Court upholds changes to teacher benefits

By David Eggert

Associated Press

LANSING (AP) -- Michigan's appeals court upheld a 2012 law requiring public school employees to pay more for their pensions and making veteran teachers contribute to their pension benefits for the first time.

The 3-0 ruling, released Wednesday and issued Tuesday, affirmed a 2012 decision by an Ingham County judge and dealt a blow to labor unions that sued to block it.

Gov. Rick Snyder and the Republican-led Legislature enacted the law that officials said would cut more than $15 billion from a $45 billion liability in the Michigan Public School Employees Retirement System, which has more than 440,000 members from K-12 districts, universities, community colleges and libraries.

Schools employees hired before 1990 -- who were paying nothing toward retirement -- must contribute 4 percent of their compensation to avoid seeing a reduction in their pension. Those hired from 1990 to June 2010 are paying 7 percent to keep their pension intact, up from before when they paid 3 percent to 6.4 percent, depending on their salary and hire date.

Those hired since the middle of 2010 are in a hybrid pension/401(k)-type plan and aren't affected by the law.

Legislators also ended employer-provided health care for new hires, instead giving them a match of up to 2 percent in their 401(k), plus a lump sum upon retirement to pay for health insurance. Current retirees also must pay at least 20 percent of their medical premiums.

In upholding the law's constitutionality, Judges Kirsten Frank Kelly and Henry William Saad it does nothing to diminish workers' vested pension benefits because only future benefits are implicated. They also said it's OK to have school employees contribute 3 percent of their salary for retiree health care because the contributions are voluntary, unlike a 2010 law. The workers can opt out of health benefits in retirement and avoid the salary deduction.

Judge Elizabeth Gleicher agreed with the ruling but said the court didn't have certain evidence needed to evaluate claims that the current workers are improperly being asked to deal with unfunded accrued liabilities.

"This just makes it even more clear how badly we need leaders who will promote a secure retirement for Michigan's working families, not take it away from them," said David Hecker, president of the American Federation of Teachers-Michigan.

Republicans have defended the changes, saying the retirement system was on an unsustainable path and eating up larger percentages of school budgets.


The case is AFT Michigan v. State of Michigan.

Published: Fri, Jan 17, 2014