was set up in 1980. The suit asks the court to place the 3 percent retirement contributions into an escrow account until the court decides the matter.

The MEA said employees would be forced to contribute to the fund with no guarantee that the health insurance benefits would be available to them when they retire.

“This clear attempt to balance the budget on the backs of employees is not only unfair, it’s illegal,” MEA President Iris Salters said in a statement posted on the union’s website.

The union opposed the retirement measure as it was advancing through the state Legislature this spring, but couldn’t persuade enough lawmakers to derail it.

Republican Senate Majority Leader Mike Bishop said the new law is on safe legal ground.

“The MEA continues to be an obstacle on the path to recovery,” Bishop said. “It’s more of the same old denial and defense of the status quo. At some point in time, the people in this state are going to get awfully upset with the MEA for standing in the way of whatever progress we’ve been able to make.”

Democratic Gov. Jennifer Granholm originally proposed the retirement incentive plan. Her spokeswoman did not immediately respond to a message seeking comment.

The suit was filed in the Michigan Court of Claims, which is staffed with Ingham County Circuit Court judges.