Reform Alert # 31 - MPSERS Litigation Update Regarding PA 300

December 3, 2012

Reform Alert # 31 - MPSERS Litigation Update Regarding PA 300

On November 29, Court of Claims Judge Aquilina ruled that the substantive provisions of 2012 PA 300 are constitutional. In pertinent part, the Court affirmed the constitutionality of (1) the 4% deduction imposed on members as a condition of having future pension benefits calculated using a 1.5%; and (2) the 3% deduction imposed on members as a condition of participating in the retiree health care plan. The Court specifically found that pension and health care elections provided under PA 300 "do not breach any contract or violate members’ constitutional rights."

The Court went on to rule, however, that the 52-day election window was "unreasonable" and, thus, found that provision unconstitutional. As a result, implementation of the law remains suspended. Previously, the Court had issued temporary restraining orders that enjoined implementation of PA 300. The Department of Attorney General filed an application for leave to appeal the restraining orders to the Court of Appeals, which the Court of Appeals granted on an expedited basis on September 26, 2012; however, no decision has been issued. In light of the Court of Claims’ ruling that the 52-day election window is unconstitutional, the Department of Attorney General and the Governor’s office are reviewing options for appealing the ruling. It is anticipated that the Plaintiffs will file an appeal.

Please also note that Senate Bill 1360 passed out of the Senate November 29, 2012. SB 1360 extends the window for making the pension and health benefit elections until January 9, 2013 (127 days total).

More details can be found here: http://www.mlive.com/news/index.ssf/2012/11/judge_upholds_michigan_school.html

Important implications:

1. Though the election choices of PA 300 were found constitutional, the pension and healthcare elections made by members who first worked before September 4, 2012 cannot be implemented until the window is closed and an implementation date has been determined.

2. The new reporting file format changes to the DTL 4 for employees who first worked on or after September 4, 2012 are required for any reports submitted on or after December 1, 2012.