August 16, 2013
By Paul Egan

LANSING — The Michigan Court of Appeals upheld a lower court ruling that the key element of a law requiring state employees to pay 4% of their income to remain in the state’s defined benefit pension plan is unconstitutional.

But in an opinion released Wednesday, a three-judge panel rejected a judge’s finding that the entire state law that contains the provision, Public Act 264 of 2011, violates the constitution.

■ PDFRead the decision on state employee pensions

Ingham County Circuit Judge Joyce Draganchuk struck down the law last October. The appeal judges sent the case back to her to sort out which parts of the law are valid and which are not.

But the panel unanimously agreed with Draganchuk on the key point: changes to state employee compensation, including pension benefits, are to be made by the Civil Service Commission, not the Legislature. [EXPAND Read more]

The law affected close to 18,000 state workers hired before 1997 — about 32% of the current work force, said Kurt Weiss, a spokesman for the Department ofTechnology, Management and Budget.

State workers hired since then have gone into a 401(k)-type pension plan, not a plan that guarantees certain defined benefits after retirement.

Gov. Rick Snyder and the Legislature approved the change as a way to cut the pension plan’s unfunded liability. State workers who didn’t want to pay the extra 4% had to move to thedefined contribution pension plan.

Weiss said the state will continue to deduct 4% from paychecks while it considers its options, including an appeal to the Michigan Supreme Court.

“No decision has been made as of yet, but the state must remain focused on resolving the long-term liabilities that these retirement reforms have helped solve,” Weiss said.

The Coalition of State Employees Unions issued a statement saying the Civil Service Commission “exists to protect civil service employees from the political whims of lawmakers,” and “it’s time to stop the unconstitutional attacks against state employees.”

The state has collected $59.1 million through the payroll deductions since April 2012, Weiss said. All but 600 of the affected employees opted to pay extra to stay in the defined benefit plan.

Judges on the panel were Donald Owens, Elizabeth Gleicher and Cynthia Diane Stephens. [/EXPAND]