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Michigan Teacher Funding of Retiree Health Benefits Violates Employment Rights: Court

The law ran afoul of protections against impairment of government contracts because teachers received three percent less in pay by paying into a fund than the amount the teachers and their employers agreed upon as part of teachers' contracts.

August 20, 2012
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Related Topics: Medical Benefits Law, Retirement/Pensions, Retiree Health Care, Health Care Benefits, Latest News
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A 2010 Michigan law that requires state teachers to pay three percent of their salaries to help fund retiree health care benefits violates their constitutional rights, the Michigan Court of Appeals ruled last week.

"The statute violates federal and state constitutional protections against state impairment of contracts, the taking of private property by the government without compensation as well as the constitutional guarantee of substantive due process," the court ruled in its 2-1 decision in a suit filed by the American Federation of Teachers.

The court noted that the law ran afoul of protections against impairment of government contracts because teachers received three percent less in pay by paying into a fund than the amount the teachers and their employers agreed upon as part of teachers' contracts.

In addition, while the money teachers paid helped to fund benefits for current retirees, the teachers making the contributions "have no vested right themselves to receipt of health benefits upon their own retirement," the court ruled.

Jerry Geisel writes for Business Insurance, a sister publication of Workforce Management. To comment, email editors@workforce.com.

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